Thursday, August 21, 2008

Suntech and the Solars: STP Wrap up

A quick compilation of reaction to STP's report yesterday. This one is a bell cow, the largest market cap among the silicon solars (ex WFR, which is further upstream).
From Barron's Tech Trader Daily:

Suntech Soars 14%: Silicon Supply Solid, Italy Promising

...Looking over the report, Collins Stewart analyst Daniel Ries notes that a portion of the strong outlook is coming from orders sold into Italy: “We will try to confirm from Italian installers, but STP and Trina Solar (TSL) have both indicated CY09 demand levels for Italy well above the 450MW we have forecast. We believe the combination of growth in Italy and Germany will fully offset the demand decline expected in Spain (down an estimated 800MW in CY09).

Thomas Weisel analyst Scott Reynolds is impressed with the jump in average selling prices that bolstered gross profit, “during a quarter where revenue contribution from Spain was lower at 44%, down from over 50% in 1Q08.” Reynolds believes the 900 megawatts of silicon capacity put the company in a good position from the standpoint of basic materials it needs, with “spot wafer prices expected to decline significantly, and a strong cash position which enables the company to sign additional supply contracts and tap the spot markets if needed.”

From Forbes:

Suntech Soars With Silicon

Silicon is the black gold in the fast-growing world of solar energy production. Solar-cell maker Suntech Power Holding can get it at a reasonable price; some of its competitors can't.

Suntech Power Holding (nyse: STP - news - people ) reported higher-than-expected second-quarter profits and sales on Wednesday, thanks to ramped-up production capacity and a diverse footprint of input suppliers.

On Monday, by contrast, Trina Solar (nyse: TSL - news - people ) also reported higher second-quarter sales, but profits came in below the consensus estimate because of rising polysilicon costs. (See " Trina's Lukewarm Quarter.") Piper Jaffray analyst Jesse W. Pichel said solar companies should be differentiated by their polysilicon contracts.

While demand for solar cells is strong, the big players in the industry are able to reduce their prices, but input costs have yet to come down. Firms benefiting from this situation are those with the wherewithal to boost their sales and gain economies of scale.

"A lot of the smaller players will have a tough time surviving long term in the solar space," said Brian Yerger, an analyst who tracks Trina Solar for Jesup & Lamont Securities. The solar industry is "anticipated to go through a rapid price decline."...MORE

I should probably point out that Jesup raised estimates on Trina:
Q3 '08: $1.01 vs. prior 0.84
Q4 '08: $1.16 vs. prior 1.03
FY '08: $3.45 vs. prior 3.26
FY '09: $4.60 vs. prior 4.15

And from

23-Jul-08 Up/Down TSL: Jesup & Lamont reits Buy

(while lowering target from $64.50 to 54.00)
Hmmm. Back to STP.

From TradingMarkets:
Suntech Power Finishes At 2-Month High

From StreetInsider:

Piper Bullish on Suntech (STP) Following Q2 Earnings

Piper Jaffray's Jesse Pichel issued a note today on Suntech Power Holdings (NYSE: STP). As Suntech reported better-than-expected Q2 earnings this morning, the research report reviews the company's results, providing commentary on key takeaway's from the earnings. While Piper doesn't currently cover Suntech, the firm's report was certainly positive and implied future strength in the stock.

The firm said Suntech's positive results were driven by strong shipments and average selling prices. Notably, "Suntech indicated it has secured ~900MW of its '09 Si supply at favorable pricing, as well as highlighted its long-term Si supply contracts with attractive pricing which should help significantly lower its Si costs over the next few years."...MORE

From earth2tech:
Stock by Stock, Is Solar Coming Back?

Finally, here's the conference call transcript.