Chinese solar cell/module maker Solarfun (SOLF) reported a strong June quarter*, but the stock has tumbled more than 15% since. The primary concern: gross margin declined on rising polysilicon prices.
AmTech’s John Hardy thinks the poly problem will extend into 2009, keeping pressure on the shares:
SOLF reported strong revenue results due to higher shipments in the quarter (up 7% sequentially, in-line with guidance) and strong ASPs (up 2.5% sequentially), which are partially attributable to EUR strength.
Further shipment strength was hindered by lack of poly availability. Gross margin results were weak as expected, down 270 bps due to increased poly pricing.
Despite the strong quarter in terms of demand and SOLF ‘ s success servicing a rapidly growing end market, we remain concerned about poly procurement for 2009 and beyond given our expectation for continued tightness. We would become more constructive on shares following evidence of declining blended poly costs greater than projected ASP declines.
AmTech maintains NEUTRAL on Solarfun (SOLF), target $17.
Jeffries had a different take on the quarter though. The firm is raising their target and estimates following the company’s Q2 results to reflect:
- stronger volumes
- better-than-expected pricing
- a modestly better opex profile
Jeffries reiterates BUY on Solarfun (SOLF), target raised from $18 to $22.
*SOLF beat the Street estimates on both EPS ($0.24 vs. $0.23 consensus) and revenue ($197 million vs. 183.6 million).
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