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Analyst Blog

ReneSola Ltd. in the first quarter of 2013 reported loss per American Depositary Share (ADS) of 45 cents per share, wider than the Zacks Consensus Estimate of a loss of 39 cents per ADS. However, its first-quarter loss narrowed from the year-ago quarterly loss of 47 cents per ADS, thanks to lower operating expenses and higher solar module shipments.

Operational Results

Net revenues for the quarter rose to $284.2 million from $211.5 million in the prior-year quarter, as a result of a significant increase in the demand for its solar wafers from customers in the Asia-Pacific region. Reported quarterly revenue also beat the Zacks Consensus Estimate of $260.0 million.

Sequentially, net revenue slipped 7.3% as the average selling prices ("ASPs") of solar wafers and modules decreased. Panel prices for solar wafers and modules fell by 2 cents each to 61 cents per watt and 22 cents per watt, respectively, during the first quarter as compared to the fourth quarter of 2012.

Total wafer and panel shipments decreased 7.2% sequentially during the period to 662.1 megawatts (MW) due to a decrease in sales of the company's wafer business. However, on a year-over-year basis, total solar product shipments surged 42.1% in the reported quarter, mainly the result of increased demand for the company's solar modules across a number of geographic regions and the increasing competitiveness of solar power as a power source.

The collapse in prices and wafer shipments sent gross margin into negative terrain in the reported quarter. Margin decreased to a negative 2% from positive 3.3% in the fourth quarter of 2012. In the year-ago quarter, gross margin was a negative 3.8%.

Financial Condition

As of Mar 31, 2013, ReneSola had cash and cash equivalents plus restricted cash of $442.7 million, compared with $268.1 million at 2012 end. Net cash inflow from operating activities was $4.2 million in the first quarter 2013, compared to net cash outflow of $87.6 million in the year-ago period. Total debt was $958.6 million at the end of the reported quarter, compared with $790.2 million at the end of 2012. Short-term borrowings were $832.8 million, compared with $733.6 million at the fourth quarter 2012 end.

Guidance

ReneSola expects its second-quarter revenue to be in the range of $310 million to $330 million. It also foresees gross margins to turn positive in the second quarter, between 3% and 5%, compared to a negative 2% in the first quarter.

The company expects second quarter 2013 solar wafer and module shipments between 700 MW and 720 MW, with solar module shipments in a range of 400 MW to 420 MW. Operating cash flow will likely exceed $40 million.

Full-year 2013 solar wafer and module shipments are forecast to be between 2.7 gigawatts (GW) and 2.9 GW, with solar module shipments of 1.4 GW to 1.6 GW.

Our Take

Based out of China, ReneSola is a leading global manufacturer of solar wafers and a producer of solar power products. Capitalizing on proprietary technologies, economies of scale, high production quality, technological innovations and know-how, and its in-house virgin polysilicon and solar cell and module production capabilities, ReneSola provides its customers with solar wafer products and processing services. The company possesses a global network of suppliers and customers.

ReneSola introduced the high-efficiency second-generation Virtus II wafers which utilize a new in-house proprietary Virtus A++ manufacturing process, alleviating the need for crystalline seeds. The Virtus II modules’ use of the Virtus A++ manufacturing process produces high-efficiency Virtus A++ wafers with lower light-induced degradation and lower processing cost.

Additionally, the company's newly launched microinverter, Micro Replus, formally obtained a Certificate of Approval from SAA Approvals, a third-party certification body accredited to issue Certificates of Approval for electrical equipment that complies with the safety requirements of the applicable Australian standard. ReneSola has also begun research on small-scale storage systems.

Going forward, ReneSola expects to continue to reduce its solar module manufacturing costs through improvements in its manufacturing methods and reduction in material costs. The company presently retains a Zacks Rank #3 (Hold).

Although ReneSola offered an optimistic view for the rest of the year, ReneSola ADSs closed at $1.92 on May 16, down 13.1% reflecting the ongoing imbalance between supply and demand, and competitive pricing that is pressuring its business as well as the sector.

Other Chinese solar stocks were also under pressure yesterday. Trina Solar Limited dropped 5.1% to $5.37 and JA Solar Holdings Co., Ltd. dropped 4.7% to $5.45, while Yingli Green Energy Holding Co. Ltd. gained one cent to $2.46.

 

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