Q-Cells outshines solar stocks with upbeat outlook
By Eva Kuehnen
Frankfurt, Nov 14, 2007
Source: Reuters UK
http://uk.reuters.com/article/oilRpt/idUKL146013020071114
German solar cell maker Q-Cells raised its sales outlook for 2008 and 2009 and reported better-than-expected third-quarter results, standing out from its renewable energy sector peers on Wednesday. Q-Cells shares surged 9.2 percent to 94.78 euros by 1144 GMT, leading gainers in Germany’s technology index (.TECDAX: Quote, Profile, Research), which was up 2.1 percent.
Smaller rival Ersol (ES6G.DE: Quote, Profile, Research) bucked the trend, dropping 2.1 percent, after it lowered its sales outlook for next year, citing an upgrade in its thin-film solar cell production. Confidence in Germany’s booming solar industry took a hit last month when solar power systems maker Conergy (CGYG.DE: Quote, Profile, Research) shocked the market with a profit warning, citing solar module supply problems as the cause of its problems.
Conergy’s market capitalisation has almost halved since then, prompting investors to take a closer look at earnings in the sector. “It’s time for stock picking,” said Philipp Bumm, analyst at Cheuvreux. “And Q-Cells is clearly the best one in the sector.”
Leaving its guidance for 2007 in place, Q-Cells — the world’s second-largest solar cell producer after Japan’s Sharp Solar (6753.T: Quote, Profile, Research) — said it now expected 2008 sales of about 1.2 billion euros ($1.76 billion), up from a previous target of at least 1 billion euros, mainly due to increasing capacity usage.
For 2009, it said it now expected sales of about 1.7 billion euros, up from a previous forecast of 1.4 billion euros. “We expect Q-Cells to be very strong during the bottleneck of pure silicon due to strong supply, and after the bottleneck because of cost leadership in cell production and additional potential from thin-film activities,” Cheuvreux’s Bumm said.
In what WestLB analysts called “a very nice set of results” Q-Cells reported third-quarter earnings before interest and tax (EBIT) of 50.2 million euros, up 43 percent and above the average estimate of 46.6 million euros in a Reuters poll.
Elsewhere, Q-Cells client Aleo Solar (AS1Gn.DE: Quote, Profile, Research) — a solar module maker — lifted its 2008 outlook after securing sufficient solar cells for its planned capacity expansion. “We expect a significant amount of business will be brought forward in 2008 ahead a possible decrease in feed-in tariffs from 2009 in key markets such as Germany and Spain,” Aleo Chief Financial Officer Uwe Boegershausen said.
He added other markets such as Italy, Greece and France would catch up at the same time. Aiming to benefit from such strong short-term demand, Ersol has decided to adopt a more efficient thin-film technology sooner than originally planned.
But this would delay the start of a new production line that had been expected to contribute to 2007 and 2008 sales and as a result, Ersol will not record any revenues from its thin-film business this year, it said.
Shares in SolarWorld (SWVG.DE: Quote, Profile, Research), which confirmed preliminary results on Wednesday, edged 0.7 percent lower. Q-Cells trades at about 40 times 2008 earnings, compared with SolarWorld on a multiple of roughly 34 and Ersol, which has a multiple of about 18, according to Reuters Estimates.
“Seeing Q-Cells outstanding position in the market, its progress in thin-film-technologies and its straightforward strategy we continue to believe that a valuation premium is justified,” WestLB said, applying a sector multiple of about 19.
(Reporting by Eva Kuehnen; Editing by David Cowell/Richard Hubbard)