The solar space has been a tumultuous one lately, with shares across the sector dropping by double digits one day, only to reverse course and scream higher the next. While shares of LDK Solar
The one that has shone most brightly over the past month, however, is Suntech Power
At present, no module maker can go toe-to-toe with China's Suntech when it comes to sheer scale. The firm reached 420 megawatts of production capacity at the end of the quarter, and anticipates hitting its one-gigawatt production target by the end of 2008, two full years ahead of schedule. That's a lot of juice.
The capacity ramp, combined with a deluge of demand, helped Suntech surpass its production guidance and sell more than 100MW of modules in the quarter. This catapulted net revenue 137% higher, and net margins of 13.8% brought $53 million down to the bottom line. Best of all, the company reported not only accounting profits, but positive operating cash flow. You might be surprised to hear that this was a first for the company since its IPO, but cash generation has finally caught up with capital expenditures.
I know this issue is so last season, but I'd like to talk about stock options for a minute. Suntech has a pretty Western attitude toward share-based compensation, which amounted to $6.6 million in the quarter. At 10% of non-GAAP operating income, that approaches Google
Looking ahead, I see a very bright 2008 for Suntech. The company has already secured 530MW worth of silicon, with a vast majority coming from established suppliers. When an analyst on the conference call put two and two together and asked if the company's projected higher selling prices and lower silicon costs would boost margins, the CEO had the perfect reply: "Can you see our faces smiling?"