In the grand scheme of things, Suntech Power's
What analysts say:
-
Buy, sell, or waffle? Sixteen analysts now follow Suntech, up three from last quarter. They give Suntech 11 buy ratings and five holds.
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Revenues. On average, they're looking for an amazing 154% growth in sales, to $228.1 million.
- Earnings. Profits are predicted to flip digits, moving from $0.12 per American Depositary Receipt last Q1, to $0.21 per ADR on Tuesday.
What management says:
Describing its business at an "Analyst and Investor Day" held in Hong Kong shortly after releasing Q4 and full-year 2006 earnings, Suntech reiterated past assertions that it's the low-cost producer in the photovoltaic world. The longer the firm can retain that title, the dimmer the prospects for the raft of fellow solar-power plays such as Evergreen Solar
What management does:
One has to wonder whether all the new "me-too" solar IPOs -- many, like Suntech, coming from China -- are beginning to compress margins for everyone. The table below sure seems to suggest it. Last quarter gave us our first comparable year-over-year number, which appears to confirm a downward trend in Suntech's margins. The upside for Suntech investors: If margins fall for everyone, the low-cost producer may soon be the only one making a profit.
|
12/05 |
3/06 |
6/06 |
9/06 |
12/06 |
|
|---|---|---|---|---|---|
|
Gross |
26.5% |
30.7% |
28.2% |
23.3% |
22.8% |
|
Operating |
24.7% |
22.9% |
22.0% |
21.3% |
14.2% |
|
Net |
11.9% |
21.5% |
20.7% |
17.6% |
14.4% |
One Fool says:
One of the key elements of Suntech's gross margins is silicon. Shortages of the raw material are widely reported in the media, which tends to make investors nervous. As revealed in our recent interview with Suntech CEO Zhengrong Shi, Suntech shareholders can rest easy. To read the whole interview, you'll need Fool access to the Motley Fool Rule Breakers website. For non-subscribers, though, let's peek at what Rule Breakers members have already learned from Dr. Shi on the subject of silicon supplies:
While we think that the solar industry will continue to operate in a silicon-constrained environment for a few years, we see this as an opportunity rather than a risk.... We are moving from an environment in 2006 where we bought 75% or more of our silicon needs with spot-type pricing. In 2007, our long-term contract silicon is trending upward to a point where spot-type pricing of silicon will only account for 30% of the silicon that we need to fulfill our 280-megawatt stated production target for the year. This is in contrast to many peer companies that are still struggling with increasing silicon costs or cannot procure sufficient volumes to fully utilize their capacity or expand their capacity as fast as they would like.
Good to know. What's more, this is only a sampling of the insights Dr. Shi gave our members in the interview, published earlier this month. Get the rest of the Fool skinny on Suntech when you claim a free trial of the Rule Breakers service.
Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.
