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LDK Solar Co. Ltd. (NYSE: LDK)

LDK Solar Co. Ltd. (LDK) is a manufacturer of multicrystalline solar wafers. The Company sells multicrystalline wafers globally to manufacturers of photovoltaic (PV) products, including solar cells and solar modules. It produces and sells multicrystalline solar wafers between 180 and 220 microns in thickness. In addition, the Company provides wafer processing services to monocrystalline and multicrystalline solar cell and module manufacturers. It manufactures multicrystalline ingots from polysilicon feedstock in its directional solidification system (DSS) furnaces as an interim step in producing wafers. In addition to using solar-grade virgin polysilicon, the Company also uses other polysilicon materials from various sources in its ingot manufacturing process. In addition, it also sells polysilicon materials, which include ingots and polysilicon scraps. In July 2009, the Company announced the acquisition of a 70% controlling interest in Solar Green Technology S.p.A.

The Company was founded in 2005 and is headquartered in Xinyu city, the People’s Republic of China.

Source: https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=LDK , http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=LDK , http://investor.ldksolar.com/phoenix.zhtml?c=196973&p=irol-IRhome

Financial Summary

Net sales for the second quarter of fiscal 2009 were $228.3 million, compared to $283.3 million for the first quarter of fiscal 2009, and $ 441.7 million for the second quarter of fiscal 2008.

For the second quarter of fiscal 2009, gross profit was negative $205.5 million, compared to $4.9 million in the first quarter of fiscal 2009, and $112.3 million for the second quarter of fiscal 2008.

During the preparation of its second quarter 2009 financial results, LDK’s management determined that an inventory write-down and loss on firm purchase commitments of polysilicon materials of approximately $175.8 million and $16.7 million, respectively, was required as a result of the continued rapid market price decline for solar wafers. As a result, gross margin and results from operations were negatively impacted in the second quarter of fiscal 2009.

Gross margin for the second quarter of fiscal 2009 was negative 90.0%, compared to 1.7% in the first quarter of fiscal 2009 and 25.4% in the second quarter of fiscal 2008.

Loss from operations for the second quarter of fiscal 2009 was $235.0 million, compared to a loss of $16.1 million for the first quarter of 2009, and compared to income from operations of $100.3 million for the second quarter of fiscal 2008.

Operating margin for the second quarter of fiscal 2009 was negative 102.9% compared to negative 5.7% in the first quarter of fiscal 2009 and 22.7% in the second quarter of fiscal 2008.

Excluding the inventory write-down and loss on firm purchase commitments of polysilicon materials, gross profit was negative $13.0 million, or a gross margin of negative 5.7% for the second quarter of 2009 and loss from operation was $42.5 million, or an operating margin of negative 18.6% for the second quarter of 2009.

Income tax benefit for the second quarter of fiscal 2009 was $29.5 million, compared to income tax benefit of $1.6 million in the first quarter of fiscal 2009.

Net loss for the second quarter of fiscal 2009 was $216.9 million, or $2.03 per diluted ADS, compared to a net loss of $22.5 million, or $0.21 per diluted ADS for the first quarter of fiscal 2009.

LDK ended the second quarter of 2009 with $265.7 million in cash and cash equivalents and $123.0 million in short-term pledged bank deposits.

LDK’s results for the second quarter of 2009 reflect the prevailing operational challenges for the solar industry. The continued decline in prices for solar wafers impacted the Company’s top and bottom lines and required an additional inventory write-down for the Company, which significantly impacted its margins in the second quarter. As part of its ongoing efforts to realign its near-term strategy and operations with current industry dynamics, LDK will maintain focus on improving its cost structure, increasing wafer sales and ramping up polysilicon production.

During the second quarter, LDT took a measured approach to capital spending and proceeded with implementing its curtailed manufacturing expansion plans. The Company believes this approach allows it to improve its strategic positioning while continuing to best serve its customers. The Company continues to ramp up its polysilicon production and also achieved mechanical completion for the first 5,000 MT train of its 15,000 MT plant. Construction is proceeding as planned and the Company looks forward to the cost savings benefits that it will realize once larger scale in-house polysilicon production commences.

Demand for solar wafers is beginning to turn more positive. The current momentum surrounding China’s Golden Sun solar subsidy program reflects the long-term confidence in the local solar industry. LDK believes that it is well positioned during this critical early stage of development of the PV industry in China, and is pleased to be negotiating contracts for a number of local projects. During the quarter, LDK also made significant strides in further diversifying its business by collaborating on a number of PV development projects, particularly in the fast growing European markets.

Source: http://investor.ldksolar.com/phoenix.zhtml?c=196973&p=irol-sec

Analyst Consensus

No chart available.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=LDK

Investment Highlights

LDK yesterday released an updated outlook for its third quarter 2009 financial results. For the third quarter of 2009, LDK expects to report between $270 million and $290 million in revenue with wafer shipments between 310 megawatts (”MW”) to 330 MW and module shipments between 5 MW to 10 MW. The Company’s prior guidance for the third quarter was revenue of $240 million to $270 million, wafer shipments of 260 MW to 300 MW and module shipments of 10 MW to 20 MW. This outlook for the three months ended September 30, 2009, is an estimate. Results are subject to change based on further review by the management. Once the third quarter reporting date is finalized, LDK Solar will issue a press release announcing the date and details of its third-quarter conference call.

LDK last week announced a supply contract with Enfinity for the largest rooftop solar energy installation project in Benelux (an economic union comprising Belgium, the Netherlands and Luxembourg). LDK will provide approximately 18,000 solar modules to be installed on the Balta Group’s factory rooftop in Sint-Baafs-Vijve, Belgium. The project is slated be the largest solar installation project in Benelux, with a capacity of 4.2 MWp (megawatt peak) and total panel surface of more than 30,000 square meters. The solar panels will deliver an average power output of 3.6 million kW (kilowatt) hours per year, which is equivalent to the power consumption of approximately 1,200 families.

The Balta Group, a manufacturer of broadloom carpets, rugs and laminate flooring, will be utilizing a portion of the solar energy to power its own business activities, with any surplus flowing back to the public grid. For a 20-year duration of the project, Balta Group will enjoy reduced and more stable power bills, in addition to avoiding producing approximately 34.6 million kilograms in carbon dioxide emissions. Enfinity, an international player in renewable energy, negotiated a 20-year lease for Balta Group’s rooftop space and has already begun installation of this project. Enfinity is utilizing revenue from the energy produced and the Green Energy Certificates from the Flemish Government to fund its participation in this project.

LDK earlier this year announced that it has entered into an agreement with Suqian City of Jiangsu Province for the development of PV power projects. According to the agreement, LDK Solar will develop PV power projects in buildings, plants and integration systems, totaling up to 300 MW by 2015. The terms, including financing, design and specific location of each of the projects, will require a feasibility study as well as final approval from relevant governmental departments prior to initiation. The PV application market has been rapidly developing in China this year and the Chinese government is supporting the establishment of the domestic PV market through the use of governmental financial subsidies.

LDK earlier this month announced organizational changes to its management team, Xingxue Tong, president and chief operating officer will temporarily take over all manufacturing operation functions, including polysilicon and wafer production, as a result of the resignation of Nicola Sarno, senior vice president of Manufacturing. Sarno will leave the Company on October 16, 2009, to pursue personal interests.

Source: Scottrade.com, Reuters.com, http://www.ldksolar.com/index.html

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

LDK is below its 50-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

Bollinger Bands

LDK is trading below its lower Bollinger Band. Relative to recent price action, the stock is currently overextended to the downside and due for either a pause or retracement.

MACD

The MACD for LDK 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.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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