Camdanke Solar Energy (hereinafter referred to as "the company", the same below) announced its 2012 results: operating income of 1.026 billion yuan (RMB, the same below), up 0.9% from a year earlier; gross profit fell 1 percentage point year-on-year to 8.1%; net loss for the year was 165 million yuan, a sharp increase from a loss of 46.3 million yuan in 2011. Excluding the non-cash loss of 191 million yuan, the company's adjusted net profit was 68.5 million yuan.
The company continued to maintain a sound non-cash loss of 191 million yuan in 2012, including the redemption of convertible bonds and the write-off of losses on warrants. The company realized net cash flow of 208 million yuan in operating activities during the year, held cash and restricted cash of 515 million yuan at the end of the year, and the net debt-to-equity ratio dropped to 2.8%. The funds raised through two rights issues in December 2012 and January 2013 were HK $56 million and HK $204 million, respectively.
The company's operating data showed good performance in 2012, the company's overall shipments were 561.7 megawatts, an increase of 152.9 percent over the same period last year, of which 310 megawatts of N-type silicon wafers were up 220.2 percent from the same period last year; the purchase cost of polysilicon was 171.6 yuan / kg, down 47.6 percent from the same period last year; the price of N-type silicon wafers, which contribute to profits, fell by only 38.1 percent in 2012, much better than that of type P (the price fell by 76.4 percent for the whole year).
The key point of investment is to reduce costs and increase the customer base. The company will expand its production capacity in Malaysia in 2013. Electricity charges and labor can save existing comprehensive costs by 510% and 20.3% respectively. The company is also considering purchasing cheap production equipment to reduce capital expenditure. The company expects to complete the Japanese customer certification and start supplying in the second quarter. This batch of N-type wafers will all be cut by diamond wire, which can reduce cutting costs by 2020%. The company's existing wafer thickness is 150mm, which is planned to be gradually reduced to 120mm in 2014 to reduce silicon consumption and save costs on the basis of ensuring conversion efficiency.
Valuation and rating we think that photovoltaic stocks worth investing at this stage should have the following characteristics: low debt or guaranteed debt service, continuous cost reduction, high entry threshold and positive operating cash flow. The forecast company, which had a net asset per share of HK $1.47 per share in 2013, was given a forecast PB of 1.2X in 2013, with a target price of HK $1.76 (a potential increase of 35 per cent compared with the closing price of HK $1.30 on March 26), upgraded to "buy".
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