Solarfun (SOLF) SOLF, a Chinese PV cell manufacturer, reports Q208 results on Aug. 27th, prior to the market open. AmTech analyst John Hardy is worried about gross margin weakness, but he believes larger-than-expected unit sales will offset this. Therefore, he is neutral:
We believe SOLF is negotiating contracts for 2009 that would imply ASPs down 8-10% on a blended basis y/y. We are modelling a steeper decline of 12% given demand uncertainty surrounding legislative updates in Spain . We believe gross margin results may come in weaker than originally anticipated due to exposure to the spot poly market.
SOLF likely saw increases on order of 3-5% versus our original 2% expectations. Despite the greater than expected gross margin decline, we believe EPS results are likely safe given shipment and ASP strength, as well as op-ex controls. In other financing news for SOLF, the company has begun to recognise proceeds from its recent $175M shelf offering. We are beginning to account for the dilution in our model at this time.
AmTech maintains NEUTRAL on Solarfun (SOLF), target cut to $17.
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