正文
there are 2 "SELL" recommendation on LDK, one from Goldman Sacks one from Lazard, both citing the dismal picture of long term competitiveness on LDK,
I dare to believe they are results of a rush to judgement,
the competitive landscape is tough, no doubt about it. The dramatic increase in Polysilicon has attracted a lot of venture capital (not in form but in essence), they are reports of plans or construction of maybe 7 to 10 poly factory in China with scale of 5000 to 20000 ton capacity,
a rat race,
however, 1, not all plans will pan out. 2, even among those who will, LDK remains one primary candidate who can actually accomplish the mission. While all enjoy province and local gov't support, LDK's project is officially sanctioned by the National Reform and Development Commision, a lot others are not. LDK has access to both foreign and internal capital market, has secued $700m bank loan, has working cash flow about $200 year. All these advantages make it's a LDK's game to lose.
now, look at the potential fall out. STP's CEO was very excited in last CC talking of Asian Silicon's 7-year supply contract to STP, that with full capacity, Asian Silicon's wafer price will go to $40 per kilo, from currently $200 range. Now, LDK's CFO said after 2009, with its own virgin poly production, LDK's cost of wafer can go to $50. Notice time frame here. By 2009, LDK's poly capacity will be at 15000 ton, Asian Silicon possibly at 6000 ton. Therefore it's very likely LDK will dismiss a lethal threat before it's materialized.
back to Goldman Lazard's analyst report, my reading is that they did NOT calculate correctly the probability of LDK successfully complete its 15000 ton poly business, (which is in addition to its LDK wafer processing business), in fact, GS's analyst still cite the "risk of the expansion project" when she had to raise the estimation numbers after LDK provided new Q4 number,
the whole point is, as of now, there is not anything that on horizon that can derail LDK fatefully, while any execution may fail, it's LDK's own game to lose,
I dare to believe they are results of a rush to judgement,
the competitive landscape is tough, no doubt about it. The dramatic increase in Polysilicon has attracted a lot of venture capital (not in form but in essence), they are reports of plans or construction of maybe 7 to 10 poly factory in China with scale of 5000 to 20000 ton capacity,
a rat race,
however, 1, not all plans will pan out. 2, even among those who will, LDK remains one primary candidate who can actually accomplish the mission. While all enjoy province and local gov't support, LDK's project is officially sanctioned by the National Reform and Development Commision, a lot others are not. LDK has access to both foreign and internal capital market, has secued $700m bank loan, has working cash flow about $200 year. All these advantages make it's a LDK's game to lose.
now, look at the potential fall out. STP's CEO was very excited in last CC talking of Asian Silicon's 7-year supply contract to STP, that with full capacity, Asian Silicon's wafer price will go to $40 per kilo, from currently $200 range. Now, LDK's CFO said after 2009, with its own virgin poly production, LDK's cost of wafer can go to $50. Notice time frame here. By 2009, LDK's poly capacity will be at 15000 ton, Asian Silicon possibly at 6000 ton. Therefore it's very likely LDK will dismiss a lethal threat before it's materialized.
back to Goldman Lazard's analyst report, my reading is that they did NOT calculate correctly the probability of LDK successfully complete its 15000 ton poly business, (which is in addition to its LDK wafer processing business), in fact, GS's analyst still cite the "risk of the expansion project" when she had to raise the estimation numbers after LDK provided new Q4 number,
the whole point is, as of now, there is not anything that on horizon that can derail LDK fatefully, while any execution may fail, it's LDK's own game to lose,
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