March 8, 2010 (Chinavestor) Shares of Yingli Green Energy (NYSE:YGE) fell 5.99% before 11:00 A.M. on Monday following 2009 fourth quarter earnings release. Weakness is not limited to YGE only, each major Chinese solar maker is in the red one hour after of trading. ReneSola Ltd. (NYSE:SOL) fell the second most after YGE and is trading -3.64% lower ahead of earnings later the week. Shares of LDK Solar (NYSE:LDK) fell -3.31% while shares of Suntech Power (NYSE:STP) shed -1.75% so far. Canadian Solar (NASDAQ:CSIQ) reported strong results last week yet is down -.88% today.
The irony is that industry heavy weights, Suntech Power (NYSE:STP) and Trina Solar (NYSE:TSL) reported strong revenue and earnings growth - yet a relatively small solar maker, YGE), has a dramatic negative impact on the sector.
Looking at Yingli Green's numbers, sector specific news are great from lasts quarter or YoY. Shipment of modules increased, total revenues increased, gross profit increased - a proof that margins remain good. The real reason that the company is in the red IS NOT SECTOR SPECIFIC! Selling, administrative and general expenses increased 300% from last quarter just as did a one time write-off, pushing total operating expenses up to a point that ate up all increase in gross profit. The increase of operating expenses is responsible for pushing Yingli Green Energy (NYSE:YGE) into the red, not that demand evaporated or margins shrank. This is purely management's inefficiency in keeping administrative cost down.
Yingli Green (NYSE:YGE) & other China solar stocks in the early morning trade on Monday
Solarfun Power Holdings (NASDAQ:SOLF) rattled the nerves of investors last Friday, reporting strong revenue and shipment growth but earnings wavered. Sporadic or choppy earnings of Solarfun (NASDAQ:SOLF) is a company specific development, as is expressed by the chairman in the latest financial report, saying "The change, arising from the adoption of ASC 815-40, was due to a number of factors, including changes in the Company's ADS price during the quarter. This line item, over which the Company has no control, has fluctuated, and is expected to continue to fluctuate quarter-to-quarter". For more coverage read Solarfun profits fell, guides higher.
But it looks to me that investors missed the big picture: shipments of PV modules grew from 48MW in 2008 Q4 to 110MW in 2009 Q4 with an outlook of 130MW-140MW for 2010 Q1 for Solarfun. Margins have started to firm up as is testified by the fact that each and every solar company have returned to profitability since 2009 Q3.
And if that wasn't enough of good news, take a look at latest earnings analysis if industry leader Suntech Power (NYSE:STP). The company reported revenue and net income growth for the fourth time in a row, suggesting that the solar industry have bottomed out. Related story: Better believe it: solar stock recover.
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