GCL-Poly Energy announces net profit expectations of around $800m in 1H14

It's banking partly on management standard enhancement.

It has been reported that China-based GCL-Poly Energy expects to record a net profit of not less than HKD800m in 1H14 versus a net loss of HKD917m in 1H13.

According to a research note from Maybank Kim Eng, the announcement mentioned the profit was mainly attributable to the continuous technology research and innovations and enhancement of management standard.

Further, the profit can also be attributed to the reduction of production costs which led to the increase of sales.

The report said that GCL's projection is significantly above Maybank Kim Eng's estimate of HKD454m for 1H14.

Here's more from Maybank Kim Eng:

If we assume that spot poly-silicon and wafer prices remain stable in 2H14, full-year earnings should easily beat our current forecast.

Without operational details, our full-year projection is unchanged, but will be adjusted post interim results (expected end-Aug).

Nevertheless, as poly-silicon cost reduction and wafer sales volume are the main drivers for

GCL’s earnings growth, we have performed two sensitivity analyses (our TP with FY14E earnings forecast against poly-silicon total production cost or wafer sales) to demonstrate the potential upside in profitability.

In sum, we see upside risk to our FY14 earnings, and we believe this announcement will be a positive catalyst to the stock.