Stock Alert for Yingli Green Energy Holding Company Ltd. (YGE)
Yingli Green Energy Holding Company Ltd. (NYSE: YGE)
Yingli Green Energy Holding Co. Ltd. (YGE) is a vertically integrated photovoltaic (PV) product manufacturer in China. The Company designs, manufactures and sells PV modules and designs, assembles, sells and install PV systems. As of December 31, 2008, the Company’s annual production capacity was 400 megawatts for each of polysilicon ingots and wafers, PV cells and PV modules. YGE’s end-products include PV modules and PV systems in different sizes and power outputs. It sells PV modules under its own brand names, Yingli and Yingli Solar, to PV system integrators and distributors located in various markets worldwide, including Spain, Germany, the United States and China. In January 2009, the Company completed the acquisition of Cyber Power Group Ltd., through its principal operating subsidiary in China, Fine Silicon Co., Ltd.
The Company was founded in 1998 and is headquartered in Baoding, the People’s Republic of China.
| Share Statistics (28-Jun-10) | CNY | FY
2007 |
FY
2008 |
%
Chg |
Q4 2008 | Q4 2009 | %
Chg |
|
| Symbol | YGE | Revenue, $Mn | 4.06B | 7.55B | 46.5% | 257.5M | 370.6M | 43.9% |
| Current price | $10.68 | Gross marg. | 23.6% | 23.4% | 0.8% | n/a | 29.6% | n/a |
| 52wk Range: | $19.11-8.31 | Oper. margin | 16.7% | 15.3% | 8.4% | n/a | -1.3% | n/a |
| Avg Vol (3m): | 4,831,800 | Net margin | 9.8% | 8.6% | 12.2% | n/a | -4.2% | n/a |
| Market Cap. | 1.36B | |||||||
| Shares Outst. | 145.6M | EPS, $ | 0.40 | 0.76 | 47.4% | 0.12 | -0.04 | 133.3% |
Source: Reuters.com, SEC Filings.
Financial Summary
First Quarter 2010 Consolidated Financial and Operating Highlights
– Total net revenues were RMB 2,449.9 million (US$358.9 million).
– Gross profit was RMB 815.4 million (US$119.5 million) and gross margin was 33.3%.
– Operating income was RMB 535.9 million (US$78.5 million) and operating margin was 21.9%.
– Net income (1) was RMB 190.9 million (US$28.0 million) and diluted earnings per ordinary share and per American depositary share (“ADS”) was RMB 1.24 (US$0.18).
– On an adjusted non-GAAP (2) basis, net income was RMB 246.8 million (US$36.2 million) and diluted earnings per ordinary share and per ADS was RMB 1.60 (US$0.23).
– Actual output of existing 600 MW vertically integrated production capacity was nearly 30% higher than nameplate capacity.
First Quarter 2010 Financial Results
Total Net Revenues
Total net revenues were RMB 2,449.9 million (US$358.9 million) in the first quarter of 2010, a slight decrease of 3.2% from RMB 2,530.9 million in the fourth quarter of 2009 and an increase of 145.0% from RMB 999.9 million in the first quarter of 2009. The slight decrease in total net revenues from the fourth quarter of 2009 was primarily due to the depreciation of the euro against the Renminbi, partially offset by the slight improvement of selling prices in original currencies. PV module shipment volume was flattish compared to last quarter.
Gross Profit and Gross Margin (3)
Gross profit in the first quarter of 2010 was RMB 815.4 million (US$119.5 million), an increase of 8.7% from RMB 750.4 million in the fourth quarter of 2009 and 387.3% from RMB 167.4 million in the first quarter of 2009. Gross margin was 33.3% in the first quarter of 2010, up from 29.6% in the fourth quarter of 2009 and 16.7% in the first quarter of 2009. The increase in gross margin was primarily due to the continuous decline in the blended cost of polysilicon, decreasing polysilicon usage per watt and continuous reduction in non-polysilicon cost.
Operating Expenses (3), (4)
Operating expenses in the first quarter of 2010 were RMB 279.5 million (US$40.9 million), compared to RMB 784.8 million in the fourth quarter of 2009 and RMB 147.0 million in the first quarter of 2009. The higher operating expense in the fourth quarter of 2009 was primarily attributable to a non-cash impairment of intangible assets and a non-cash bad debt expense of RMB 461.0 million, which did not recur in the first quarter of 2010. Operating expense as a percentage of total net revenues was 11.4% in the first quarter of 2010, down from 12.8% in the fourth quarter of 2009 after excluding the two non-cash charges in the fourth quarter of 2009.
During the course of the preparation of the Company’s 2009 annual report, one of its customers failed to perform its obligations under contractual arrangements it had entered into with the Company regarding certain accounts receivable outstanding as of December 31, 2009. The Company is currently seeking legal advice on its options to recover the account receivables. A non-cash bad debt expense was recognized in the fourth quarter 2009 to provide a partial provision for the outstanding accounts receivable. As a prudent measure, the Company has provided an additional non-cash bad debt provision of RMB 145.5 million to cover the full amount of the outstanding accounts receivable for the fourth quarter and full year 2009, which was offset by adjusted income tax benefit and earnings attributable to the non-controlling interests for these two periods. As a result, net loss for the fourth quarter and full year 2009 increased by RMB 61.9 million. The impact of this additional non-cash debt expense on the full year 2009 will be fully reflected in the Company’s annual report for 2009. This provision will be reversed in subsequent financial statements if the Company can recover a portion of the outstanding accounts receivable from this customer.
Operating Income (Loss) and Margin (4)
Operating income in the first quarter of 2010 was RMB 535.9 million (US$78.5 million), a substantial increase from an operating loss of RMB 34.4 million in the fourth quarter of 2009 and an operating income of RMB 20.4 million in the first quarter of 2009.
Operating margin was 21.9% in the first quarter of 2010, compared to a negative operating margin of 1.4% in the fourth quarter of 2009 and 2.0% in the first quarter of 2009. The significant increase in operating margin was mainly due to increased gross margin and decreased operating expenses as a percentage of net revenues.
Interest Expense
Interest expense was RMB 91.2 million (US$13.4 million) in the first quarter of 2010, compared to RMB 80.8 million in the fourth quarter of 2009 and RMB 79.0 million in the first quarter of 2009. The increase in interest expense was consistent with the increase in short-term borrowings from RMB 3,501.0 million as of December 31, 2009, to RMB 3,993.3 million (US$585.0 million) as of March 31, 2010.
After excluding non-cash interest expenses, interest expense was RMB 63.4 million (US$9.3 million) in the first quarter of 2010, compared to RMB 58.7 million in the fourth quarter of 2009 and RMB 72.2 million in the first quarter of 2009. The weighted average interest rate for the borrowings in the first quarter of 2010 was 6.43%, an increase from 6.27% in the fourth quarter of 2009, both measured on a basis excluding non-cash interest expenses.
Foreign Currency Exchange Loss
Foreign currency exchange loss was RMB 169.1 million (US$24.8 million) in the first quarter of 2010, compared to foreign currency exchange losses of RMB 48.5 million in the fourth quarter of 2009 and RMB 93.6 million in the first quarter of 2009. The foreign currency exchange loss in the first quarter of 2010 was primarily due to the depreciation of the euro against the Renminbi.
Income Tax Expense (Benefit) (4)
Income tax expense was RMB 39.5 million (US$5.8 million) in the first quarter of 2010, compared to income tax benefit of RMB 63.0 million in the fourth quarter of 2009 and RMB 13.0 million in the first quarter of 2009. The income tax expense in the first quarter of 2010 was primarily due to the net operating income generated by Tianwei Yingli and Yingli Energy (China) Company Ltd. (“Yingli China”) in this quarter. Under the PRC Enterprise Income Tax Law and the various implementation rules, Tianwei Yingli was subject to an enterprise income tax rate of 12.5% in both 2009 and 2010, and Yingli China was subject to an enterprise income tax rate of 15% in both 2009 and 2010.
Net Income (Loss) (4)
As a result of the factors discussed above, net income was RMB 190.9 million (US$28.0 million) in the first quarter of 2010, compared to a net loss of RMB 106.7 million in the fourth quarter of 2009 and a net loss of RMB 141.6 million in the first quarter of 2009. Diluted earnings per ordinary share and per ADS was RMB 1.24 (US$0.18) in the first quarter of 2010, compared to diluted loss per ordinary share and per ADS of RMB 0.72 in the fourth quarter of 2009 and diluted loss per ordinary share and per ADS of RMB 1.11 in the first quarter of 2009.
On an adjusted non-GAAP basis, net income was RMB 246.8 million (US$36.2 million) in the first quarter of 2010, compared to a net income of RMB 75.7 million in the fourth quarter of 2009 and a net loss of RMB 77.1 million in the first quarter of 2009. Adjusted non-GAAP diluted earnings per ordinary share and per ADS were RMB 1.60 (US$0.23) in the first quarter of 2010, compared to a non-GAAP diluted earnings per ordinary share and per ADS of RMB 0.49 in the fourth quarter of 2009 and a non-GAAP diluted loss per ordinary share and per ADS of RMB 0.61 in the first quarter of 2009.
On an adjusted non-GAAP basis and, if the Company excludes the foreign currency exchange loss, net income was RMB 415.9 million (US$60.9 million) in the first quarter of 2010, compared to a net income of RMB 124.1 million in the fourth quarter of 2009 and a net income of RMB 16.5 million in the first quarter of 2009. Adjusted non-GAAP diluted earnings per ordinary share and per ADS excluding foreign exchange loss were RMB 2.70 (US$0.40) in the first quarter of 2010, compared to a non-GAAP diluted earnings per ordinary share and per ADS excluding foreign exchange loss of RMB 0.80 in the fourth quarter of 2009 and a non-GAAP diluted earnings per ordinary share and per ADS excluding foreign exchange loss of RMB 0.13 in the first quarter of 2009.
Balance Sheet Analysis
As of March 31, 2010, YGE had RMB 4,355.6 million (US$638.1 million) in cash and restricted cash, compared to RMB 3,631.1 million as of December 31, 2009. The increase in cash and restricted cash was primarily a result of positive operating cash flow resulting from the improved collection of accounts receivables and payment control.
Working capital was RMB 675.4 million (US$99.0 million) as of March 31, 2010, compared to RMB 1,031.3 million as of December 31, 2009.
As of the date of this press release, the Company had approximately RMB 10,207 million in authorized lines of credit, of which RMB 4,230 million had not been utilized.
Business Outlook for Full Year 2010
Based on current market and operating conditions, estimated production capacity and forecasted customer demand, the Company reaffirms its PV module shipment target to be in the estimated range of 950 MW to 1 GW for fiscal year 2010, which represents an increase of 80.8% to 90.4% compared to fiscal year 2009.
In addition, after taking into consideration the Company’s estimated blended cost of polysilicon in 2010, the expected average selling price of PV modules and forecasted exchange rates of the euro and U.S. dollar against the Renminbi, the Company also reaffirms its gross margin target for fiscal year 2010 to be in the estimated range of 27% to 29%.
| Financial Strength (28-June-2010) | Company | Industry | Sector | S&P 500 |
| Quick Ratio (MRQ) | 0.86 | 0.89 | 0.70 | 0.80 |
| Current Ratio (MRQ) | 1.09 | 1.14 | 0.93 | 0.96 |
| Long-Term Debt to Equity(MRQ) | 11.98 | 10.74 | 36.70 | 133.99 |
| Total Debt to Equity (MRQ) | 89.35 | 14.06 | 46.90 | 200.21 |
Source: Reuters.com, SEC Filings.
Analyst Consensus
| Buy | Outperform | Hold | Underperform | Sell | No Opinion |
This is the consensus forecast amongst 20 polled investment analysts. Against the Yingli Green Energy Holding Co Ltd company.
| Analyst Detail | Buy | Outperform | Hold | Underperform | Sell | No Opinion |
| Latest | 9 | 2 | 9 | 0 | 0 | 0 |
| 4 weeks ago | 9 | 2 | 9 | 0 | 0 | 0 |
| 2 months ago | 9 | 2 | 7 | 0 | 0 | 0 |
| 3 months ago | 8 | 4 | 7 | 0 | 0 | 0 |
| Last year | 6 | 3 | 5 | 1 | 0 | 0 |
The 21 analysts offering 12-month price targets for YGE have a median target of 13.60, with a high estimate of 23.00 and a low estimate of 8.00. The median estimate represents a 27.34% increase from the last price of 10.68.
Source: www.ft.com
Consensus Estimates Analysis
| # of Estimates | Mean | High | Low | 1 Year Ago | |
| SALES (in millions) | |||||
| Quarter Ending Jun-10 | 18 | 369.85 | 425.14 | 342.00 | 318.23 |
| Quarter Ending Sep-10 | 18 | 383.09 | 469.00 | 289.09 | 360.87 |
| Year Ending Dec-10 | 22 | 1,514.57 | 1,662.58 | 1,330.80 | 1,261.21 |
| Year Ending Dec-11 | 21 | 1,667.84 | 2,175.64 | 1,383.00 | 1,295.43 |
| EARNINGS (per share) | |||||
| Quarter Ending Jun-10 | 17 | 0.20 | 0.36 | 0.09 | 0.25 |
| Quarter Ending Sep-10 | 17 | 0.20 | 0.33 | 0.05 | 0.31 |
| Year Ending Dec-10 | 23 | 0.85 | 1.12 | 0.45 | 1.04 |
| Year Ending Dec-11 | 20 | 0.93 | 1.16 | 0.55 | 0.92 |
| LT Growth Rate (%) | 4 | 25.00 | 40.00 | 15.00 | 33.67 |
Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=YGE
Investment Highlights
YGE recently announced that it will provide its expertise in solar energy to power “20 Centres for 2010,” the official campaign of the 2010 FIFA World Cup South Africa(TM). This campaign is part of the Football for Hope movement, which is using the power of the game for positive social change. It is led by FIFA, world’s football governing body, and streetfootballworld, a social profit organization that links relevant actors in the field of development through football, and their affiliates such as YGE.
YGE will actively support the campaign by providing solar power to training centres across Africa. Yingli Solar calls this “Football for Hope. Energy for Hope.” The Company will supply the centres with solar installations that will, for instance, power pitch lighting, computers or study rooms in those centres. Of the 20 centres, five are being built in South Africa and 15 in other African countries. The first six centres to be built are located in South Africa, Kenya, Rwanda, Mali, Namibia and Ghana.
YGE is hosting a “Football for Hope. Energy for Hope.” press conference on June 30 in Johannesburg, South Africa, in cooperation with FIFA. Federico Addiechi, Head of FIFA’s Corporate Social Responsibility Division, and YGE’s senior management will present and hold one-on-one interviews at the press conference. Furthermore, the Company will also showcase the wide range of solar applications which it plans to contribute to those centres based upon each centre’s specific needs.
YGE also recently announced that its U.S. subsidiary, Yingli Green Energy Americas Inc. has signed a strategic PV module supply agreement with DC Power Systems through the end of 2010. This is one of the largest U.S. agreements for Yingli Green Energy Americas this year, and is also the largest contract between the companies to date.
Yingli Green Energy Americas’ solar panels have been sold to the residential market through DC Power and other solar distributors. According to the Solar Energy Industries Association, residential grid-tied PV installations are showing particularly strong growth, increasing by 100% in 2009 in the United States.
Source: http://www.yinglisolar.com/
Technical Analysis
Source: http://stockcharts.com
YGE is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.
YGE’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, YGE is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.
The MACD for YGE currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above zero, which implies that the underlying moving averages are trending higher.
Comparative Analysis
| Company Name | Ticker | Price per | Mrkt. Cap. | P/E | P/S | ||
| Jun-28-2010 | symbol | Share, $ | $ Mn | 2010 | 2011 | 2010 | 2011 |
| Trina Solar Ltd. (ADR) | TSL | 18.33 | 2.56B | 11.73 | n/a | 1.52 | n/a |
| Suntech Power Holdings Co. | STP | 9.54 | 1.72B | 16.55 | n/a | 1.05 | n/a |
| SunPower Corp. | SPWRA | 13.27 | 1.29B | 23.58 | n/a | 0.91 | n/a |
| Renewable Energy Median | 1.85B | 17.28 | n/a | 1.16 | n/a | ||
| Yingli Green Energy Hold. Co. Ltd | YGE | 10.68 | 1.36B | n/a | n/a | 1.23 | n/a |
Source: Thomson Financial
Insider Trading Activity
| NET SHARES PURCHASE ACTIVITY
Inside Purchases – Last 6 Months |
||
| Shares | Transaction | |
| Purchases | n/a | n/a |
| Sales | n/a | n/a |
| Net Shares Purchased (Sold) | n/a | n/a |
| Total Insider Shares Held | n/a | n/a |
| % Net Shares Purchased (Sold) | n/a | n/a |
| Net Institutional Purchases — Prior Qtr to Latest Qtr | |
| Shares | |
| Net Shares Purchased (Sold) | n/a |
| % Change in Institutional Shares Held | n/a |
Source: Yahoo Finance
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