For a company that appears to be outperforming most of its global peers on the ground, Yingli Green Energy
If you follow this space, you're probably aware that Germany has been the source of major unease in 2010. As soon as the new government was elected last fall, rumors started flying about reductions to the country's generous subsidy program. In mid-January, the rumors got much more specific. While the details are still being hammered out, solar stocks have gotten hammered since that time. The fear is that with a German pullback, the global solar market will return to an oversupply situation that, while not as severe as the one we saw in late 2008 to early 2009, could still do a number on sales prices and margins.
Yingli just reported fourth-quarter results, which failed to light anyone's fuse. The top line was robust, at $371 million, but net income was negative, and even adjusted earnings were an uninspiring $20 million. That's a 5.5% adjusted earnings margin for the quarter, and a 5% margin for the full year. Suntech Power
Earnings tend to be quirky, and in the solar sector in particular I've found their correlation with cash flows to be quite low, so it's probably a mistake to read too much into a single quarter. This divergence between Yingli and Suntech is something to keep an eye on, though. I should mention that both companies lag Trina Solar
One reason I wouldn't count Yingli out is that the company seems to be taking share from competitors in key markets. Germany is an obvious one. Domestic players there are just getting killed, on account of their higher cost structures. Yingli asserted on its conference call that it expects "sustainable growth" in Germany in 2010. As the subsidies get reeled in, that means eating someone else's lunch. The United States is another case. Yingli reports exiting 2009 with the largest share of applications under the California Solar Initiative, which has to sting for SunPower
Yesterday, Reuters quoted one Wall Street analyst who argued that Yingli is likely to be a price taker, rather than a price setter, as competitive pricing dynamics play out this year. I would very much like that to be the case, but I can't shake some of Yingli's past behavior in this regard. The company's lousy lowball, in which the company dramatically undercut more realistic bids by the likes of Canadian Solar
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