Solar Reality... The Sun Just Does Not Shine (STP, LDK, CSIQ, TSL, JASO, JKS)

The solar PV sector has been struggling for the last two or three quarters as manufacturing over-capacity has driven down module pricing by around 40% since the beginning of the year. China’s top solar makers are getting beaten up, perhaps even worse than their US counterparts.

Six Chinese solar makers reported earnings after markets closed last night and before they opened again this morning: Suntech Power Holdings Co. Ltd. (NYSE: STP), LDK Solar Co. Ltd. (NYSE: LDK), Canadian Solar Inc. (NASDAQ: CSIQ), Trina Solar Ltd. (NYSE: TSL), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), and JinkoSolar Holding Solar Co. Ltd. (NYSE: JKS). Every one of the six performed much worse than already poor expectations. Here’s the litany of third-quarter failure:

Suntech posted an EPS loss of -$0.64 on revenue of $810 million. The consensus estimate called for an EPS loss of -$0.64 on revenue of $776 million. Gross margin was 13.3% in the quarter, and the company expects that to fall to a range of 9%-11% in the fourth quarter. The company lowered its full-year shipment guidance from 2,200 megawatts to 2,000 megawatts.

LDK Solar posted an EPS loss of -$0.87 on revenue of $472 million. The consensus estimate called for an EPS loss of -$0.46 on revenue of $515 million. Gross margin was -3.6% in the quarter, and the company expects that to rise to 2%-7% in the fourth quarter. The company lowered full-year module shipment guidance from 750-850 megawatts to 55–65 megawatts. LDK also revised wafer and ingot shipments downward.

Canadian Solar posted an EPS loss of -$1.02 on revenue of $500 million. The consensus estimate called for an EPS loss of -$0.39 on revenue of $497 million. Gross margin was 2.4% in the quarter, and the company expects that to rise to 5%-8% in the fourth quarter. The company reiterated its full-year shipment guidance of 1,200-1,300 megawatts.

Trina Solar posted an EPS loss of -$0.45 on revenue of $482 million. The consensus estimate called for an EPS loss of -$0.09 on revenue of $440 million. Gross margin was 10.8%, and the company expects gross margin of about 10% in the fourth quarter. The company lowered its full-year shipment guidance from 1,750-1,800 megawatts to 1,400 megawatts.

JA Solar posted an EPS loss of -$0.36 on revenue of $388 million. The consensus estimate called for an EPS loss of -$0.01 on revenue of $379 million. Gross margin was -4.3%, and the company did not provide an estimate for fourth quarter gross margin. The company reduced its full-year shipment guidance from 1,800 megawatts to 1,600 megawatts.

JinkoSolar posted an EPS loss of -$0.47 on revenue of $279 million. The consensus estimate called for EPS of $0.18 on revenue of $272 million. Gross margin was 3.7%, and the company did not provide an estimate for fourth quarter gross margin. Its project for fourth quarter revenue is $180-$210 million.

To declare today an unmitigated disaster for the Chinese solar makers may be understating the case. The companies that are predicting a higher gross margin the current quarter are probably dreaming, and the two companies that did not offer an estimate of fourth-quarter margins (JA Solar and JinkoSolar) undoubtedly face margins so low that they are embarrassed to discuss them.

There will be blood in the streets from these stocks again this morning. That does not mean that this is a particularly good buying opportunity, however. Failures and consolidations in the Chinese solar PV industry have got to be just around the corner. For the past 12 months, every one of these companies’ share price is down at least -70%.

In this morning’s pre-market, JinkoSolar shares are down the most, -12%, at $5.02 in a 52-week range of $4.55-$32.21. LDK shares are down more than -4.5%, at $2.70, in a 52-week range of $2.55-$14.97. Trina Solar is down nearly -4%, at $5.99, in a 52-week range of $5.28-$31.08. JA Solar is down more than -90%, to $1.38, a new 52-week low if it holds. JA Solar’s current 52-week range is $1.46-$8.57. Canadian Solar is down about -4.5%, at $2.10, also a potential nerw 52-week low. The company’s current range is $2.16-$16.79. Suntech shares have not moved yet this morning.

Paul Ausick