Aufgrund der exorbitant hohen Verschuldung, sehe ich in LDK Solar, eine der chinesischen Unternehmen, die es schwer haben dürften die bevorstehende Konsolidierung zu überstehen.
Wells Fargo dropped coverage of Chinese solar company LDK Solar(LDK_) on Tuesday, with analyst Sam Dubinsky writing, "We are dropping equity research coverage of LDK as we are not convinced shares are a viable investment."
On Monday night, LDK released the latest in a string of negative pre-reports from solar companies, and to be frank, the numbers don't even matter. The pre-reports in solar -- and especially from profligate over-promiser and under-deliverer LDK -- were expected as fundamentals remain weak in the solar sector and sector recovery could be at least a half year out on the horizon.
An example of why LDK should not be trusted by investors (and there are many): It provided its third-quarter guidance a full two months into the quarter, and based on Monday's numbers still came up 29% below its revenue guidance. In past years, LDK has missed its revenue guidance by as much as a billion dollars so this should not have surprised anyone.
As TheStreet wrote when the solar sector entered its current downturn at the beginning of this year, LDK Solar is arguably the most dangerous solar stock out there, heavily indebted and with Wall Street buy ratings banking on a successful initial public offering of its polysilicon operation this year (an event which still has not happened even though LDK continues to talk it up). In fact, polysilicon prices have entered free fall and the major players in the market announced massive capacity expansion plans. LDK also has been trying to move both into module production and project development, while facing intense pressure in the wafer market from GCL-Poly. Wearing all of these hats at once might make the company look like it's on the right track (to some), but in the current solar downturn it's more of a dream than a reality.
Making a bad situation even worse, the head of LDK Solar's audit committee left in the middle of the sector downturn (always a negative headline for a Chinese equity).
As Dan Ries of Collins Stewart wrote on Tuesday after the LDK pre-announcement, "While the market was poor ... the company has badly under-estimated the challenges associated with entering the module market and understated the inherent difficulty of competing head-to-head in the wafer market with the cost advantaged GCL Poly. ... Given concerns about LDK's financial viability ($3.3B of debt as of 6/30/11, only $1.15B of cash), we do not believe it has a 'winning hand' in the module market, as its poor balance sheet naturally leads to concerns on the part of solar system buyers (and the banks that finance systems) about the ability of LDK to honor a 20-year warranty. ... Given LDK's higher-than-peers' production cost, high interest expense load, and limited brand strength in modules, its loses are expected to continue in this downturn."
Reis moved to a $2 price target on LDK shares and a sell rating.
When the company with arguably the best balance sheet in solar, First Solar(FSLR_), is firing its CEO and rumored to be running into the hands of a GE because it can no longer "go it alone," the issue of a solar company's balance sheet is only magnified the worse the balance sheet looks, and LDK is the poster-child for the bad balance sheet in solar.
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