Solarfun showed two different hands on Friday, March 5th. Their quarterly call was very balanced, with every bit of good news being offset by another point of worrisome news.
On the bright side of things, the company said it is now profitably (although barely) with a $1.6 quarterly profit. This is in stark contrast to their performance last year's fourth quarter where SOLF posted a loss of more than $418 million.
However, Solarfun said there was a downside in that they expect that sales will be off by about 10% of equivalent products in 2010. This is due to the downward sell price of photovoltaic modules across the PV industry.
But on the upside, the company pointed out that they are projecting a growth in their earlier estimates for sales volume in 2010. SOLF now expects to sell 600 megawatts of modules versus the 500 megawatts they had predicted a few months back.
On the downside, the firm did not meet the expectations of analysts for their overall revenue sales. SOLF didn't miss the mark by much, in fact they missed the target by less than 2%.
The stock price of SOLF has been largely flat over the last few weeks, trading around $6 to $7 a share.
The key to understanding the future of Solarfun are in the basics. The company is Chinese and it is a green company. China is favoring their green companies, and not in a small way. The Chinese government is providing a backbone for their solar companies.
In addition to this the Chinese solar photovoltaic manufacturers are generally competitive and well run companies. Although SOLF is not a Suntech in size or class, they are cut from the same cloth. Solarfun will keep selling product and run their company in a very efficient manner.
And that's the key. Manufacturing efficiencies that are executed by Chinese companies. The real reason everyone should consider SOLF a buy is because of the clear concepts that the CEO of Solarfun demonstrated when he spoke at the fourth quarter...
The CEO stated "after a transition year for Solarfun in 2009 we expect 2010 to be a year of renewed focus on manufacturing cost" and so on. He went on to talk about product development and quality, and he also mentioned something about focusing on customers. The latter statements of course have merit, but it's his first statement that shows where the profits will come from in 2010.
No one else can control costs and generate efficiencies as Chinese manufacturers can. That's why they build more and more of everything the world uses.
Between the already demonstrated improvements, becoming a profitable company, the fact that China will stand behind their greentech companies and the fact that SOLF has stated that cost containment is their first focus, it seems that all signs point to good things for Solarfun in 2010 and beyond.
The share price of SOLF has not reflected these situations and events. The history of SOLF shows that it has the room to run with even limited good news. And the fundamentals involved make Solarfun a good deal at the current price levels.
Back in December 2009, the company was trading around $20 a share. The news then was that a turnaround was underway, albeit all solar was running strong in this time. More recently, SOLF was trading over $10 a share in January of this year. As of 3/9/10 the stock price of SOLF is trading below $7 a share, currently at $6.72 per share.
Let's call SOLF a buy at less than $6.80 per share.
