ReneSola (NYSE: SOL) has certainly turned out to be more than just another solar IPO. After their initial stumble out of the gate, the shares have more than tripled since late March. So why's ReneSola causing such a ruckus?

Like LDK Solar (NYSE: LDK), ReneSola is a Chinese solar wafer manufacturer. Whereas LDK is branching out from multicrystalline wafers into more efficient monocrystalline, ReneSola is doing the exact opposite. This ought to work toward ReneSola's advantage, in that the firm will be able to reclaim scrap material from its more demanding monocrystalline operations.

Moving into lower-cost multicrystalline manufacturing ought to aid ReneSola's gross margins, which fall well below those of LDK. Both firms have seen a huge rise in raw material costs -- in ReneSola's case, a 21% sequential jump in the first quarter. Given the polysilicon squeeze that's hurting everyone from Suntech Power (NYSE: STP) to Trina Solar (NYSE: TSL), you'd think ReneSola's quarter would be kinda crummy.

You'd be wrong, though. By decreasing its silicon consumption to 6.3 grams per watt (a 3% sequential drop), ReneSola protected, and in fact expanded, its margins in the first quarter. Rising sales prices for its wafers, which the firm sells to leading lights like Suntech, JA Solar (Nasdaq: JASO), and Solarfun Power (Nasdaq: SOLF), also helped.

Quarterly wafer shipments rose about 30% over the fourth quarter, and pre-tax profit was up a massive 72%. The swing from a significant tax benefit to a tax expense made the bottom line look limp, but there's plenty to be excited about here.

There are also a few items I'm less than thrilled about. ReneSola's balance sheet isn't the prettiest I've ever seen, and the firm will need a fair amount of capital to move forward with both its wafer expansion (1 gigawatt of capacity by the end of 2009) and its polysilicon joint venture. The diluted share count is up 23% in a year, and future dilution will add an extra hurdle for the company to deliver value for shareholders.

On a related point, the business is consuming a lot of cash at this stage. While I appreciate the company's provision of a cash flow statement in its press release, these significant working capital needs are another strain on liquidity. As long as investors remain sunny on the solar group, none of this will be a problem, but we've seen Mr. Market go sour on solar in the recent past, and I can't rule out a relapse.

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