Most Chinese solar stocks took a big hit in early market opening driven by fears over Chinese companies accounting . LDK fell nearly 20% on Thursday after a financial controller left alleging irregularities on inventory accounting of polysilicon ( which is the critical raw material in making c-Si based photovoltaic) cells.After a relatively quiet Friday , LDK is down again after a report came on Barron's that the yields at LDK were low and they were not writing down the value of low quality polysilicon which could not be used .
Well my take on all of this is that the news has been overblown as usual by Mr. Market. $2bb in market cap has been lost due to a $50mm in inventory issue (which still needs to be verified) . Rather than the correction being only due to the news , I think this has been used by investors to book profits after the stock appreciated to $75 in the previous month up nearly 170% from its IPO prices at $27.
LDK's valuation is hardly dependent on its current year's earning rather its dependent on its plans to double solar wafering capacity each year and move upstream into poly manufacturing by building a really large poly plant which will catapult into the league of top 6 poly makers in the build.After the recent correction stock has started looking attractive at current levels once again, would look to buy after it goes down further at $35.
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