Date
18 December 2017
Yingli's solar panels will power the stadium at the World Cup final in Brazil, but it will be just fleeting glory for the Chinese firm. Photo: Yingli
Yingli's solar panels will power the stadium at the World Cup final in Brazil, but it will be just fleeting glory for the Chinese firm. Photo: Yingli

Good technology can be bad investment

Yingli Green Energy may be able to enhance its profile and perhaps win some new business through its World Cup sponsorship — the company is the sole Chinese sponsor of the ongoing football carnival in Brazil — but it is mistaken if it thinks that its troubles are over.

Having extended its money-losing streak into the first quarter, the solar panel manufacturer has been given the thumbs down by several analysts.

Merrill Lynch, for instance, has flagged “higher than anticipated operating and interest expenses” in a recent report on Yingli. “Net debt has increased, and balance sheet remains a key point of concern,” the US investment bank said, adding that it doesn’t like the stock even at the current depressed levels.

The problem with tech companies is the extreme difficulty in getting the timing right. You can be correct about the industry’s growth and still lose lots of money.

Over the past decade, photovoltaic technology has improved markedly and renewable energy has been getting plenty of government support, but there were still a million reasons that kept some solar companies from earning a decent return. Yingli is a case in point.

The company made money at one point, but has lost more over the past three years. So, you can’t blame investors for losing faith.

Since hitting a peak of US$41.5 in 2007, the year when Yingli got listed and was in fact its most glorious year so far, the counter has seen an almost one-way drift to the south. 

Who would have anticipated the huge increase in supplies, most from fellow Chinese photovoltaic module makers. And few would have foreseen the hostile trade environment, with the US and EU taking action against what they see as dumping moves by Chinese firms. 

In tech investing, as some financial veterans have put it succinctly, acting too soon can be as damaging as not acting soon enough.

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RC

Funny Money.

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