First Solar Thesis Is Stronger Than Previously Estimated

First Solar's (FSLR) Q3 earnings yielded no surprises and some incremental information to strengthen the current thesis at Beyond The Hype.

As usual, due to the lumpy nature of the business, quarterly revenue and profit numbers are largely meaningless to investors. Just about the only meaningful revenue and EPS numbers to consider are the 2023 guidance (image below). We can see that there is a slight improvement in EPS prospects, but the other numbers are largely unchanged.

Series 6 And Series 7 Ramp Per Plan

On the manufacturing front, the Company continues to execute well. The Company recently converted its first Series 6-plus plants in Perrysburg, Ohio, to commercially produce bifacial solar panels. Once the manufacturing process meets the required metrics, the Company plans to convert other Series 6 plants around the world to bifacial. While the Company has not provided any official guidance on how much the average energy production will increase, the increase will come with an incredibly low capex. Note that the incremental production of the bifacial panels adds to the Company’s contracted module ASPs and will fall to the earnings line at close to 100% rate.

The third Ohio factory, which establishes the template for high-volume Series 7 manufacturing, has ramped up to 15,000 modules per day and the facility is approaching the nameplate throughput. The factory produced 565 MW Series 7 modules in Q3, and the year-to-date production has surpassed 1 GW. The India plant started production of Series 7 in Q3 and has demonstrated a production capability of approximately 12,000 modules per day. The factory produced a total of 154 MW in Q3 with a top module wattage of 535 watts. Commercial shipments are expected to begin once the factory gets the Bureau of India Standards certification from the Indian government, which is expected by year-end.

Bookings Is Where All The Action Is

The stock has been trading at very low forward multiples despite massive earnings power and growth ahead. Just about the only major concerns seem to be that the Chinese competition will step in with US-based modules and that the Company’s ASPs are not sustainable. In this context, the detailed booking data that the Company presents is the most informative (image below).

The total backlog climbed smartly to 81.8 GW. Management claimed 6.8 GW of net bookings since the last earnings call at an ASP of $0.30 per watt, excluding India. Management noted that the bookings for this quarter are all the way out into 2029, and weighted in 2029, the pricing is stable quarter-to-quarter. The base ASP that the management guided for is spectacular and much better than Beyond The Hype estimates of ASPs moving towards $0.28. As such, the Company’s ASP is even stronger than the $0.30 number indicates because the base ASP excludes adjusters which could add as much as 2 cents per watt when delivered. For example, since the announcement of the IRA, the Company has amended some contracts to provide US-manufactured products or Series 7 modules. Consequently, the Company has increased contracted revenue by approximately $354M, an increase of $42M from the prior earnings call.