Yingli Green Energy (YGE, Financial) recently released solid results for the third quarter which came in line with the company’s expectations. The company managed to deliver solid results due to the robust demand in China, Japan and other emerging markets. This best in class performance also helped the company to see solid improvement along its key financial metrics, indicating enough steam to post better results in future. Yingli is now working closely to improve its results and is aligning its operating efficiency towards better execution. It is also putting efforts to improve its margins by reducing manufacturing costs. Let us have a detailed look at the overall business.
Expecting better times ahead
The company is now confident of performing impressively in coming fiscal year. There are some good signs that indicates a merry rolling of the coaster. Yingli is seeing solid growth opportunities not only in the U.S but also in the markets such as Latin America and Caribbean. These markets are expected to have a positive impact on Yingli’s growth momentum. However, the company did see some short term headwinds such as Trade case but for the long term it is seeing good business opportunities that will drive its revenue and financial performance further.
Moving on to its international market, Europe stands as a shining star for Yingli. The company can boast on the back of some great achievements in these areas. For example in France, Yingli has won a module supply contract for 120 MW that will contribute about 40% of the power capacity with a largest European utility project of 300 MW in Southwest France. This seems to be a good move and will add wings to Yingli’s growth in future.
Moving ahead, wise investments have always been a key factor in Yingli’s success. The company has always invested in profitable initiatives and has also seen positive impact of this move in the previous quarters. Its continued investments are expected to help the company in securing supply projects for utility scale projects which will also help it to maintain a competitive position in the market.
Witnessing a recovery
In the past, Yingli had bad times with the underperformance in the European markets. The company saw huge decline in the demand in 2011. Since then, Yingli has been on the upfront to fight those nightmares. Under this, it has come up with solid restructuring plans. Under the strategic initiatives taken in this, the company is aiming to provide the European customers with the products and services level that is expected by the Europe’s leading solar brands. Besides this, Yingli continues to invest in resources in its downstream project business unit to build strong capability in accessing and emerging sales consumption market in Europe.
With restructuring initiatives, Yingli is seeing many benefits. This new structure is providing strong flexible local sales in its core markets. As the restructuring has also improved the business processes, this will reduce the duplication and support functions also driving a significant OpEx reduction for its business in 2015. Moreover, it is seeing solid growth in international markets also such as in Germany, Egypt and UAE. It is now focusing on strengthening its existing relationship at the same time expanding its new customer base. In 2015, Yingli is expecting the Middle East solar market to develop more giving huge opportunities for large scale utility projects.
Conclusion
Moving on to the fundamentals, the stock is definitely a good pick as of now as it is seeing good growth in the near term. While I would not suggest the long term investors to pick up Yingli for long term as its earnings for the next five years are declining at a CAGR of -149.70% which is far less than the industry average of 16.45%.
