- Piper Jaffray is out positive on Yingli Green Energy (NYSE:YGE) saying they believe shares have underperformed in part due to what they view as misconceptions about poly supply, gross margin, and DSO's. Firm reiterate Buy on compelling valuation and superior mid and longer term prospects, thanks to its vertical integration, lowest known cost structure, secure near term poly supply and high quality reputation across Europe.
Recent discussions and meetings with YGE management and its poly suppliers reconfirm Piper's belief that YGE has 70%-plus of its 2008 supply under contract; they believe their 250MW estimate for 2008 may be conservative. Given secure poly supply costs and higher ASPs they anticipate gross margin upside to Q407.
Also, as they have previously highlighted, they believe the recent increase in YGE DSO is simply a shift away from troubled German installers to well financed Spanish utilities such as Acciona and Iberdola (under letter of credit which takes longer but is irrevocable letter of credit). Also shipments away from Germany occurred late in the quarter. Based on discussion with management, the firm believes YGE's DSO will drop into the mid 70s and normalize to 60-65 over next two quarters while changing to irrevocable letter of credit terms.
Piper's $65 price target is based on ~25x their 2009 pro forma EPS estimate. Firm believes valuation multiple is justified given YGE currently trades at ~23x 2008 EPS estimate of $0.94 and ~9x 2009 EPS estimate of $2.54, which is at a significant discount to other leading Chinese companies such as JASO and STP that trade at 26-28x 2008 and 17-18x 2009 consensus EPS estimates. Also, YGE has more than $200M in cash and ample bank liquidity for its expansion plans.
Notablecalls: I expect YGE to see strong buy interest following this call. The stock has been absolutely trashed over the past weeks and PJ's Jesse Pichel holds enough weight to pop this at least a couple of pts.
Be early and agressive.
Actionable trading call alert!
Recent discussions and meetings with YGE management and its poly suppliers reconfirm Piper's belief that YGE has 70%-plus of its 2008 supply under contract; they believe their 250MW estimate for 2008 may be conservative. Given secure poly supply costs and higher ASPs they anticipate gross margin upside to Q407.
Also, as they have previously highlighted, they believe the recent increase in YGE DSO is simply a shift away from troubled German installers to well financed Spanish utilities such as Acciona and Iberdola (under letter of credit which takes longer but is irrevocable letter of credit). Also shipments away from Germany occurred late in the quarter. Based on discussion with management, the firm believes YGE's DSO will drop into the mid 70s and normalize to 60-65 over next two quarters while changing to irrevocable letter of credit terms.
Piper's $65 price target is based on ~25x their 2009 pro forma EPS estimate. Firm believes valuation multiple is justified given YGE currently trades at ~23x 2008 EPS estimate of $0.94 and ~9x 2009 EPS estimate of $2.54, which is at a significant discount to other leading Chinese companies such as JASO and STP that trade at 26-28x 2008 and 17-18x 2009 consensus EPS estimates. Also, YGE has more than $200M in cash and ample bank liquidity for its expansion plans.
Notablecalls: I expect YGE to see strong buy interest following this call. The stock has been absolutely trashed over the past weeks and PJ's Jesse Pichel holds enough weight to pop this at least a couple of pts.
Be early and agressive.
Actionable trading call alert!
NC.. Thanks for your great work but the market is tricking your calls lately...
ReplyDeleteRegular reader.. AJ
Is this call still "actionable" ?
ReplyDeleteDoes it have legs ?