Yingli Green Energy (YGE, Financial) reported a mixed set of numbers for the third quarter. Although the company narrowed its losses considerably and was better than the street expectations, revenue was down year over year and did match the consensus. As a result of its tepid performance the stock tanked to its 52-week level a few days back and still remains near that level. Interestingly, the company, which did not report any profit in the past three years, reduced its losses during the quarter and seems to be on the right track to break even. This was mainly driven by a robust demand from China, Japan and other emerging markets.
A look at its markets
In China, Yingli had a tough time in the first part of the year on account of slower than expected growth. But in the second half, it reported strong demand for its high quality PV products. Moreover, new policies were framed by China National Energy Administration that made the approval process easier and further bolstered the demand for its products. In fact, China has pledged to increase the share of renewable energy to 20% by 2030. This is a significant development indicating strong support from government, which will drive its growth in the coming months.
Not only this, but the company has various orders in its pipeline, strengthening its balance sheet. Yingli currently has around 1.4 gigawatts of PV projects at different approval stages, spread across various Chinese provinces. And to fund these projects, the PV maker has opted for financial lease compared to bank loans. This will allow the company to revise its downstream line and accelerate capital turnover
Even in the international market, it performed quite well. The company reported a 400% year-over-year increase in shipments to emerging markets. It strengthened its presence in Japan while maintaining a steady growth in America. In Latin America, Yingli sees huge potential for its products across all segments ranging from residential houses to utility skilled projects. For the fourth quarter, the management is confident of a robust demand from this region, leading to a strong order book for the first quarter next fiscal.
Innovation is important
In spite of a strong demand, Yingli understands the importance of innovation and continues to invest in product development. During the quarter it launched its improved multicrystalline and power generation modules, offering twenty five year linear warranty. This will enable its clients to improve accuracy of system performance yield and cash flow modeling.
And to continue its leading position in the renewable energy market, the company has come up with a new strategy, which is to provide superior after sales technical support. In fact Yingli tries to differentiate itself with this new service. Explaining this move, Robert Petrina, VP, Sales and MD of Yingli Americas, said, “The Yingli Green Energy Americas is now in the process of establishing an independent engineering services company which is going to offer a suite of pre and post-construction services to PV system designers and owners in order to insure that their systems are designed, built and proven to perform in the field.”
With such strategic initiatives the company seems to be well positioned for growth in the days ahead. Although the company had a weak performance in Europe, but it is determined to tap the European solar PV market, which is estimated to be around €10 billion. In this direction, the management has decided to make necessary modifications in its products and services that will match the requirements of its European customer base. This is a strategic move, which will provide a strong local sales presence in its core markets.
The company sees a similar potential in the Middle East, especially UAE. During the quarter it expanded its customer base in the region and even established a permanent sales office in Dubai. In addition, the company has also planned to start a solar rooftop program for UAE. These expansions will play a significant part to strengthen its balance sheet in the coming years.
Conclusion
Although the stock has declined near to its 52-week low, its future prospects seems to be good. Moreover, it managed to reduce its losses considerably during the quarter, which again is a strong indication of its improving fundamentals. Therefore in the light of all the above factors Yingli Green Energy could do better in the future.
