Solarfun Power Holdings Co. Ltd. (SOLF) recently reported second-quarter EPADS of 8 cents that easily beat the paltry Zacks Consensus loss per ADS estimate of 4 cents.

However on a GAAP basis, the company sank to a net loss of 87 cents per ADS due to large one-time charges. It lost 64 cents per ADS for a prepayment provision and another 31 cents for changes in fair value of conversion feature of convertible bonds.

Solarfun witnessed a 24.9% sequential rise to record net revenue in excess of $125 million. Photovoltaic (PV) module shipments rose to 64.3MW from 35.7MW in the first quarter. The spike in volumes came from higher PV module shipments and PV module processing services. Of this, Germany continued to account for the lion’s share, consuming 83% of the company’s total PV module shipments during the quarter. Czech Republic, Australia, Korea and Spain accounted for 6%, 5%, 3% and 2%, respectively, of the module shipments during the same period.

The company had cash and cash equivalents of $72.4 million, working capital of $188.7 million and unutilized credit lines worth $84.9 million at the end of the second quarter. Solarfun continues with its capacity expansion programs. It plans to expand its current module capacity of 460MW to 510MW by the end of the third quarter of fiscal 2009. Over the long term, it plans to reach annualized module capacity of 700MW in fiscal 2010.

However, Solarfun saw lower average selling price during the quarter, which was down to $2.66 from $2.78 per watt in the first quarter on account of poorer market prices of PV products. The company sees the trend continuing for the rest of the year and warned that average selling prices could slide as low as $2 per watt. We maintain our market Neutral recommendation on the shares.

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