Despite the many clouds dampening prospects for China’s solar firms, Yingli Green Energy (NYSE: YGE) has just come out with a quarterly earnings reports that looks surprisingly optimistic about the year ahead, leading me to wonder if it has been told that China intends to announce some plans for major new solar power plants in 2012. The actual report looks the same as other companies that have already reported their fourth-quarter results, showing sharp drops in both revenue and profit as many firms took big write-offs related to the plunge in prices last year that has driven everyone into the red and forced a number of overseas players into bankruptcy. (results announcement) But what caught my attention was Yingli’s forecast for a hefty 50 percent sales increase this year, with the company expecting to ship 2.4 to 2.5 gigawatts worth of solar modules in 2012, up from last year’s 1.6 gigawatts. That forecast looks quite surprising since Yingli and its other Chinese rivals are facing big challenges in both the US and Germany, 2 of their biggest markets. Chinese solar cell makers are likely to face punitive tariffs in the US this year following an anti-dumping investigation, while Germany has taken recent steps to sharply cut back its incentives for new construction of solar power plants. So where does Yingli see such a jump in demand coming from? My suspicion is that Chinese officials may be quietly informing Yingli and China’s other major solar companies to expect major new orders at home this year, as the country starts to execute Beijing’s plans announced last year to embark on a multibillion-dollar campaign to build new solar plants. (previous post) In fact, Beijing sent a previous signal in the same direction last week when media reported that the government was urging solar companies to sharply boost their capacity (English article) despite the current downturn that has seen prices fall by 50 percent or more over the last year, driving share prices for many companies down to all-time lows. Yingli’s own shares now trade at $3.74, including a 4 percent drop after it announced its results, off their all-time lows from last fall but still at a third of where they traded a year ago. If and when the big orders from China start to come, look for Yingli and other top domestic players like Suntech (NYSE: STP) and Trina (NYSE: TSL) to be major beneficiaries, while smaller players will also get some new business but perhaps not as much. Whether the new China business will be enough to support Yingli’s ambitious 2012 target is still a big question. But at least for now I would be cautiously optimistic that a strong turnaround could be on the horizon for the battered sector by the end of the year.
Bottom line: Yingli’s forecast for a 50 percent rise in sales this year despite the solar sector’s current downturn indicates a China-fueled rebound could be on the horizon.
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◙ Beijing Boosts Solar In Latest Mixed Signal 中国扩张太阳能行业发展 解决与美争端立场混乱
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