Friday, March 04, 2011

Missing the Fun

If you think you have been missing out on the “fun” in the solar energy space it might be because China-based solar cell manufacturer Solarfun Power Holdings Co., Ltd. has changed its name and stock symbol to Hanwha Solarone Co Ltd. (HSOL:  Nasdaq).  The name change is not unexpected given the significant position of Korea’s Hanwha Group in Solarfun.  To reintroduce itself to U.S. investors, management team of Hanwha Solarone is ringing the closing bell at Nasdaq where its stock trades.

Hanwha Solarone manufactures silicon ingots, photovoltaic cells and photovoltaic modules for the solar energy industry.  The company won a couple of recent deals that are helping to drive the top-line and profitability.  Hanwha Solarone recently announced agreements with MEMC Electronic Materials and CNBM International Corp. to supply 54 MW and 50 MW of photovoltaic modules, respectively.  The modules will end up in power plant projects in the U.S. and China.

Management is bullish on the future.  They are expecting photovoltaic module shipments between 1.0 GW to 1.2 GW in the fiscal year 2011, an increase from previous guidance.  The optimism stems from good visibility on order flow from customers and stable pricing conditions.  The average selling price in recent months has been near $1.77 per watt, slightly higher than reported in the industry.  Improving availability of wafers and cells for purchase is also giving management confidence the company can fill orders through outside purchases.

Margins increased to the 20% level in recent months.  The company expects profit margins to continue improving on vertical integration efforts that reduce costs.

We expect more from the company than just a bit of cost savings at the operating level.  The company has a new strategy officer, Sungsoo Lee, who is coming from the company’s significant shareholder, Hanwha Group.  The company is looking for a chief operating office since the resignation of Zhoumiao Gao in February 2011.  Do not be surprised if that position is filled with another graduate from Hanwha.

HSOL is trading near 8.0 times trailing earnings of $0.95 per share, a compelling valuation for some.  Nonetheless, the prevailing opinion on HSOL is hold.


Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. HSOL is included in Crystal Equity Research’s The Atomics Index in the Solar Group.

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