LDK Solar to Divest Anhui Asset - Analyst Blog

By Zacks | January 03, 2013 AAA

Leading China-based solar product manufacturer, LDK Solar Co., Ltd. (LDK) entered into an agreement with Shanghai Qianjiang Group to sell its loss making LDK Anhui asset for RMB 25 million (approximately $4.01million). LDK Anhui, located in Hefei City was moving toward insolvency and had negative net assets of nearly $54 million while its total bank borrowings amounted to $485 million. The Anhui business had an alarming asset-to-liability ratio of 107%.

LDK Solar expects this asset sale to boost its net assets by $58 million and improve its asset-to-liability ratio by around 1.8%. The Anhui asset divestiture is a part of the company's ongoing liquidity and working capital plan disclosed on May 15, 2012.

In the wake of the crimping trade barriers adopted by the U.S. which includes countervailing duties ("CVD") of 15.24% and anti-dumping duties ("AD") of effectively 25.96%, we believe this will take a severe toll on LDK Solar's businesses in North America. The Zacks Consensus Estimates for the fourth quarter and full year 2012 currently stand at a loss of $1.09 per share and $5.63 per share, respectively.

For the fourth quarter 2012, LDK Solar expects modest wafer shipments in the range of 200 megawatt ("MW") to 250 MW with cells and module shipments in the band of 50 MW-80 MW.

However, the strong economic rebound in China is expected to push forward solar generation in the domestic markets, which will somewhat mitigate the above mentioned negatives. LDK Solar presently retains a short-term Zacks #3 Rank (Hold).

Another operator in the renewable energy zone, JinkoSolar Holding Co., Ltd. (JKS) is also gearing up its business to tackle the tariff headwinds by diversifying its operations across the globe. The company was involved in the supply of PV modules for the development of solar projects in Germany and South Africa.

With a market capitalization of $200.97 million, Xinyu City-based LDK Solar and its subsidiaries, engage in the design, development, manufacture, and marketing of photovoltaic ("PV") products; and development of power plant projects.

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