ReneSola (SOL, Financial), a solar PV company that ranks amongst the top ten panel suppliers globally, manufactures and sells various solar power products, operating through two divisions -- Wafer, and Cell and Module. The solar PV Company has a geographically diversified presence encompassing Mainland China, Taiwan, Australia, Singapore, Korea, India, Hong Kong, Japan, Germany, Greece, Belgium, Italy, France, the United States, Spain, Czech Republic, England, the Netherlands, and South Africa.
Looking Back
Despite the headwinds of continued macro challenges in the fourth quarter, primarily on forex fluctuations, the company beat its own guidance for shipments and also managed to meet its guidance for gross margin. This was facilitated by its diversified global manufacturing network, which helped the company to re-balance the geographic mix by cutting down on exposure in euro dominated market, while shifting toward dollar based and other non-euro markets.
Total solar and module shipments and wafer shipments in the fourth quarter clocked 488 megawatts and 256 megawatts, respectively. The shipment exceeded guidance mainly due to rapid expansion in emerging markets such as India. Net revenue came in at $387 million versus $372 million in the third quarter. Gross profit was $51.2 million versus $57.1 million in the third quarter.
ReneSola’s customer base inched up to 2,546, as a result of providing more renewable energy product and services to smaller sized customers. The polysilicon production for the fiscal 2014 stood at 5,825 metric tons with an output of 1,884 metric tons in the fourth quarter.
The company completed the sale of 37 megawatts in distributed generation project in mainland China and it currently has about 38.5 megawatt in existing project. This includes 25 megawatts in utility scale projects in Eastern Europe and 13.5 megawatt in the United Kingdom, all of which have been completed and connect to their respective grid.
Looking Ahead
RebeSola has a total of 57 megawatt utility-scale project under construction in the UK and this is expected to go live in the first quarter of fiscal 2015. In addition, the company has been investing in research and development aimed at developing new technologies and increase efficiency of its current solar products. Notable amongst these was the up gradation of it’s A++ + wafer process technology, resulting in reduction of manufacturing cost by 4% while maintaining the same efficiency of 17.8%. This should improve the margins of the company going forward.
In addition, the 275 watt and 330 watt polycrystalline modules have been completed and commercial production is slated to start soon. The average power output of the modules has also been improved.
On inverter side, the company’s 300 watt micro inverter is now in pilot run and undergoing onsite project testing. Necessary certifications have been obtained in several key markets in North America and Europe. The first batch of the products is slated to enter the market soon. It has also continued to obtain necessary certification for its string inverters across several international markets and its 5K watt hybrid inverter is in trial production after having received necessary certifications. These new inverter side products when in full swing commercial production will add to top and bottom line growth going forward.
ReneSola is the amongst the few largest polysilicon manufacturers operating in China, with many gone out of business during the troubled years. China is aggressively trying to reduce dependence on imported polysilicon and this could be another tailwind for ReneSola going forward.
Market Projections
Solar power demand is growing globally at a hectic pace. According to Statista, the global solar power market is slated to grow from $ 91.3 billion in 2013 to $158.4 billion by the year 2023. China and India alone have ambitious growth plans going forward. India has plans to invest $1 billion into renewable energy going forward, and it has raised its 2022 solar power capacity target from 22 gigawatts to 100 gigawatts. This is a steep upward revision and India plans to achieve this by developing what it calls "ultra mega solar power projects." ReneSola with its presence in Indian market is on a firm footing to make the most of the opportunities that unfurl going forward.
In addition, according to IEA, the global solar PV industry will account for 16% of the global electricity production by 2050 and ReneSola is present in most of the geographies to take benefit of the impending growth in the global solar power market.
Bottom Line
Although ReneSola’s performance in the past has not been very exciting, we see it is indeed making the right moves to fuel its growth going forward. The market potential looks encouraging. Analysts are also optimistic and expect the bottom line to improve at a CAGR of 15% over the coming five years. This is a substantial improvement over the annual decline of almost 10% that it has seen in the past five years. Hence, over a long-tem, this stock is a buy.
