An eye on First Solar (NASDAQ:FSLR)

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First Solar (NASDAQ:FSLR), which is the largest solar producer in the US, has published its 3rd quarterly results on Nov 6, showing earnings above market expectations. But there seems to be irregular revenue recognition for the quarter, as the gross revenue rose around 66% making it to $889 million. This was due to the launch of the Desert Sunlight Project which was delayed during the 2nd quarter, while the net income rose from $4.5 million in the last quarter to $88 million.

But on the annual basis, the net sales and income showed a decrease. On the other hand, the company has shown a lot of progress in operating and developing the business, it has improved the conversion efficiency of its panels and has succeeded in cutting its manufacturing cost. It has also expanded considerably and has added several new projects recently. The company has increased bookings for its systems by 100 MW making it to 3.3 GW.

In the first nine months, First Solar received upto 1.6 GW of new bookings while shipments were of 1.1 GW. The ratio of book to bill is around 1.5, which is quite good. The potential opportunities of booking have increased about 1 GW making it to 13.7 GW; this is because of growth in US markets along with India and South America. The overseas market now makes up to 56% of the company’s potential booking. Solar Panel demand in the US is likely to increase in the coming two years.

This is because the buyers would take advantage of the tax credit on solar investment, which would expire in late 2016. First Solar (NASDAQ:FSLR), which has a current panel capacity of 1.8 GW, is going to take advantage of this demand and has planned to increase its manufacturing capacity by 46% in 2015. It aims to do this by improving its production level in its existing facilities and restarting a few inactive factories in Malaysia. It also has plans to add more capacity to its plant in Ohio.

Although First Solar (NASDAQ:FSLR) panels are still behind the Silicon based panels in conversion efficiency, the advancement rate of the company in efficiency is rising. Last quarter the average efficiency rate was 14.2% which is up by 0.2% subsequently and 0.9% annually. Getting more efficient will make the company more competitive and also bring down the costs while increasing the profit margins. According to the company, its efficiently is expected to increase 19% by the year 2017.

 

The company yet has no plans to create a Yieldco to handle its assets.  Yieldcos are public listed entities that own and operate solar assets which have long term agreements for power purchase with companies. It is popular with solar companies like SunEdison and NRG energy who have created a Yieldco, which has reduced funding costs. First Solar (NASDAQ:FSLR) still wants to have the control of its projects; but would start to break out financials of its ownership by 2015 onwards.

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