Sunedison Inc (SUNE) Mixed Q1, But Attractive Valuation

Sunedison Inc (SUNE) Mixed Q1, But Attractive Valuation

UBS issued an investment report on Sunedison on Thursday, May 8th. Sunedison Inc (NYSE:SUNE) posted mixed first quarter results with “key positives” for the company being an increase in the solar pipeline by 6% quarter over quarter to 3.6GW compared to 3.4GW in the fourth quarter last year. Analyst Stephen Chin expects the company to enjoy a marginal hike in its average selling price for solar systems, “reported at” $2.58/watt compared to the previous estimate of $2.50/watt.

Lower backlog for Sunedison

Instead of selling the projects for one time gain, Sunedison Inc (NYSE:SUNE) has decided to raise the number of projects going into its YieldCo by 55MW to 505MW. The sale option was also considered a good move as it enhances the retained value.

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For the first quarter, the backlog for Sunedison Inc (NYSE:SUNE) came in lower by 100MW quarter over quarter to 1.0G against 1.1GW compared to 4Q 2013. Other players in the industry, including First Solar and SolarCity, witnessed “strong book to bill ratios.” According to analyst, this might indicate that results for the second quarter are improving.

Projects retained by the company in the first quarter are equal to $1.75/watt, which according to Chin is lower than the $1.92/watt discussed at the analyst day. Chin says this also could be timing related with possible improvements in the next quarter, but “tightening PPA price” may impact the numbers. Sunedison Inc (NYSE:SUNE) also witnessed a percentage decline on backlog to 38% against 40% in the international markets in the last quarter.

PT based on sum of parts

For 2014, Sunedison Inc (NYSE:SUNE) revised upward its 2014 full year estimates for MW to be retained on its balance sheet from 450MW to 520MW. Furthermore, for the projects that the company planned to sell, it lowered its MW to 520MW from 575MW previously. For the total MW of completions, the guidance has been kept unchanged at 1.0GW.

UBS maintains a Buy rating on Sunedison Inc (NYSE:SUNE) with a 12-month price target of $26, which is based on a sum of the parts — with the YieldCo valued at $19, the solar project business at $4 and the semi wafer business at $3. Chin plans to “revisit” the earnings estimates and price target after the company’s conference call.

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