June 8, 2012 (Chinavestor) Here we go again. We know there is going to be inevitable consolidation within the Chinese solar industry, yet it's been unknown who the first victims will be. Based on the latest numbers, out guess is that LDK Solar (NYSE:LDK) and Suntech Power (NYSE:STP) may be one of the first ones to be acquired or go under. Possible winners are Yingli Green Energy (NYSE:YGE) and some smaller names.Here is why.
There's been a lot of talk about LDK Solar's (NYSE:LDK) ability to service its debt load given falling revenues and burning cash at an alarmingly high rate. One analyst went as far as calling outlook in LDK Solar's latest report as "fantasy land".
Looking at cold numbers, one thing is certain. LDK Solar (NYSE:LDK) is one of the highest leveraged as of last quarter. The company has yet to report first quarter financials. Nevertheless based on what we've seen from the other solar players in the first quarter, chances are that LDK was burning more cash while its ability to take on more debt is severely limited.
Suntech Power (NYSE:STP) is another company deep in the red. The company burnt over $1 billion since 2010 and is now highly leveraged as well. The problem is not that both STP and LDK have to service ever increasing debt levels but that their cash reserve is already thin.
Lookjing at current ratio for these Chinese PV manufacturer it is clear that LDK Solar (NYSE:LDK) and Suntech Power (NYSE:STP) have very little leverage left. Current ratio, measuring current assets relative to current liabilities, is lowest for Suntech Power (NYSE:STP) for 2012Q1 while LDK Solar (NYSE:LDK) hasn't reported yet. LDK had the lowest current ratio among Chinese solar companies back in 2011 Q4.