Yingli Green Energy (YGE), a Chinese solar PV module maker, posted a strong Q2 yesterday with upside to both EPS ($0.25 vs. $0.21 consensus) and revenue ($289.7 million vs. $234.8 million).
YGE raised FY08 shipment and revenue guidance as well, but the stock is not performing well. AmTech believes investors were spooked because YGE’s guidance implies little growth in 2H08 from 2Q08 run rates and an ASP decline in the mid-teens from reported levels in 2Q08.
However, AmTech’s primary worry is YGE’s cash position:
We remain concerned over YGE’s cash balance and reliance on short-term debt to fund capacity expansion. To close 2Q, YGE had cash and cash equivalents of $119M and short-term debt facilities of $236.5M (FY08 capex guidance $250-$300M). While we believe the company has enough cash and credit lines to finance the current planned expansion, we see further financing as necessary to grow beyond 2Q09.
AmTech does still believe the positives outweigh the negatives however:
We remain positive on YGE ‘ s long-term outlook given its low processing costs, vertical integration, and brand reputation, but we do not believe multiple expansion to 20x is likely near-term given financing and ASP uncertainty. We are reducing our target to $27 on a 15x forward multiple.
AmTech maintains BUY on Yingli Green Energy (YGE), target cut from $36 to $27.
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