LDK Solar (NYSE:LDK) Posts a Major Supply Deal with Q-Cells - Another Reason to Own the Stock

Sep 12, 2008
Author: SCP Editor

September 12, 2008 – LDK Solar (NYSE:LDK) made another blockbuster announcement this morning. This time, an 11-year solar-grade polysilicon processing deal with Q-Cells, a leading European midstream firm, with an MOU to process an additional 5MW of silicon (20,000 metric tons) through 2018. The company’s stock has pulled back from about $50 in broader market weakness of late, and we think that this morning’s announcement is just another reason to be accumulating more LDK on the dip.

Last week, it signed an 8-year contract with Sumimoto Corp. to supply 750MW for multicrystalline silicon wafers,  a $32 million polysilicon reactor agreement with GT Solar (Nasdaq:SOLR) and a 550MW delivery deal for multicrystalline silicon wafers to Solartech Energy Corp. The week before it announced a 440MW supply deal for solar wafers to Hyundai Heavy Industries. On this last announcement traded up to $52. On the heels of all of these large announcements, the stock has pulled back $12 – amidst sector and market weakness. Again, we see this is an opportunity to accumulate.

Based on 4x  our forecast FY2008 sales, a 5% discount to yesterday’s closing price, and based on 22x our forecast FY2008 earnings, we arrive at an implied target for the stock of $63.

Important Disclosure Note: SCPEditor is LONG LDK. The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance.