LON:PVCS | Interims Strong - When Is This A Buy?

18th Nov '08 by promethean

5 comments 3252 reads

PVCS has just reported in it's interim statement this morning that the group performance was strong, and it's upped it's guidance for FY to 225-230MW from 220-230MW. Sales are expected to be considerably ahead of expectations due to the strong Yen (+25% vs Euro)... the majority of income from PVCS is currently in Yen and the Japanese government has also announced increased subsidies for PV installations.

The Bitterfield polysilicon production facility remains on course for a December start and production should begin in about April 2009.

95% of long term wafer supply agreements are contracted at fixed prices and the company reports that demand from customers is unchanged in spite of the credit crunch.

PVCS looks to be one of the top tier solar companies in the near term and the least likely to be affected by the downturn in the PV market as reported by JA Solar in their recent results statement. Demand is primarily from Japan residential properties and not affected immediately by increased cost and reduced availability of project financing.... the subsidies should counter weaker electricity prices.

Trading at a premium to the sector, this looks factored in - the question is, how long will the turn be in the Solar Market and when is the right time to start buying?

Unlock with Email

Unlock with Google

Already have an account?
Login here

Betasurfer

18th Nov '08

The next few months will be tough for solar companies like PVCS, because of the lack of financing for projects, but longer-term, they have a bright (excuse the pun) future. Singer Capital Market published some good thoughts recently, arguing that Obama's election will prove good news for the renewable energy sector - they said:

Barack Obama wants to spend $150bn over 10 years on clean energy and green jobs. With unemployment at a five-year high, an early effort to create jobs by encouraging electricity production from solar and wind will get top priority, energy lobbyists say. Renewables, including hydropower, account for 8% of US electricity. Obama has said he wants 10% of electricity to come from renewable sources by 2012 and 25% by 2025. The US will become an important part of end-demand for renewable energy products in the future. In the UK we like solar stocks like PV Crystalox and Renesola. In wind we like Hansen Transmissions, Clipper Windpower (execution risks still present here but valuation looks attractive). These manufacturers of renewable energy products will benefit from US end-demand for renewables. Also, carbon companies like Camco, Trading Emissions and Climate Exchange could benefit in the longer term from a push for carbon cap and trade systems in the US.

pennant

4th Dec '08

I feel Japan could be the first to turn the corner out of this recession and that bodes well for PVCS as does the weakening pound. When is this a buy? - when the low end of a consensus of well considered earnings forecasts puts fair value ahead of the share price. If anyone has such a forecast I'd be happy to do the math. It is also interesting to work back from the current share price to see what growth expectations are already built in.

promethean

What news have you on Japan? Interested to know more... I know that the New Star Japan Fund collapse is one of the big reasons why New Star is in so much trouble... complete train wreck today - they've turned all £250m of debt into equity and screwed shareholders. Seems investors in general can't be sharing the positive Japan spin... what have you been discovering?

Murakami

Pennant, good points. I agree on Japan. It's grim there now (like everywhere else) but increased consumer spending coupled with the fall in commodity prices could well make this the first among the advanced economies to recover. Maya Bhandari, an economist at Lombard Street Research, put forward an interesting argument to that effect based on the following tenets: 1) Japan's present weakness, like much of Europe ex-Britain, is not 'home grown'," as Japanese banks have been neither reckless lenders, as in the US, nor reckless borrowers, as in the UK; 2) Households have not borrowed and spent, leaving the current account in healthy surplus; 3) Japan has the biggest scope for fiscal stimulus of the G7 economies (the fiscal deficit shrank from 8% of GDP in 2002 to an estimated 1.4% of GDP) and the business sector was in 9.6% financial surplus as a share of GDP as end 2007, against an average of between 0.7% and 3% for Britain, America and Europe.

Still, people have been predicting a recovery in Japan for many, many years so it pays to be cautious...

valueinvestor

27th Oct '09

I have added some thoughts here - http://www.stockopedia.com/article/view/32787/pv-crystalox-solar-always-look-a-gift-horse-in-the-mouth . Whew! This is one interesting stock! But the thing that worries me is how fast thin-film could take over the market.... I'd welcome comments.

Interims Strong - When is this a buy?

Unlock the rest of this article with a 14 day trial

About the Author

Promethean

5 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...