LDK Solar Company (LDK)

LDK Solar Co., Ltd. (LDK), founded in July 2005 in Jiangxi Province, China, is a global leading manufacturer of multicrystalline solar wafers, which are the principal raw material used to produce solar cells. LDK sells multicrystalline wafers globally to manufacturers of photovoltaic products, including solar cells and solar modules. Multicrystalline solar wafers business contributes 90% of LDK's revenue. In addition, the company provides wafer processing services to monocrystalline and multicrystalline solar cell and module manufacturers, which provides around 10% of LDK's revenue. Since the company made its first commercial sale of multicrystalline wafers in April 2006, LDK has experienced significant growth. LDK became a public company on NYSE on June 4, 2007. LDK's annualized wafer production capacity is expected to reach 1.2 GW at the end of 2008 and become the largest wafer producer in the world.

LDK s revenue and earnings for the second quarter continued to show strong growth, which again exceeded market expectations. We think LDK s will continue to grow quickly in the next few quarters due to its aggressive capacity expansion and strong growth of solar power industry worldwide. However, we are concerned its gross margin will continue to decline due to rising pre-sold orders and increasing competition in the wafer segment. In addition, current capital market situation may limit its stock price upside potential in the near future. Therefore, we are maintaining our Hold rating on LDK.

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