What We Do Not Like About ReneSola:
– The Company’s profitability in Q2 was primarily a result of reversal of doubtful account allowance from Q1. The module business underperformed due to a decline of ASPs from $0.69 per watt in Q1 to $0.66 per watt in Q2 which was only partially offset by declining cost structure. Further ASP decreases in excess of cost reduction can adversely affect the Company’s profitability.
– ReneSola’s module cost may become higher without access to cheaper Taiwanese cell capacity. ReneSola is one of the few Chinese companies that can benefit from the cheaper Taiwanese cell prices. However, low Taiwanese cell pricing is a temporary phenomenon due to supply dislocation caused by US tariffs. It is doubtful if the low Taiwanese cell costs can be sustained for more than a quarter or two.
– While the Company’s polysilicon operation contributed meaningfully to the positive cash flow, the polysilicon upside a short term story and it is doubtful if the Company can derive meaningful cash flows from this business past 2016.
– The Company’s balance sheet remains one of the weakest among its Chinese peers. The debt situation severely limits the Company’s strategic options including its ability to participate in the high margin solar project business.