Monday, February 14, 2011

Yingli Green Energy Holding Co. Ltd. (NYSE: YGE): Q4 Earnings Preview 2010

Yingli Green Energy Holding Co. Ltd. (NYSE: YGE) is scheduled to release its fourth-quarter earnings before the opening bell on Friday, February 18, 2011. Analysts, on average, expect the company to report earnings of 44 cents per share on revenue of $544.36 million. In the year ago period, the company reported earnings of 9 cents cents per share on revenue of $370.77 million.

Yingli Green Energy Holding Company Limited is a vertically integrated photovoltaic (PV) product manufacturer. The Company designs, manufactures and sells PV modules, and designs, assembles, sells and installs PV systems.

In the preceding third-quarter, the Baoding, China based company's net income was $68.2 million, or 44 cents per American Depository share (ADS), compared with a profit of $17.7 million, or 12 cents per ADS, in the year-ago quarter. On an adjusted basis, the company earned 53 cents per ADS in the latest quarter. Revenue jumped 50 percent to $490.9 million from $325.98 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 36 cents per share on revenue of $477.31 million. 

At its last earnings call in November, the Company raised its PV module shipment target to the estimated range of 1,020 MW to 1,040 MW from the previous estimated range of 950 MW to 1,000 MW for fiscal year 2010, which represents an increase of 94.2% to 98.0% compared to fiscal year 2009. The net revenue for full year 2010 is estimated to be in the range of $1.78 billion to $1.81 billion. In addition, based on the strong gross margin performance in the first three quarters of 2010, the estimated ramp-up cost of Fine Silicon and the 400 MW of new production lines which started initial operation in July 2010, the expected average selling price of PV modules and forecasted exchange rates of the euro and U.S. dollar against the Renminbi, the company further raised its gross margin target to the estimated range of 32.0% to 32.5% from the recently raised estimated range of 31% to 32% for fiscal year 2010. However, the company told investors margins could fall in the next few quarters as it ramps up polysilicon facilities, Acaro said. Polysilicon is the solar industry's key raw material. The company forecast that average selling prices would be flat in the first half of 2011 and show a slight decline in quarters three and four. Shipments during 2011 should see a growth and in developing markets such as southern Europe, the U.S. and China.

Yingli is looking to enhance the conversion efficiency of its monocrystalline cells to 20% by 2012 and 22% by 2015. The expansion is set to fall back on the developments through Yingli’s Panda project, N-type-metal-wrap-through and heterojunction with intrinsic thin-layer cell technology.  Yingli expects to increasemulti-crystalline cell conversion efficiency to 17.5% in 2011, 18% in 2012 and 20% in 2015.

Xiong also commented on Yingli’s multi-crystalline cell conversion efficiency with a continued goal to progress to 17.5% in 2011, 18% in 2012 and 20% in 2015.

Yingli has a broad customer base, not only from US and Europe companies - which are Yingli's principal markets - but also from emerging markets in Asia and Africa. Yingli is on track for about a 10 percent share of the U.S. solar modules market by volume this year, and if it meets forecasts, would vault the company among the top U.S. suppliers.

Recently, the company signed an agreement with Borrego Solar Systems to supply the San Diego-based company 20 megawatts of photovoltaic (PV) modules in 2011. 

In December, the company said that it would supply about 190 megawatts of photovoltaic panels to project developers under China's program to build solar plants. Yingli said it would sell about 70 percent of the modules that turn sunlight into electricity to project developers under China's "Golden Sun Program," which has announced a 272 MW of projects. Most of Yingli's shipments will take place in the second half of 2011, and will receive a 70 percent subsidy from the Ministry of Finance.  China is in the midst of a solar energy drive that is on track to make China the world’s largest solar market by 2014.

2010 continued the significant growth of the solar market with new markets in China and the USA advancing their demand for solar panels. Solar industry as a whole has benefited from continued strong demand thanks to growing awareness about global warming, skyrocketing oil prices, cheap financing and technological advances. Companies involved in the production of semiconductors used in solar panels have enjoyed a positive quarter. Many have experienced rising shipments over the last few quarters, resulting in a sequence of record quarters. The world is becoming increasingly environmentally conscious. Both commercial and private demand for solar power is rising. Solar options are becoming more attractive as more governments provide better options for buildings producing solar power to feed into and out of the grid as required.

Last month, US President Barack Obama in his State of the Union address called for 80 percent of the nation's electricity to come from clean sources by 2035. Meanwhile, Senator Bernie Sanders submitted a bill to congress titled the "10 Million Solar Roofs and 10 Million Gallons of Solar Hot Water Act". This bill is expected to spur alternative energy growth and create green jobs.

Thanks to better cost advantages, Chinese solar module maker have grabbed more market share from their international competitors. Local solar companies have also benefited from China's well-developed supply chain, cheap electricity, supportive policies and even low environmental standards. More than 90 percent of domestic Chinese manufacturers sell their products overseas currently, especially in Europe, where the solar electricity industry is more mature.

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