Renesola - Chinese Solar Panel/Silicon Recycling

Good posts by vernit - 20 Dec'06 - 10:15 - 17869 and pze1 - 20 Dec'06 - 10:24 – 17870.

I have double checked JT’s calculations and can confirm that he does appear to have included 40 cents extra profit per wafer in his forecasts arising from SOLA bringing wafer slicing in-house with their own machines.

As ever JT’s research is extremely thorough. I therefore agree the recent note from lemminginvestor.com is unlikely to affect his forecasts. JT is away but should be back soon and will be able to check and clarify himself.

However, this does not invalidate my main point, which is SOLA management have confirmed to lemming that in-house slicing will increase profits by 40 cents per wafer and that Merril, EVO and other analysts appear not to have factored the increased efficiency and profitability which JT has identified and incorporated in his forecasts.

Therefore we are likely to see very large upgrades in earnings forecasts by Merril and other analysts as they too begin to catch-up and recognise this increased profitability, as can be seen comparing analysts’ forecasts with those of JT below:

2007 Estimates
Merril Lynch: ……......Net Profit $US 77.56 millions; ….EPS..39.0 pence
Hanson Westhouse....EPS..39.3 pence
Evolution………….......EPS..40.8 pence


JTCod ………...….. Net Profit $US 134.6 millions; ….EPS…64.1 pence

JT earnings forecasts are 64% higher than Merrils for 2007.





2008 Estimates
Merril Lynch.................... EPS…..65.0 pence
Hanson Westhouse..........EPS......59.9 pence
Credit Suisse...................EPS.....57.0 pence

JTCod.............................EPS....100.0 pence

JT has explained that his 2008 forecast is a rough estimate and that he intends to do more detailed calculations.

He also said that his 2008 estimate is conservative because it is based on year end 2007 production capacity rate annualised and does not allow for any increase in production capacity during 2008 which SOLA will announce in 2007.




I agree with JT and that SOLA will almost certainly announce during 2007 very significant capacity increases for 2008. because:

(A) of the massive increased demand for wafers which can be derived by the already announced huge production increases of cells/modules/panels in 2007 and again in 2008 forecast by just about every PV company

(B) there will still be a shortage of conventional silicon raw material in 2008 according Daiwa, Merril Lynch, Evolution and other analysts

(C) SOLA’s ability to finance its increased production capacity out of cash flow because of the exceptionally high profitability and low costs in China and the proven willingness of its customers to enter into commitments to buy future production and to finance and/or provide through tolling arrangements to pass their scrap to SOLA to process and sell back to them the finished wafers.




Some recent posts illustrate this combination of rapidly increasing demand with shortage of supply of PV quality poly silicon;

From jks246 post 17844

Piper Jaffray : “Additionally, the market’s wondering where many of these newcomers get their polysilicon."”

Mark Cox, CEO of the New Energy Fund hedge fund “I’d say we’re in a flat overall market because of the shortage of silicon and things.”




The scale of increase of demand is illustrated in OC’s post 17937

“Overall, in 2005 the solar cell production of 12 manufacturers in China was around 150 MW. According to Zhang Cheng, TI Manager for NDRC/PMO, in 2006 the production capacity may reach 1,450 MW with more than 30 Chinese manufacturers. The figures for solar modules are of a similar magnitude. The production in 2005 was 284 MW at a capacity of 857 MW. This capacity will almost double to 1,500 MW in 2006. The number of manufacturers is not known. It could well be over 50, but will already be more at the time of writing this line”