ReneSola Posts Wider-than-Expected Q1 Loss - Analyst Blog

ReneSola Ltd SOL reported loss per American Depositary Share ADS of 14 cents in the first quarter of 2014, wider than the Zacks Consensus Estimate of a loss of 5 cents per ADS. However, loss in the reported quarter was narrower than the year-ago loss of 45 cents per ADS. The year-over-year improvement was driven by strong shipments to Japan.

Operational Results

ReneSola's net revenues of $415.0 million advanced 46.0% from $284.2 million in the prior-year quarter but decreased 5.4% from $438.8 million in the sequentially preceding quarter. The reported figure fell short of the Zacks Consensus Estimate of $465.0 million by 10.8%.

The year-over-year improvement in sales was driven mainly by higher shipment to Japan at a much higher price. In addition, the company's continuous effort to convert more of its silicon wafers into solar photovoltaic (PV) modules brought considerable sales growth.  

During the quarter under review, total solar wafer and module shipments were 710.1 megawatt (“MW”), up 7.2% year over year but down 9.5% sequentially. Its module shipments were 521.1 MW, up a considerable 59.6% year over year and 3.1% sequentially.

Operating expenses, representing 12.7% of total revenues, jumped 77.2% year over year and 29.1% sequentially to $52.8 million during the quarter.

Operating loss during the quarter was $8.7 million as compared to an operating income of $8.8 million in the fourth quarter of 2013. However, the quarterly loss was much narrower than the year-ago loss of $33.4 million.

Financial Condition

As of Mar 31, 2014, ReneSola had cash and cash equivalents plus restricted cash of $214.9 million, compared with $348.9 million as of Dec 31, 2013. Net cash outflow from operating activities was $112.3 million in first quarter 2014 compared with net cash outflow of $30.8 million in the fourth quarter of 2013. Total debt was $723.9 million as of Mar 2014 compared with $742.6 million as of Dec 31, 2013.

Guidance

The company expects to deliver a robust second quarter on the back of its strong sales and marketing capabilities across international markets. In addition, its polysilicon factory was back to full production since the end of March and is expected to contribute to the company's overall profitability from the second quarter onward.

The company expects second quarter 2014 total solar module shipments between 480 MW and 500 MW, with overall gross margin in the range of 12% to 14%.

For 2014, the company maintained its solar module shipments forecast in the range of 2.3 gigawatts (GW) to 2.5 GW.

At the Peers

JA Solar Holdings Co. Ltd. JASO announced a profit of 32 cents per American Depositary Share ADS in the first quarter of 2014, comfortably surpassing the Zacks Consensus Estimate of a profit of 8 cents by 300%. The company also swung to a profit in the reported quarter from a loss of 85 cents per share in the year-ago period. The reported figure was also 113.3% higher than 15 cents per ADS reported in the preceding quarter.

Solar cell manufacturer Canadian Solar Inc. CSIQ reported earnings of 7 cents per share in the first quarter of 2014 as against a loss of 10 cents per share in the year-ago quarter. The bottom line, however, was short of the Zacks Consensus Estimate by a penny.

JinkoSolar Holding Co. Ltd. JKS reported first quarter 2014 results with adjusted earnings per American Depositary Share ADS of 20 cents (adjusted earnings of 5 cents per share), much lower than the Zacks Consensus Estimate of 41 cents. The company, however, reversed its year-ago adjusted loss per ADS of 56 cents (adjusted loss of 14 cents per share) in the reported quarter. Each “ADS” represents four ordinary shares.

Our Take

ReneSola continues to emphasize its original equipment manufacturing (OEM) strategy. It is believed that the company could continue its operations with low capital expenditure requirements despite the presence of regulatory uncertainties related to trading in the major solar markets, including the U.S, India and Australia. Its overseas OEM module capacity now surpasses 1.1 GW, with a total of 11 facilities in Europe, Africa, South Asia, and the Asia-Pacific region.

The company offers varied products for the PV industry. The company is presently manufacturing polysilicon, wafers, PV modules, microinverters, string inverters and energy storage systems. It is also developing a tripod mounting system. Therefore, we believe that this diversified business portfolio will generate strong business opportunity for the company.

ReneSola is committed to expanding its global retail market for commercial and residential installations. It is expected that retail market sales will reach roughly half of shipments by the end of the year.

ReneSola presently carries a Zacks Rank #3 (Hold).