August 20, 2008, 3:27 pm
Suntech Soars 14%: Silicon Supply Solid, Italy Promising
Posted by Tiernan Ray
Shares of Chinese solar-power technology maker Suntech Power Holdings (STP) are up $5.05, or nearly 14%, at $42.25 this afternoon after the company this morning reported sales and profit for its second quarter ended June 2008 rose 51.3%, year-over-year, to $480.2 million, well ahead of an average $439.3 million estimate of analysts. Earnings per share jumped over 30% from a year earlier, to 41 cents, well ahead of the 32-cent estimate.
The forecast for 3Q is also sharply ahead, with revenue projected in a range of $570 million to $580 million, versus the average estimate of $542.7 million. Gross margin is taking a slight hit, with projected gross profit of 22% to 23% of sales, versus last quarter’s 24.1%. For the full year, the company raised its forecast from a range of $1.9 billion to $2.1 billion to a range of $2.05 to $2.15 billion. The average estimate at the moment is $2.06 billion. The company said its photovoltaic cell production capacity reached 660 megawatts at the end of the quarter, and it expects to reach production capacity of 1 gigawatt by the end of this year. Suntech chair and CEO Zhengrong Shi said the company was “fully booked through the second half of 2008 and expect those excellent demand conditions to continue through 2009.” The company also said it has secured 900 megawatts of silicon capacity through next year.
Looking over the report, Collins Stewart analyst Daniel Ries notes that a portion of the strong outlook is coming from orders sold into Italy: “We will try to confirm from Italian installers, but STP and Trina Solar (TSL) have both indicated CY09 demand levels for Italy well above the 450MW we have forecast. We believe the combination of growth in Italy and Germany will fully offset the demand decline expected in Spain (down an estimated 800MW in CY09).
Thomas Weisel analyst Scott Reynolds is impressed with the jump in average selling prices that bolstered gross profit, “during a quarter where revenue contribution from Spain was lower at 44%, down from over 50% in 1Q08.” Reynolds believes the 900 megawatts of silicon capacity put the company in a good position from the standpoint of basic materials it needs, with “spot wafer prices expected to decline significantly, and a strong cash position which enables the company to sign additional supply contracts and tap the spot markets if needed.”
blogs.barrons.com |
