From CS..
SunPower Corp. (SPWRA)
PRE RESULTS COMMENT
F1Q09 Preview
Expect a reset to estimates.
SPWR will be the first solar company to report C1Q results. Company reports on April 23 (Thursday) after the close, dial in. Recall company has already commented C1Q09 will be similar to C1Q08, we are modeling C1Q rev/EPS of $263.4mm (down 3.7 y/y) and 15c, vs cons at $258.9mm and 23c. Component suppliers have reported C1Q shipments down 35% y/y, and channel checks suggest US market remains soft YTD; so there can be risk even to our lowered C1Q estimates. We are currently modeling C2Q rev/EPS of $287.3mm and 23c, vs cons $342.7mm and 40c. For CY09, our non-GAAP EPS of $1.07 is well below cons at $1.84; company guidance is $2.2-$2.8.
Margin compression with poly declines key risk. Checks suggest that brand name Asian panels (STP, YGE) are mostly being offered around €€ 2.1/watt, but YGE remains the price leader, offering €€ 1.8-1.9/watt for higher volumes. We expect SPWR can maintain ~30c/watt premium over lower efficiency panels. At $75/kg poly price, we estimate SPWR has a panel manufacturing cost of ~$2.25/watt, versus the bulk of Asian companies at $1.70/watt. Non-vertically integrated Asian suppliers can price at ~$2.20/watt at $75/kg poly (~€€ 1.70/watt), which suggests a SPWR price of ~$2.50/watt. Thus, we estimate SPWR’s panel GMs may decline to 15% versus 35.5% in C4Q08. These margin estimates exclude under absorption charges, we would not be surprised if SPWR had slowed production in Q1.
Outlook.
SPWR has sustainable barriers given its higher efficiency panels; also SPWR has positive attributes with its 1GW US utility pipeline. We are more constructive on US market development in 2010 (we are modeling 1.9GW in 2010) – we think US incentives are generous (ITC refund, and DOE loan guarantee). SPWR will ultimately be a way to play strong US demand in 2010 – but first, we would prefer to see estimates and margins reset to lower levels; also SPWR may need to slow capacity expansion until US pipeline is more imminent. We remain constructive on FSLR, especially if it pulls back on a weak Q1 result from SPWR. |
