In Q2, pretty much every solar panel manufacturers reported surprisingly better than expected results because increased demand outweighs the decreased ASP's impact on major players' top line and bottom line. Comparing with that situation, results in Q3 is mixed, ASP is still in downtrend, demand still exceeded supply, however, from trading perspective, even though major players' actuals beated wall street expectations, market sentiment has become much more volatile than Q2, stock prices were beaten nontheless after earning beats.
There are yet more to the rich solar story, polysilicon panels is gradually taking away the cost advantages of thin film panels, indicated by First Solar (FSLR)'s dropping gross margin by ~6% over the quarter due to the company's reaction to fierce price competition put up by its polysilicon panel competitors.
Looking forward, rapid ASP reduction is still expected until year end 2009, as SunPower (SPWRA) expected ASP to drop another 10% in Q4, demand will keep going up as a result of dropping ASP makes solar energy more affordable. These two forces will continue to have opposite yet strong impact on the earning power of all players in solar industry.
This post recaps key points in major solar companies most recent quarter earning conference call, the objective is to help readers to follow industry landscape change on individual company basis.
The post is not final until the last conference call in the season, as different solar companies report earning in different dates. So keep check back to find out the latest updates.
SPWRA (10/22)
Gross Margin: 20.7% vs. 22.6% in Q2 09 and 29.2% in Q3 08, mainly driven by drop in ASP and an one-time tax expense.
ASP: fell by less than 10 percent in the third quarter from the second. The company expects a similar decline in the fourth quarter.
FY outlook: full-year net income to be between $1.15 to $1.25 per share, the lower end of its previous range of $1.15 to $1.60 per share. revenue for year would range between $1.425 billion and $1.50 billion, compared with its July forecast for $1.35 billion to $1.7 billion.
Based on SunPower's q3 earning results, Seeking Alpha commentator Jack Yetiv summarized solar story below:
I believe the solar business is going to be a relatively low-margin business in 2009 and beyond. SPWRA's conf call simply confirms this impression.
I think the fourth quarter may still show some decent margins because of cost-cutting and because I believe ASP reductions will slow down because demand will exceed supply--primarily because panel-fab-building slowed down significantly in late '08 and the first half of '09, but I believe by next year, ASP's will drop again as production increases to meet demand.
Of course, as prices go down, that will further boost demand, which will arrest pricipitous falls in prices (and hence, margins), but once equilibrium is reached, I believe gross margins of good companies (like SunPower) will be in the 20% range--as they were this quarter (FSLR will have higher margins than the 20's because of its cost advantages, but its margins are going to be compressed as well, rpobably down from the 50's last quarter to the 30s by the end of next year).
I do believe that SPWRA can increase sales by 20-30% next year, but that is not going to yield such a high EPS that it justifies a forward PE against 2010 income in excess of 20.
FSLR (10/28)
Gross Margin: 50.9% vs. 56.7% in Q2 09, mainly driven by ASP pressure causing rebate program to eat into gross margin.
Q3 Sales: seasonal demand and race against pending subsidy cuts drove q3 sales higher.
JASO (11/12)
Q3 Sales: 77% of sales comes from China, benefiting from reduced competition. 33% of orders come from customers of uncompetitive cell makers who are out of business.
Pricing sweet spot: JA said that during September, customer demand exceeded the firm's available capacity by two to three times. Excess demand continues today, with November looking very strong.
YGE (11/13)
Major growth driver: the prospect of lower German subsidy in 2010 has pushed up demand in 2009 since people are rushing to grab rich subsidy before it's lowered. Due to the same reason, the demand has outstripped capacity in Q3.
Outlook: with German feed-in-tariff cut's scope still unknown, YGE expects 2010 to be "very strong".
CSIQ (11/17)
Outlook: gross margin to be in high teens in 2010, modest ASP reduction in course of 2010 despite uptick of spot market price in Oct and Nov 2009. 2010 shipment to at least double to 600-700MW level. Expect to grab market share at the cost of lowering ASP
Capacity: to expand from 270MW to 700MW by June 2010
TSL (11/19)
Cost: non-silicon cost down from 85c/w to 82c/w in Q3, silicon material cost down 25%+ to 82c/w
Outlook: 145 - 165MW shipment, 25-27% gross margin in Q4, and 350MW shipment in 1H 2010. Full year 2009 shipment to be 380-400MW, with lower target raised and higher target unchanged. Non-silicon cost expected to drop 13% from 80c to 70c/w year over year to 2010.
Over Capacity: expect to expand capacity to 850MW - 950MW by year end 2010. CSIQ expand from 400MW to 700MW, SOLF from 500MW to 700MW. Responding to over capacity doubts, some high cost producers shut down the production lines.
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