Yingli Green Energy Holding Company Limited (YGE) and its subsidiaries are engaged in the design, development, marketing, manufacturing, installation and sale of photovoltaic (PV) products in the People’s Republic of China and internationally. Its products include multicrystalline polysilicon ingots and wafers, PV cells, PV modules, and integrated PV systems that are connected to electricity transmission grids or those that operate on a stand-alone basis. With 400MW of total annual production capacity in each of the polysilicon ingots and wafers, PV cells and PV modules, YGE is currently one of the largest manufacturers of PV products in China.

The Company sells its PV modules under Yingli and Yingli Solar brand names to PV system integrators and distributors, as well as to installers and other value-added resellers located in various markets around the world, including Germany, Spain, China and the United States. It also sells PV systems to mobile communications service providers in the People’s Republic of China.

The Company was founded in 1998 and is headquartered in Baoding, PRC.

USD 1.00 averages RMB 6.83

Source: Reuters.com, SEC Filings.

YGE’s total net revenues were RMB 1,498.9 million (US$219.5 million) in the second quarter of 2009, a decrease of 24.6% from RMB 1,987.0 million (US$290.6 million) in the second quarter of 2008, but up from the analysts’ consensus of $213.53 million. The decrease from the second quarter of 2008 was primarily due to decreased PV module shipment volume resulting from the worsened credit environment in major PV markets and lower average selling price in 2009 as compared to the first half of 2008. However, the Company saw an increase of 49.9% from RMB 999.9 million in the first quarter of 2009 due to recovering markets, increased brand awareness, continued promotional efforts and improved product bankability. Gross margin was 18.3% in the second quarter of 2009, down from 25.8% in the second quarter of 2008, but up from 15.3% in the first quarter of 2009 despite the decline in average selling price.

As a result of interest expense of RMB 115.9 million (US$17.0 million), loss on derivative liabilities of RMB 204.2 million (US$29.9 million) and loss on debt extinguished of RMB 244.7 million (US$35.8 million), the net loss was RMB 393.7 million (US$57.6 million) in the second quarter of 2009, compared and net income of RMB 203.9 million (US$29.8 million) in the second quarter of 2008.

As of June 30, 2009, YGE had RMB 2,452.7 million (US$359.1 million) in cash and RMB 4,356.4 million (US$637.8 million) in working capital, up from RMB 1,059.7 million in cash and RMB 2,780.4 million in working capital as of March 31, 2009. Long-term bank borrowings increased to RMB 1,971.9 million (US$288.7 million) as of June 30, 2009, from RMB 1,172.4 million as of March 31, 2009, and short-term borrowings decreased to RMB 1,817.5 million (US$266.1 million) as of June 30, 2009, from RMB 2,601.9 million as of March 31, 2009. Presently, the Company has approximately RMB 7,373 million in authorized lines of credit, of which RMB 4,872 million had been utilized.

Source: Yahoo! Finance, SEC Filings

Shares of YGE are down about 17% so far this month. The stock has traded between $2.50 and $18.39 over the last 52 weeks.

Analysts polled by Thomson Reuters rate YGE as “Hold” with one analyst rating the stock with “Hold,” the same number as three months ago. According to Reuters Estimates, analysts are expecting the Company to report revenue of $968.5 million and EPS of $0.35 for the fiscal year 2009; and revenue of $1,230 million and EPS of $0.92 for the fiscal year 2010.

YGE is currently one of the largest manufacturers of PV products in China as measured by annual production capacity, with an annual production capacity of 400 megawatts of polysilicon ingots and wafers, 400 megawatts of PV cells and 400MW of PV modules, as of September 2008. Additionally, YGE is one of the few large-scale PV companies in China to have adopted vertical integration as its business model. The Company expects to gradually expand annual production capacity of polysilicon ingots and wafers, PV cells and PV modules. The Company plans to increase its overall annual manufacturing capacity of each of polysilicon ingots and wafers, PV cells and PV modules to 600 megawatts in the beginning of 2010 and to establish in-house polysilicon manufacturing facilities.

Taking advantage of the foreseeable boost in the Chinese solar market, YGE has been selected by the State Development and Investment Corp. to supply PV modules for a 10 MW on-grid solar plant in Dunhuang, Gansu Province. YGE also formed a strategic alliance with a subsidiary of China Guangdong Nuclear Power Holding Co. Ltd. to develop on-grid solar projects both in China and abroad.

In July, YGE partnered with Hainan Provincial Development Holding Company Limited, a state-owned enterprise, to form a joint venture, Hainan Yingli New Energy Resources Co. Ltd., to build manufacturing facilities with annual production capacity of 100MW in each of the polysilicon ingots and wafers, PV cells and PV modules in Haikou, Hainan Province. Under the agreement, YGE will hold an 80% equity interest in Hainan Yingli. The Company also entered into an agreement with Hainan Development and Hainan Provincial Water Conservancy & Power Group Company Limited to form a joint venture, in which Yingli China will hold a minority stake, to develop and operate up to 300MW on-grid solar projects in Hainan Province from 2009 to 2011.

The Company continues to build its presence in existing solar markets worldwide. YGE established U.S. subsidiaries with two offices in New York and in San Francisco. The Company expects that these two regional headquarters in the U.S. will enhance support for the Company’s growing North American customer base and facilitate the formation of new partnerships across the solar value chain in North America. In the U.S., YGE entered into a strategic sales agreement with Recurrent Energy to supply crystalline PV modules through 2012 for expected use in Recurrent Energy’s distributed solar projects, typically ranging from 2MW to 20MW, in the U.S., Canada, Europe and other emerging markets. The Company also entered into an exclusive polysilicon PV module framework supply agreement with AES Solar, under which YGE has already shipped 4.35MW of PV modules.

Global energy demand is expected to increase substantially with demand for electricity forecast to double from 17,408TWh to 33,750TWh by 2030, according to EIA. The solar industry has grown 48% annually since 2001. Some 2,826MW of solar PV were installed worldwide in 2007, up 62% compared to the previous year which, however, accounts for only 0.04% of the world’s energy usage. According to the European Photovoltaic Industry Association, this sector is poised for four-fold growth from 1.6GW in 2006 to at least 12GW in 2010. China is aiming for an installed solar power capacity of 2GW by 2011, nearly a 15-fold jump from the 140MW capacity it had at the end of last year. According to some studies, the demand in China for new solar modules could be as high as 232MW each year from now on until 2012. The government has announced plans to expand the installed capacity to 1,800MW by 2020. Over the long-term, China’s power demand is projected to grow 6.6% to 7.0% annually over the next 10 years.

The Company continues to improve its capital structure. During the last several months, the YGE received the net proceeds of US$227.4 from YGE’s follow-on offering of 18,390,000 ADSs; received two credit facilities, with principal amounts of US$100 million and RMB 300 million, respectively, from Bank of Communications Co., Ltd.; made an early repayment of the full principal amount of US$50 million, together with related accrued interest and fees, to ADM Capital; and Renewed RMB 1 billion credit facility with the Export-Import Bank of China and restructured a total of RMB 800 million working capital loans into a long-term bank facility.

Source: http://stockcharts.com/h-sc/ui

YGE is trading below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower. The MACD for the Company currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

YGE is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

YGE is traded discount to peer 2010 P/E multiples. The Company’s loss of revenue last quarter caused by European cutbacks is starting to dissipate with the U.S., European and Chinese markets ramping up again. The PRC’s National Energy Administration has decided to expand the country’s solar power capacity to 2GW in the next two years. Top panel-makers, such as YGE is expected to benefit from the revised goal. The Company reaffirmed its PV module shipment target to be in the estimated range of 450MW to 500MW for fiscal year 2009 with gross margin of 18-20%; this represents an increase of 59.9% to 77.6% compared to fiscal year 2008.

Source: Thomson Financial, Yahoo! Finance, Analyst estimates.

Net Share Purchase Activity

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