First Solar's Strong Growth and Positive Outlook in Renewable Energy Industry
2023-07-30
Oppenheimer and Company organized a call meeting to discuss the earnings of First Solar Inc. (FSLR). During the meeting, the company focused on various important topics, including provisions for a portion of their contracted backlog and their approach to contracts based on relationships.
The outlook for First Solar appears positive, with strong guidance for the full year of 2023 and expectations of higher earnings in the second half of the year. The company boasts a record contracted backlog and robust net bookings, indicating a strong demand for their products. Their emphasis on manufacturing technology excellence has resulted in a record quarterly production, and their expansion plans are on track. Additionally, First Solar maintains a strong financial position with a significant cash balance. Overall, the company is expected to continue experiencing growth and demand beyond 2023.
The key drivers of First Solar's business include strong operating cash flow, efficient management of working capital, expansion in the module business, potential mergers and acquisitions, research and development, and increasing manufacturing capacity.
In terms of their product and service plans, First Solar aims to enter into long-term multiyear contracts with customers, expand their capacity, and invest in research and development to enhance their technology. They prioritize factors beyond just the module average selling price, such as contract integrity, product availability, uncertainty, and an ethical and transparent supply chain. The company has a robust pipeline of potential bookings and expansion opportunities, with a particular focus on North America, India, and the EU. They have also achieved a new world record research conversion efficiency for CadTel through their CuRe technology.
Looking ahead, First Solar expects their earnings profile to be higher in the second half of the year. This is attributed to contractual delivery schedules, the timing of first sales of Series 7 products, and the recognition of Section 45X benefits. The company anticipates selling approximately 50 megawatts of U.S. manufactured product in the second quarter that is not eligible for the Section 45X tax benefit. Furthermore, the shipment of Series 7 products is set to commence in June, leading to revenue and Section 45X benefit recognition in the latter half of the year. First Solar projects sales of 31.9 gigawatts in the first half of the year and between 7.3 and 8 gigawatts in the second half.
First Solar's strategic initiatives involve focusing on selling their '27 volume strategically to create more multiyear agreements and visibility for the future. The company has witnessed continued growth in demand for their products and services, as evidenced by their total pipeline and mid- to late-stage pipeline. They are actively working on finalizing significant deals with strategic counterparties, which could result in a strong second quarter and continued bookings in the subsequent quarters. First Solar exercises patience in securing deals that make sense and remains open to exploring opportunities with other partners if necessary. They expect a lower average selling price for their India volume but still aim to maintain an attractive gross margin. The company is optimistic about its position in the U.S. market and will closely monitor average selling price trends throughout the year. Additionally, they are actively seeking to incorporate technology advancements and domestic content uplifts in their contracts.
In conclusion, Oppenheimer and Company organized a call meeting to discuss First Solar's earnings. The company's positive outlook, strong financial position, and strategic initiatives indicate a promising future for First Solar in the renewable energy industry.