Yingli Green Tumbles on Wider-than-Expected Loss - Analyst Blog

Yingli Green Energy Holding Company Limited's YGE shares dropped more than 8% yesterday after the world's largest vertically integrated photovoltaic manufacturer reported fourth quarter 2013 results in the red and also missed the Zacks Consensus Estimate.

The company reported fourth quarter 2013 adjusted loss of 31 cents per American Depositary Share ADS, wider than the Zacks Consensus Estimate of a loss of 17 cents. The reported loss was, however, narrower than the year-ago loss of 93 cents per share. Loss in the reported quarter was again wider than the loss of 24 cents incurred during the third quarter 2013.

Although the company managed to boost shipments during the quarter, its massive debt burden and the associated interest expense led it to incur losses.

In 2013, Yingli Green narrowed its adjusted loss to $1.52 per ADS from a loss of $2.15 per ADS incurred in 2012.

Quarterly Performance

Yingli Green's revenues in the reported quarter were $613.0 million, lagging the Zacks Consensus Estimate of $651.0 million by 5.8%. Revenues increased 31.5% from $466.0 million in the fourth quarter of 2012 and 2.8% from $ 596.3 million in the third quarter of 2013.

Full year 2013 total revenue also increased 21.2% year over year to $2,216.5 million. The upcast was mainly due to higher photovoltaic (PV) module shipments.

Gross profit was $74.6 million or 12.2% of total revenue, as against a gross loss of $39.8 million or a negative 8.5% in the year-earlier period and a gross profit of $81.5 million or 13.7% of total revenue in the third quarter of 2013.

Total operating expenses increased 21.9% year over year and 85.8% sequentially to $172.8 million.

Interest expense surged 26.2% year over year to $42.4 million in the quarter under review, while it increased 11.5% to $160.5 million in 2013.

Shipments

Total shipments comprising shipments of PV systems in the reported quarter jumped 11.4% sequentially.

In 2013, total shipments were 3,234.3 megawatt MW, an increase of 40.8% from 2,297.1 MW in 2012.

Financial Condition

At the end of 2013, Yingli Green had a cash balance of $462.2 million. Long-term debt, excluding current portion, was $678.6 million versus $654.3 million at 2012 end.

Guidance

Yingli Green expects to ship 4.0–4.2 gigawatt (GW) of PV module for 2014, an impressive increase of 29.4% to 32.6% over 2013 levels. For 2014, the company plans to establish its position in China, the U.S., Japan, and other emerging markets, such as Africa, South America, and Southeast Asia. It also expects to return to profitability by the end of this year.

Peer Comparisons

Solar cell manufacturer Canadian Solar Inc. CSIQ reported earnings of 39 cents per share in the fourth quarter of 2013 as against a loss of $2.43 per share in the year-ago quarter. The bottom line, however, came in below the Zacks Consensus Estimate of 49 cents by 20.4%.

JinkoSolar Holding Co. Ltd. JKS reported fourth quarter 2013 results with adjusted earnings per ADS of $1.28 (adjusted earnings of 32 cents per share) coming in ahead of the Zacks Consensus Estimate of 86 cents. The company reversed its year-ago adjusted loss per ADS of $5.06 (adjusted loss $1.26 per share) in the reported quarter.

Our Take

Yingli Green, with its main focus on the Chinese market, where solar-panel margins are thinner, not only missed the consensus expectation but also revealed that it won't be profitable until the third quarter of 2014. The company still needs to get rid of its huge $2.5 billion of debt.

However, the company is stepping up its efforts to build solar farms. It has completed 128 MW in projects in 2013 and expects to complete construction of 400 MW to 600 MW of projects in China in 2014.

Yingli Green's numbers look particularly disappointing when most of the solar giants are returning to profit after two years of a punishing downturn. Presently, China, Japan and the U.S. are driving demand for solar panels. Solar majors active in Asia are expected to gain traction as the industry oversupply shrinks. Notably, 2013 showed astounding scale in the Chinese market, overtaking longtime leader Germany. This year, solar developers around the globe are expected to install record capacity as a booming Chinese market drives growth.

Zacks Rank

Yingli Green currently has a Zacks Rank #3 (Hold). Promising companies in the space include Canadian Solar with a Zacks Rank #1 (Strong Buy), and JinkoSolar and Trina Solar Limited TSL, each with a Zacks Rank #2 (Buy).