Yingli Green Energy Holding Company Limited (YGE) or Yingli Solar’s shares jumped more than 12% yesterday – the most in over five months – after the world's largest vertically integrated photovoltaic manufacturer reported a narrower first quarter loss on improved gross margins.
The company reported first quarter 2014 adjusted loss of 35 cents per American Depositary Share (ADS), wider than the Zacks Consensus Estimate of a loss of 25 cents. Although the company reported a wider-than-expected loss, it narrowed substantially from a loss of 62 cents per share in the year-ago quarter. Loss in the reported quarter was again narrower than the loss of 31 cents incurred in the fourth quarter of 2013.
Quarterly Performance
Yingli Solar’s revenues in the reported quarter were $432.2 million, lagging the Zacks Consensus Estimate of $463.0 million by 6.7%. Revenues increased 0.2% from $431.4 million in the first quarter of 2013 but down 29.5% from $613.0 million in the fourth quarter of 2013.
Gross profit was $67.8 million or 15.7% of total revenue, as against $17.8 million or 4.1% in the year-earlier period and $74.6 million or 12.2% of total revenue in the fourth quarter of 2013.
The upsurge in gross profit margin was mainly due to more sales in the higher-priced markets like Japan added to cost control initiatives. In Japan, shipments increased 30% from the previous quarter.
Total operating expenses increased 26.2% year over year but dropped 48.8% sequentially to $88.5 million.
Interest expense surged 13.4% year over year to $40.5 million in the quarter under review, while it dropped 4.5% sequentially.
Shipments
Total shipments comprising shipments of PV systems in the reported quarter dropped 32.9% sequentially to 630.8 megawatt (MW).
Financial Condition
At the end of the first quarter of 2014, Yingli Green had a cash balance of $204.8 million versus $462.2 million at 2013 end. Long-term debt, excluding current portion, was $610.7 million versus $678.6 million at 2013 end.
Guidance
Yingli Solar reiterated its module shipment guidance in the range of 4.0–4.2 gigawatt (GW) of PV modules for 2014, an impressive increase of 29.4% to 32.6% over 2013 levels.
Second quarter 2014 shipments are expected in the range of 870 MW to 950 MW. Gross margin is expected to remain in the band of 14% to 16% in the second quarter of 2014.
For 2014, the company sees considerable demand from China, the U.S., Japan, and other emerging markets, such as Africa, South America, and Southeast Asia. It also expects to return to profitability by the end of this year.
Peer Comparisons
JA Solar Holdings Co. Ltd. (JASO) announced a profit of 32 cents per ADS in the first quarter of 2014, comfortably surpassing the Zacks Consensus Estimate of a profit of 8 cents by 300%. The company also swung to a profit in the reported quarter from a loss of 85 cents per share in the year-ago period. The reported figure was 113.3% higher than 15 cents per ADS reported in the preceding quarter.
Solar PV module manufacturer Trina Solar Ltd. (TSL) reported earnings of 37 cents per ADS in the first quarter of 2014 as against a loss of 90 cents per ADS in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by a whopping 3700.0%.
JinkoSolar Holding Co. Ltd. (JKS) reported first quarter 2014 results with adjusted earnings per ADS of 20 cents (adjusted earnings of 5 cents per share), much lower than the Zacks Consensus Estimate of 41 cents. The company, however, reversed its year-ago adjusted loss per ADS of 56 cents (adjusted loss of 14 cents per share) in the reported quarter. Each “ADS” represents four ordinary shares. Earnings in the quarter came on the back of JinkoSolar’s wide geographical expansion.
Our Take
Yingli Solar, with its main focus on the Chinese market, where solar-panel margins are thinner, not only missed the consensus expectation but did not report a profit for 11 quarters in a row.
However, the company is stepping up its efforts to build solar farms. It completed 128 MW of projects in 2013 and expects to complete construction of 400 MW to 600 MW of projects in China in 2014.
Presently, China, Japan and the U.S. are driving demand for solar panels. Solar majors active in Asia are expected to gain traction as the industry oversupply shrinks. Notably, 2013 showed astounding scale in the Chinese market, overtaking longtime leader Germany. This year, solar developers around the globe are expected to install record capacity, as a booming Chinese market drives growth.
Again, Yingli Solar’s 2014 FIFA World Cup sponsorship is expected to give a major thrust to its PV installation worldwide.
Zacks Rank
Yingli Solar currently has a Zacks Rank #3 (Hold).
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