LDK Notes:

IBD 9/19/07

• Shortage of silicon universal sector complaint

• Increasing polysilicon prices convinced LDK to get into polysilicon production business

• LDK concentrates on making wafers which go into solar panels

• Cost to enter polysilicon production is $1.2b

  • Must have roughly 13,000 acres

  • Need access to technology

  • Substantial equipment commitments

  • Access to major power plant

• Expects to start production in Q3 of 2008 (6,000 metric ton annual rate – to be increased to 15,000 tons in 2009)

  • Analysts are skeptical but even smaller amounts of production can add to bottom line in an already profitable business

• Until polysilicon production is up and running, LDK is still able to use 75% recycled silicon for its wafers

  • This allows LDK to product at lower costs (30c per watt compared to 43c for the industry)

  • Margins are higher than peers due to lower costs

CIBC 10/9/07

• Allegations of poor financial controls – CIBC cannot confirm or deny

• Financial controller left after submitting allegations to management, SEC, and auditors

CIBC 10/9/07

• Management raised guidance to $140-150m revenue from $115-125 for Q3 – no profit guidance

• May use third party auditor for special inventory accounting

  • Possibility that some inventory on books may be unusable

• CIBC sees $1.35 in 2007 and $1.79 in ’08 – projecting $3.95 in 2009

 

11/30/07 Press Release

-          Secured another 312 metric tons of polysilicon for 2008

-          On schedule to reach production goal of capacity of 6,000 metric tons in Q4 of 2008

 

12/10/07 Press Release

-          Signed 10 year contract to supply wafers and polysilicon to German Q-Cells AG

o        6 Gigawats of multicrystalline solar wafers over 2009-2018 period

o        Q-Cells paying 10% up front to finance required expansion

o        Q-Cells has option to increase purchase if expansion successful

 

Q3 EPS and conf call (12/19/07)

-          Revenue $158.7m up 60% sequentially, net income $41.6m (0.37 per share) up 45% sequentially

-          Wafer shipments up 49% sequentially to 78.9mw for the quarter and signed 4 long-term wafer supply agreements (five more since Q3 closed)

-          “With the inventory investigation behind us, we have returned our focus to growing our business”

-          On track to meet production capacity goal of 400mw by end of 2007

-          Guiding Q4 revenue to 180-185m and wafer shipments 87-92mw – EPS 0.40-0.43

-          Average sales price per watt up 1% but margins dropped 4.4% to 30.8% (gross) from 35.2% due to higher polysilicon costs

-          Capex 59.1m in Q3 as company expands production capacity

-          Inventories significantly higher as company builds supply of raw material in expectation of expansion of production

-          Independent investigation found no material errors in silicone wafer quality or quantities

-          Top 5 customers accounted for 52% of revenue during Q4

-          Dec 10 signed deal with Q-cells to supply 6GW of wafers over 10 years

-          On track to production capacity of 1.6GW by 2009

-          Continuing to find ways to drive efficiency in production of wafers with less poly needed.

-          Pricing strategy – expect to reduce by 1.5-2% each quarter – have already entered agreements for 75% of poly needed for ’08 production – Continued material efficiency gains – all net out to slight margin squeeze in ’08 to 25-30% gross margins

-          Long-term sales contracts have variable prices on later years derived from ploy prices.

 

CIBC 12/20/07 report

-          Expect GM to be near low end of management guidance of 25-30% due to ASP declines and higher poly prices

-          Management’s statements about 75% poly prices fixed is a bit misleading as contracts are for recycled material and specific mix not expressly nailed down

-          Revenue breakout 30.2% from China, 33.5% from Asia Pacific, 26.6% Europe, 9.7% N. America

 

 

1/2/08 – Announces financial outlook for 2008

-          Guiding Revenue $190-1B, 510-530 MW wafer shipments, 100-350 metric tons of Polysilicon produced, Gross margins 26-31%

-          2009: 1,050-1,150 MW shipped, 5,000-7,000 Metric tons Poly produced, 42-50% GM

 

EPS Release 8/11/08

-          Revenue $441.7m up 89.2% q/q and 346% y/y

-          Annualized wafer production capacity 880MW

-          Signed 9 long-term supply agreements YTD

-          Shipments up 60.8% to 191.7MW for Q2

-          Gross profit margin 25.4% (was 27.7% in Q1 and 35.2% year ago)

-          Net income $149.5m (1.29 per ads) versus 49.8m (0.45/ads in Q1

-          83.7m in cash and 261.9m in pledged bank deposits

-          “customer demand remains strong – diversifying customer base – raising target annualized capacity to 1.2GW by end of 2008, 2.2GW by end of ’09 and 3.2GW by end of 2010”

-          Guiding Q3 revenue $486-496m and wafer shipments between 210 and 220 MW

o        Full year revenue $1.65b to 1.75b, shipments 750-770 MW, Gross margin 23-28%

 

Lehman Report 8/12/08

-          Results above expectations due to faster than expected capacity expansion, stronger ASP and a one time gain of $60m

-          Raised guidance for 2008 by 48%

-          Visibility on polysilicon projects are uncertain

-          Higher poly costs should bring margins below expectations

-          Strong backlog depends on poly projects which Lehman labels as uncertain

-          Management expects flat wafer pricing in second half and 8% decline in 2009

-          Management expects higher poly costs in Q3 but sees that tapering off as in-house production of poly ramps in Q4

o        So gross margins weaker in Q3 but rebounding Q4 and following

-          Capex for 2009 to be $1.2b plus – faster capacity expansion

 

Oppenheimer report 8/12/08

-          Prefer to wait for poly ramp before becoming constructive on stock.

o        Poly production has proven difficult and any delay would be disappointing.

 

EPS Release 11/19/08

-          Revenue $541.8 mil up 22.7% Q/Q, 241% y/y

-          Wafer production capacity of 1.2 GW

-          YTD signed 14 long-term wafer supply agreements

-          Shipments of 252.7MW – up 31.8%

-          Net income 88.4 mil – $0.77 per ADS vs 0.37 last year and $1.29 the previous quarter

-          $347.8 mil in cash and $115.4m in short-term pledged Bank Deposits

-          9/24 – sold 4,800,000 ADS – proceeds $192.4 mil

o        60% for funding construction of Poly Manufacturing plant

o        30% to fund wafer production capacity

-          Continue to experience robust demand and significant growth of our business

-          Well positioned with sufficient resources to fund our growth plans through 2009

o        Geographically diverse customer base

-          Expect polysilicon output in early December, 2008 – a bit behind schedule

-          Guiding Q4 revenue $555- 565 mil – shipping 260-270 MW

-          Guiding 2009 revenue $2.9-3.1 B – wafer shipments 1.80-1.85 GW – Gross margins 26-31%

 

 

 

Release 1/5/08

-          Q4 revenue $425-435, shipments 245-255 MW, Gross margin 10-13% (previously was $555-565, 260-270 MW, 18-20%

-          Capacity at end of 2008 was 1,460 MW

-          Customers requested to delay shipments to 2009 (tight credit markets)

-          Delay in ramping polysilicon production – still in production and likely to ramp in mid-2009 (this is the 1,000 MT plant)

o        Construction of 15,000 MT plant still on schedule – to begin production mid-2009

-          2009 – lower ASP and lower shipments

o        Revenue $2.3-2.5 billion

o        Shipments 1.57-1.67 GW

o        Production capacity to reach 2.3 GW (end of 2009)

o        Gross Margin 22-27%

o        Polysilicon production 3-5,000 MT

-          “Competitive positioning as largest and lowest cost wafer producers will provide comopetitive edge” –Xiaofeng Peng, Chairman and CEO

-          $380 mil in cash, credit facilities > $850 million

-          Operations at full capacity – contract backlog strong for 2009

 

JPM Report 1/6/09

-          2009 cut in shipment expectations was 11%, revenue guidance cut by 20%

-          JPM remains very cautious on solar stocks – demand will be significantly weak in 2009

 

OPCO Report 1/6/09

-          Shares cheap at 5x 2009 estimates

-          Concerns: Soft macro environment, increasing debt, cash burn potential

-          Lowering revenue EPS to $2.34 billion, 2.90 EPS – below company guidance

-          Catalyst likely to be a ramp in poly

EPS Release 3/11/09 – Q4

-          FY 2008 revenue $1.6 bil up 214%

-          Production capacity 1.46 GW (up 1 GW over year)

-          Shipments up nearly 400%

-          In-house poly production early Jan

-          Signed 14 long-term supply agreements – sales backlog of 14 GW through 2018

-          Q4 sales 426.6 mil down 21.3% from Q3 but up 121% from Q4 2007

-          216.7 mil write down in inventory

o        Ex writedown gross profit of $89.9 mil

-          Gross margin negative 29.7%

-          Ended 2008 with $255.5 mil in cash and $83.4m in pledged bank accounts

-          Continued progress on 15,000 MT poly plant – 5,000 line to reach mechanical completion end of Q2.  2,000 to 3,000 MT output in 2009

-          Amended expansion plans to lower capex in short-term

-          Unused credit facilities $850 mil

-          Guiding 2009 revenue Q1: 240-280 mil, shipments 1700-200 MW, GM 3-6%

o        FY 1.4-1.8 bil revenues, shipments of 1.2-1.45 GS, Gross margins 12-19%, poly production 2-3,000 MT

-          Very small amount of debt

 

Piper Jaffray Report 2009-03-11

-          Deteriorating balance sheet

-          Lowered Poly production guidance