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Suntech Power Holdings Ltd. (STP) Reports First Quarter Earnings and Revenues ahead of Estimates

Suntech Power Holdings Ltd. (STP), a manufacturer of photovoltaic solar cells and panels for power generation in China, reported first quarter non-GAAP net income of $60.6 million, or 35 cents per diluted American Depositary Receipt, well above analysts’ consensus estimate of 27 cents and an increase of 85% year over year. Net revenues of $434.5 million were 15% higher than expected and 76% above last year’s sales.

“We executed extremely well during the first quarter, despite the impact of the snowstorm, to deliver stronger than expected growth in net revenues and solid financial results,” said Dr. Zhengrong Shi, Suntech’s Chairman and CEO. “A vigorous demand environment in the major solar markets in Germany and Spain as well as in the emerging markets including South Korea and Italy drove strong pricing during the quarter. We expect demand to remain robust through 2008 and are virtually sold out for the full year.”

The biggest constraint facing solar cell makers is securing long-term access to enough polysilicon to meet increasing demand for photovoltaics. Dr. Shi said, “During the first quarter we leveraged the funds raised through our convertible senior notes offering to enhance our long term cost competitiveness with new and expanded polysilicon supply agreements and strategic investment in key suppliers. Our ability to secure reasonably priced silicon reflects our competitive strengths with respect to our leading market position, financial strength, and close relationships with upstream suppliers. We are confident that this improved silicon outlook will help us to achieve our goal of providing grid parity solar solutions.”

Suntech provided second quarter revenue guidance of $430-440 million, slightly ahead of the $427.7 million analysts are expecting. The company reiterated its full-year revenue target of $1.9 – $2.1 billion. Gross margins of 22.5% were better than the 19.9% reported last year, and could continue to improve because Suntech believes that silicon will become cheaper and more readily available as the year progresses.

Shares of STP closed at $46.26 on Wednesday, and have ranged between $28.19 and $90.00 during the past year. With 153 million shares outstanding, STP has a market cap of $7.1 billion. With $1 billion in cash on the balance sheet, STP has a quick ratio of 2.8. The accelerated surge in crude oil prices recently has sparked renewed interest in the solar sector among investors. Chinese firms, including CSIQ, SOLF and TSL, have been particularly in the spotlight.

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