Solar industry leader Suntech (NYSE: STP) has just released its latest quarterly results, which prove that times of crisis are a natural selector to separate the strong from the weak. (company announcement) While other companies have been sharply revising down their annual forecasts amid the industry’s worst ever downturn, Suntech’s revisions were far less severe, and it even forecast a sharp rebound in its gross margins in the third quarter as its situation stabilizes. The company slightly lowered its full-year revenue forecast to about $3 3 billion from a previous $3.4 billion, and actually maintained its full-year shipment target at 2.2 gigawatts worth of modules. Last month it showed it was aggressively moving to manage costs by terminating an expensive 10-year supply agreement with MEMC, negotiated five years ago when solar material prices were rising. (previous post) The company forecast more turbulence for the next few quarters, but clearly it has turned the corner by containing costs and using its market-leading position to steal sales from other weaker performers. Its strong performance contrasts sharply with LDK Solar (NYSE: LDK), one of the industry’s weakest players, which last week shocked few with a massive downward revision in many of its second-quarter forecasts, including a 63 percent downgrade in its forecast for module shipments. (previous post) Suntech shares ended Monday down slightly, possibly due to a net loss in the second quarter on some one-time charges. But with its shares now trading near a 52-week low, like most of the industry, Suntech looks like a good bet to lead the sector out of its current downturn, set to not only survive but also emerge as a possible consolidator for some of its weaker peers with attractively low valuations.
Bottom line: Suntech’s latest results show that stronger companies are starting to emerge from the solar sector’s downturn, and could lead consolidation by buying up weaker players.
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China Mobile (HKEx: 941; NYSE: CHL), under new leadership as long-serving Chairman Wang Jianzhou gets set to retire, is showing signs of new life on several fronts, including some of its best earnings in quite a while. The company reported its second-quarter profit rose 7 percent — a figure that might look boring by anyone else’s standards but marks a sharp improvement for a company that has reported low single-digit growth and even one decline for most of the past three years. (
The central government, unwilling to directly tackle Baidu (Nasdaq: BIDU) as a monopoly despite its dominant position in the online search market, is instead attacking the company on several smaller fronts in a bid to curtail its influence. In one of two major developments, Chinese media are reporting that the telecoms regulator is preparing new online search regulations that would force all search engines to clearly state which of their results are paid and which are organic. (
It’s Monday morning, which means there’s not too much news in the market yet and instead it’s a good time for one of my period looks at the broader auto industry. A wide array of new data is out on July sales, which show the continuing decline of China’s top 3 independent auto brands, BYD (HKEx: 1211), Chery and Geely (HKEx: 165). BYD’s top-selling model, the F3, continued its plunge in July, with sales down 41 percent from a year earlier. Sales for Chery’s top model, the QQ, grew just 0.9 percent, lagging the broader market and causing it to lose share. Geely doesn’t have a model in the top 20, but its overall sales fell 6.3 percent in July, a month when overall passenger vehicle sales rose 12 percent. The stumbling of these top 3 domestic brands bears a striking resemblance to a similar trend from six or seven years ago, when domestic cellphone makers like TCL (HKEx: 2618) and Ningbo Bird suddenly emerged to challenge the then-dominant positions of market leaders Nokia, Motorola and Samsung. But in that instance the domestic firms soon fell almost as quickly as they rose, never to return in most cases. The reason was relatively simple: they all soared to prominence on the strength of one or two popular models that captured the public’s interest. But then they failed to follow with more popular models in an industry where product life-cycles typically run around 2-3 years, causing them to quickly fade. The same now appears to be happening with these domestic car makers. Both BYD and Chery found quick success with the F3 and QQ, respectively, but are now struggling to develop popular new models as these successful ones near the end of their life cycles. If they fail to find other new hits soon, they could easily find themselves following in the footsteps of faded names like Ningbo Bird and TCL.
The bloodbath also known as China’s alternate energy sector is nearing the end of its worst reporting season on record, and newly updated guidance from problem-plagued LDK Solar (NYSE: LDK) should provide a spectacular finale to the show. (
world economy struggles out of recession, Coke notched 21 percent growth in China in the first half of the year with unit sales surpassing 1 billion — equal to its annual sales for the market just 5 years ago. Clearly there’s plenty of room for growth, as Coke, despite its position as China’s largest software seller, still only has a relatively modest 17 percent of the market. What’s most interesting to me in this story is the fact that earlier this year Coke scored an unusual first in China with Minute Maid Pulpy, which claimed the honor of becoming the company’s first billion-dollar drink developed outside the US. (
Leading Chinese PC maker Lenovo (HKEx: 992) has finally discovered a winning formula, beating market expectations with a profit that doubled in its latest fiscal quarter on the back of strong sales in its core emerging markets business. (
Ad spending looks strong in the latest quarterly results of Sina (Nasdaq: SINA), Phoenix New Media (Nasdaq: FENG) and NetEase (Nasdaq: NTES), but big questions remain about the future as the portals continue to squeeze their advertisers for more and more money. Thursday saw a flood of earnings come out for major US-listed China firms, providing the perfect time to take a broader look at ad spending that is so crucial to many of these companies’ top and bottom lines. Leading Web portal Sina saw its ad revenues rise 26 percent, while NetEase saw a 16 percent gain and Phoenix ad revenues jumped a whopping 150 percent. (
