Yingli shines on Chinese demand
The solar energy company expects to see higher sales in 2012 despite German headwinds.
We have revised our price estimate for Yingli to $3.50, which is about 25% ahead of its current market price. While we still believe the company is well-positioned in the long term, our forecast changes reflect a deterioration in the company's liquidity and sharper drops in the pricing of modules and gross margins across markets in 2012 on the back of weak demand. Despite Yingli's strong performance in the first quarter, overall demand from the German market is expected to see a drop and the imposition on tariffs in the U.S. market will also hamper Yingli's sales and margins.
We also expect panel prices to go down further because of continuing overcapacity in the industry. Yingli's dependence on traditional markets to drive sales could result in the company losing a significant portion of its sales as the market sizes contract because of subsidy pullbacks.
Management's bullish outlook
Yingli will continue to increase manufacturing capacity in 2012 despite the overall weakness in the solar modules market. The company beat its Chinese competitors in terms of shipments in the last quarter on the back of strong sales in Germany and the U.S., while Suntech and Trina reported a drop in module sales. Yingli also remained positive on future sales in Germany and the U.S. despite the issues the solar industry is facing. The company also hopes to achieve 15% sequential growth in the next quarter and increased sales for the year on growing demand from China. It also hopes to keep its gross margins intact by cutting costs in line with drops in panel prices.
Going forward, Yingli is hoping to cut down on silicon as well as non-silicon costs to tackle the fall in module prices. Yingli is also pursing a broad effort to increase the efficiency of its panel range in 2012 to retain its technological and cost advantage. The company said that it expects 30% of revenues for the year 2012 to come from sales in China. However, despite strong sales, the company's cash position showed a slight deterioration in the period. The changing market conditions for solar in key markets such as Germany and the U.S. could have a major impact on Yingli's performance throughout the year.
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