First Solar, Inc.

First Solar, Inc. provides photovoltaic (PV) solar energy offerings in the United States, Japan, France, Canada, India, Australia, and internationally. The company designs, manufactures, and sells cadmium telluride solar modules that converts sunlight into electricity. It serves developers and operators of systems, utilities, independent power producers, commercial and industrial companies, and other system owners. It also specialises in maintenance, operations and upkeep of solar energy systems - which further drives their revenue.

Currently, the share is trading at $169.14, up 15.9% year-to-date. The current market cap is $18.03bn.

Key Financials	Q3’22	Q3’21
Net sales	$629mn	$584mn
CapEx	$223.3mn	$164.6mn
Net income	-$49.2mn	$45.2mn

Operations

First Solar, Inc. was founded in 1999 by Harold McMaster, a former ARCO executive, who had the idea to use thin-film technology to create solar cells that could be mass-produced more efficiently and at a lower cost than traditional silicon-based solar cells.

McMaster's idea was based on research that showed that a thin layer of cadmium telluride (CdTe) could be used to absorb sunlight and convert it into electricity. Compared to traditional silicon-based solar cells, CdTe thin-film cells required much less material and energy to produce and could be manufactured at a lower cost.

McMaster formed First Solar to develop and commercialize this technology. In the early days, the company faced significant technical challenges in scaling up the manufacturing process and improving the efficiency of its solar cells. However, after years of research and development, First Solar was able to overcome these challenges and establish itself as a leading manufacturer of thin-film solar modules.

Today, First Solar is one of the largest solar companies in the world, with a global manufacturing footprint and a broad range of solar products and solutions. The company's success has been driven by its innovative technology, its focus on sustainability and environmental responsibility, and its commitment to providing customers with high-quality, reliable solar products.

What's the mission of the company?

The mission is to help accelerate the transition to a more sustainable energy future.

What's a main problem that the company's flagship offering solves?

First Solar's Series 6 PV offerings aim to solve the problem of reducing the cost of solar energy while increasing its efficiency. Solar energy has traditionally been more expensive than conventional forms of energy, and the high cost has been a barrier to its widespread adoption.

First Solar's Series 6 PV modules are designed to be more efficient than traditional solar panels, meaning they can generate more electricity from the same amount of sunlight. Additionally, they are designed to be manufactured at a lower cost than traditional solar panels, thanks to advanced manufacturing processes and a reduction in the amount of material required for each panel.

By reducing the cost of solar energy and increasing its efficiency, First Solar's Series 6 PV offerings aim to make solar energy more accessible and affordable for consumers and businesses, helping to accelerate the transition to a more sustainable energy future.

What's the flagship offering of the company?

Series 6 PV is a thin-film solar module, which is a type of solar panel that uses a thin layer of photovoltaic material to convert sunlight into electricity. What makes the Series 6 unique is its advanced technology and design, which enables it to achieve a higher level of efficiency and reliability compared to previous models. Some of its key features include:

1. High efficiency: Series 6 modules have a power output of up to 445 watts, which is significantly higher than previous versions. This is due to the use of larger solar cells and improved manufacturing processes. Indeed, the efficiency rate is 19.2%, which means that the module is able to convert 19.2% of the sunlight that hits it into electrical energy; in other words, if a solar panel with an area of 1 square meter is exposed to 1000 watts of sunlight, it will be able to produce 192 watts of electrical power.
2. Durability: The Series 6 modules are designed to withstand extreme weather conditions, including high winds and heavy snow loads. They are also resistant to potential induced degradation (PID), which can cause power loss in other solar modules. Indeed, the degradation rate of the offering is 0.3%; in other words, the solar module is expected to lose 0.3% of its power output per year due to normal wear and tear, environmental factors, and other factors that may affect its performance.
3. Sustainability: First Solar has implemented a closed-loop recycling process that enables the recovery and reuse of up to 90% of the materials used in the manufacturing of Series 6 modules. This makes it one of the most sustainable solar solutions available.
4. Cost-effectiveness: Despite its advanced technology and high efficiency, Series 6 is competitively priced compared to other solar solutions, making it a cost-effective option for both residential and commercial customers.
5. Warranty: Some conventional PVs have higher efficiencies of around 25%, but offer a 10-15 year warranty compared to First Solar's 30 year warranty.

[DEGRADATION IMAGE]

Differentiating Factors

1. Environmental: The CadTel technology us 2.5x lower carbon dioxide and 3x lower water usage than c-Si panels. Also, global recycling services can recover >90% of the material used.
2. Energy: CadTel PVs have a superior Temperature Coefficient & Spectral Response, meaning they provide 4% more annual energy in hot climates and a further additional 4% in humid conditions. Also, they do not experience power loss from LID/LeTID mechanisms, which impact c-Si panels considerably.
   

Performance Outlook

Q3 earnings highlights:-

1. Manufacturing:-->$200mn to upgrade Ohio manufacturing capacity by 0.9 GW ->$1bn for new 3.5 GW greenfield plant in southeast USA ->Building facility in India, beginning operations in late 2023
2. R&D:- ->Announced $270m for a dedicated R&D line in Perrysburg, Ohio. Expected completion in 2024.

• Forecasted a thin film CadTel entitlement of 25% cell efficiency by 2025 and pathways to 28% cell efficiency by 2030.
• Vertically integrated manufacturing process -new factories in 18 months, addressing the urgency of the climate crisis.

ESG

FSLR holds an MSCI ESG rating of AA, significantly better than its competitors, such as Enphase Energy and SolarEdge Technologies - both have a rating of BBB.

• Environmental: 1st PV solar recycling program. 1st PV manufacturer to have its product included in EPEAT global registry for sustainable electronics.
• Social: Invested $11m in social welfare programs. 33% diverse Board of Directors. 25+ diversity and veteran focused recruitment sites.
• Governance: 1st PV solar manufacturer to join Responsible Business Alliance and be in the Global Electronics Council registry for sustainable electronics. Provided annual sustainability report for over 10 years.

Team

Chief Executive Officer

Mark R. Widmar was appointed Chief Executive Officer in July 2016. He joined First Solar in April 2011 as Chief Financial Officer and also served as First Solar’s Chief Accounting Officer from February 2012 through June 2015. From March 2015 to June 2016, Mr. Widmar served as the Chief Financial Officer and through June 2018, served as a director on the board of the general partner of 8point3 Energy Partners LP (“8point3”), the joint yieldco formed by First Solar and SunPower Corporation in 2015 to own and operate a portfolio of selected solar generation assets. Prior to joining First Solar, Mr. Widmar served as Chief Financial Officer of GrafTech International Ltd., a leading global manufacturer of advanced carbon and graphite materials, from May 2006 through March 2011. Prior to joining GrafTech, Mr. Widmar served as Corporate Controller of NCR Inc. from 2005 to 2006, and was a Business Unit Chief Financial Officer for NCR from November 2002 to his appointment as Controller. He also served as a Division Controller at Dell, Inc. from August 2000 to November 2002. Mr. Widmar also held various financial and managerial positions with Lucent Technologies Inc., Allied Signal, Inc., and Bristol Myers/Squibb, Inc. He began his career in 1987 as an accountant with Ernst & Young. Mr. Widmar holds a Bachelor of Science in business accounting and a Master of Business Administration from Indiana University.

Chief Financial Officer

Alexander R. Bradley was appointed Chief Financial Officer in October 2016. He joined First Solar in May 2008, and previously served as Vice President of both Treasury and Project Finance, leading or supporting the structuring, sale, and financing of over $10 billion and approximately 2.7 GWDC of the Company’s worldwide development assets, including several of the largest PV power plant projects in North America. From June 2016 to June 2018, Mr. Bradley also served as an officer and board member of the general partner of 8point3. Prior to joining First Solar, Mr. Bradley worked at HSBC in investment banking and leveraged finance, in London and New York, covering the energy and utilities sector. He received his Master of Arts from the University of Edinburgh, Scotland.

Chief Commercial Officer

Georges Antoun was appointed Chief Commercial Officer in July 2016. He joined First Solar in July 2012 as Chief Operating Officer before being appointed as President, U.S. in July 2015. Mr. Antoun has over 30 years of operational and technical experience, including leadership positions at several global technology companies. Prior to joining First Solar, Mr. Antoun served as Venture Partner at Technology Crossover Ventures (“TCV”), a private equity and venture firm that he joined in July 2011. Before joining TCV, Mr. Antoun was the Head of Product Area IP & Broadband Networks for Ericsson, based in San Jose, California. Mr. Antoun joined Ericsson in 2007, when Ericsson acquired Redback Networks, a telecommunications equipment company, where Mr. Antoun served as the Senior Vice President of World Wide Sales & Operations. After the acquisition, Mr. Antoun was promoted to Chief Executive Officer of the Redback Networks subsidiary. Prior to Redback Networks, Mr. Antoun spent five years at Cisco Systems, where he served as Vice President of Worldwide Systems Engineering and Field Marketing, Vice President of Worldwide Optical Operations, and Vice President of Carrier Sales. Prior to Cisco Systems, he was the Director of Systems Engineering at Newbridge Networks, a data and voice networking company. Mr. Antoun started his career at Nynex (now Verizon Communications), where he was part of its Science and Technology Division. Mr. Antoun serves as a member of the board of directors of Marathon Digital Holdings. He is also the Chairman of the University of Louisiana’s College of Engineering Dean’s Advisory Council board. He earned a Bachelor of Science degree in engineering from the University of Louisiana at Lafayette and a Master’s degree in information systems engineering from NYU Poly.

Chief Supply Chain Officer

Michael Koralewski was appointed Chief Supply Chain Officer in November 2022 and is accountable for maintaining executive oversight of First Solar’s strategic global supply chain. He previously served as First Solar’s Chief Manufacturing Operations Officer and provides over 25 years of global operational experience to the executive leadership team. Mr. Koralewski joined First Solar in 2006, serving in several senior roles in operations and quality management, including Senior Vice President, Global Manufacturing since 2015; Vice President, Global Site Operations and Plant Manager since 2011; and Vice President, Global Quality since 2009. In all of these roles Mr. Koralewski has been significantly involved since the beginning of First Solar’s manufacturing scaling and expansion from site selection through sustaining operations and supply chain development. Prior to joining First Solar, Mr. Koralewski worked at Dana Incorporated where he held several positions with global responsibility in operations and quality management. He earned a Bachelor of Science in chemical engineering from Case Western Reserve University and a Master of Business Administration from Bowling Green State University.

Chief Manufacturing Officer

Kuntal Kumar Verma was appointed Chief Manufacturing Officer in November 2022 and previously served as First Solar’s Chief Manufacturing Engineering Officer. He is responsible for First Solar’s global manufacturing operations and engineering, including its performance and improvement roadmap, global technology scaling, new plant start-ups, and strategic initiatives. Mr. Verma joined First Solar in 2002, serving in progressively more senior roles in engineering and manufacturing, including Vice President, Global Manufacturing Engineering since 2012. Prior to joining First Solar, Mr. Verma held several engineering and operations positions at Reliance Industries Limited, India. He is a Master Black Belt in Six Sigma/Lean Manufacturing with an expert certification in Taguchi Methods (Robust Engineering) and a Certification in Production and Inventory Management from American Production and Inventory Control Society. He earned a Bachelor of Science in mechanical engineering from the National Institute of Technology in India, a Master of Science in industrial engineering from the University of Toledo, and a Master of Business Administration from Bowling Green State University.

Chief Product Officer

Patrick Buehler was appointed Chief Product Officer in December 2022, having previously served as Chief Quality and Reliability Officer. Mr. Buehler has over 20 years of operational and technical experience. In his role, Mr. Buehler is responsible for all aspects of product lifecycle management, including understanding market demands, technology trends, and competition to facilitate implementation of new or enhanced products. Mr. Buehler maintains global leadership responsibility for quality and reliability, environmental, health, safety, and security, recycling technology process development and operations, customer service, program management, and strategic initiatives. Mr. Buehler joined First Solar in 2006, serving in progressively more senior technical and operations roles, including Vice President, Quality and Reliability since 2019. Prior to joining First Solar, Mr. Buehler held several roles in manufacturing, engineering, maintenance, and product development at DuPont de Nemours, Inc. and Cummins, Inc. He earned a Bachelor of Science in mechanical engineering from the University of Cincinnati and a Master of Science in mechanical engineering from Purdue University.

Chief Technology Officer

Markus Gloeckler was appointed Chief Technology Officer in November 2020 after being appointed Co-Chief Technology Officer in July 2020. He is focused on driving First Solar’s thin film PV module technology. Mr. Gloeckler has extensive experience guiding strategic research and development activities and served First Solar as Vice President and Chief Scientist before being promoted to Senior Vice President, Module Research and Development. He was instrumental in enabling First Solar’s achievement of various world records relating to conversion efficiency for CdTe solar cells. In his role as Vice President of Research, he led the thin film technology transfer from General Electric to First Solar following the intellectual property acquisition in 2013. He joined First Solar in 2005 in an engineering function supporting First Solar’s technology development after the initial launch of the Series 2 module. Mr. Gloeckler holds an undergraduate degree in microsystems engineering from the Regensburg University of Applied Sciences in Germany, and a Doctor of Philosophy in physics from Colorado State University.

Chief People and Communications Officer

Caroline Stockdale joined First Solar in October 2019 as Executive Vice President, Human Resources and Communications and was appointed Chief People and Communications Officer in October 2020. Prior to joining First Solar, she served as the Chief Executive Officer for First Perform, a provider of human resources services for a variety of customers, from Fortune 100 companies to cyber start-ups. Previously, she served as Chief Human Resources Officer for Medtronic from 2010 to 2013 and Warner Music Group from 2005 to 2009. Before joining Warner Music Group, she served as the senior human resources leader in global divisions of American Express from 2002 to 2005 and General Electric from 1997 to 2002. Ms. Stockdale is a member of the Forbes Human Resources Council. Ms. Stockdale holds a Bachelor of Arts in political theories and institutions, and philosophy, from the University of Sheffield, England.

General Counsel and Secretary

Jason Dymbort joined First Solar in March 2008, serving in a broad range of legal roles before being appointed General Counsel and Secretary in July 2020. Between 2015 and 2018, Mr. Dymbort served as General Counsel and Secretary for the general partner of 8point3 Energy Partners, then a publicly-traded yieldco and affiliate of First Solar. Before joining First Solar, Mr. Dymbort was a corporate attorney at Cravath, Swaine & Moore LLP. He holds a Juris Doctor degree from the University of Pennsylvania Law School, where he was a member of the Penn Law Review, and a bachelor’s degree from Brandeis University.

Market

The size of the electric power industry in terms of revenue can vary depending on the country and region being considered, as well as the specific sectors within the industry. According to data from the International Energy Agency (IEA), the global electricity sector generated an estimated $2.3 trillion in revenue in 2020.

However, it's important to note that this figure includes revenue generated by all segments of the industry, including generation, transmission, and distribution, as well as retail sales to end-users. The revenue breakdown can vary significantly depending on the country, with some countries relying heavily on state-owned utilities while others have more diversified markets with a mix of public and private ownership.

Industry Outlook: Renewables

1. Net-zero commitments: e.g. Paris agreement & Biden administration’s vision to fully decarbonise US economy. The Inflation Reduction Act 2022 was signed by the Biden government. This act includes $369 billion in renewable energy provisions.
2. Russia-Ukraine tensions: Global clean energy investment is set to rise to more than $2 trillion a year by 2030, up by half from current levels, while "international energy markets undergo a profound reorientation in the 2020s as countries adjust to the rupture of Russia-Europe (energy) flows”, the IEA said.
3. Europe's Green Energy plan: Target to generate 45% of energy from renewable sources by 2030.

Industry Outlook: Solar Energy

• 85% decline in costs of PV systems.
• More solar-plus-storage buildouts increases operational efficiency and reduces storage costs.
• Inflation reduction act incentivising PV uptake.

Therefore, investment in the global solar power market is set to rise by 6.9% annually till 2028.

Competition

The solar energy and renewable energy sectors are highly competitive and continually evolving as participants in these sectors strive to distinguish themselves within their markets and compete within the larger electric power industry. Among PV solar module manufacturers, the principal method of competition is sales price per watt, which may be influenced by several module value attributes, including wattage (through a larger form factor or an improved conversion efficiency), energy yield, degradation, sustainability, and reliability. Sales price per watt may also be influenced by warranty terms and customer payment terms. First Solar faces intense competition for sales of solar modules, which may result in reduced selling prices and loss of market share. The company's primary source of competition is crystalline silicon module manufacturers, the majority of which are linked to China. Allegations of forced labour in the Chinese solar supply chain have emerged in recent years, which means the company also competes on its approach to responsible sourcing and supply chain due diligence. First Solar's differentiated technology, integrated manufacturing process, and tightly controlled supply chain helps limit the risks associated with outsourcing and the multiple supply tiers of conventional crystalline silicon module manufacturing.

First Solar also expects to compete with future entrants into the PV solar industry and existing market participants that offer new or differentiated technological offerings.

Certain of First Solar's existing or future competitors, including many linked to China, may have direct or indirect access to sovereign capital or other forms of state support, which could enable such competitors to operate at minimal or negative operating margins for sustained periods of time. First Solar's results of operations could be adversely affected if competitors reduce module pricing to levels below their costs, bid aggressively low prices for module sale agreements, or are able to operate at minimal or negative operating margins for sustained periods of time. First Solar believes that the solar industry may experience periods of structural imbalance between supply and demand, which could lead to periods of pricing volatility.

	First Solar	Enphase Energy	Solar Edge Technologies
Sales price per watt	?	?	?

Financials

ccc

Financials ($'million)

Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	21	22
Year end date	31/12/1999	31/12/2000	31/12/2001	31/12/2002	31/12/2003	31/12/2004	31/12/2005	31/12/2006	31/12/2007	31/12/2008	31/12/2009	31/12/2010	31/12/2011	31/12/2012	31/12/2013	31/12/2014	31/12/2015	31/12/2016	31/12/2017	31/12/2018	31/12/2019	31/12/2020	31/12/2021
Income statement
Revenues ($'million)
Net profits ($'million)
Balance sheet
Total assets ($'million)
Cash flow
Cash from operations ($'million)
Cash from investing ($'million)
Cash from financing ($'million)

What are the assumptions used to estimate the financial forecasts?

Key inputs

Description	Value	Commentary
Revenue
What's the estimated current size of the total addressable market?	$2.3 trillion	Here, the total addressable market (TAM) is defined as the global electric power market, and based on a number of assumptions, it is estimated that the size of the market as of today (11th March 2023), in terms of revenue, is $2.3 trillion.
What is the estimated company lifespan?	50 years	Research shows that the average lifespan of a large corporation is around 50 years.
What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?	3%	Research shows that the growth rate of the global electric power market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022).
What's the estimated company peak market share?	1%	We estimate that especially given the experienced team of the company, the peak market share of First Solar is around 1%, and, therefore, suggests using the share amount here. As of ccc, First Solar's current share of the market is ccc%.
Which distribution function do you want to use to estimate company revenue?	Gaussian	Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped), so we suggest using that function here.
What's the estimated standard deviation of company revenue?	5.5 years	Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on First Solar's current revenue amount (i.e. $ccc million) and First Solar's estimated lifespan (i.e. 50 years) and First Solar's estimated current stage of its lifecycle (i.e. growth stage), the we suggest using five and a half years (i.e. 68% of all sales happen within five and a half years either side of the mean year), so that's what's used here.
Growth stages
How many main stages of growth is the company expected to go through?	4 stages	Research suggests that a company typically goes through four distinct stages of cash flow growth. Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation. In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company. A summary of the economic links to cash flow patterns can be found in the appendix of this report. We estimate that with First Solar's operating cash flows positive (+), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the second stage of growth (i.e. the 'growth' stage), and, therefore, it has a total of three main stages of growth remaining.
What proportion of the company lifecycle is represented by growth stage 1?	30%	Research suggests 30%.
What proportion of the company lifecycle is represented by growth stage 2?	10%	Research suggests 10%.
What proportion of the company lifecycle is represented by growth stage 3?	20%	Research suggests 20%.
What proportion of the company lifecycle is represented by growth stage 4?	40%	Research suggests 40%.
Growth stage 2
Cost of goods sold as a proportion of revenue (%)	35%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 35%.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 15%.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	10%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the margin for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.
Growth stage 3
Cost of goods sold as a proportion of revenue (%)	45%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the margin for its peers is 45%.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the margin for its peers is 15%.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.
Growth stage 4
Cost of goods sold as a proportion of revenue (%)	55%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the margin for its peers is 55%.
Operating expenses as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the margin for its peers is 15%.
Tax rate (%)	12%	Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the rate for its peers is 12%.
Depreciation and amortisation as a proportion of fixed capital (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%.
Fixed capital as a proportion of revenue (%)	10%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 10%.
Working capital as a proportion of revenue (%)	15%	Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4), and the amount for its peers is 15%.
Net borrowing ($000)	Zero	We suggest that for simplicity, the net borrowing figure is zero.
Interest amount ($000)	Zero	We suggest that for simplicity, the interest amount figure is zero.

Risks

As with any investment, investing in First Solar carries a level of risk. Overall, based on the First Solar's adjusted beta (i.e. ccc), the degree of risk associated with an investment in First Solar is 'ccc'.

Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report.

Risk Metric	First Solar	Enphase Energy	Solar Edge Technologies
Beta	1.27	1.47	1.28
Sharpe Ratio	0.80	0.41	-0.18
VaR	23.15%	60.34%	47.50%

Qualitative risks

The key risks of an investment in First Solar, in order of importance (from highest to lowest), are as follows:

1. Competition in solar markets globally and across the solar value chain is intense and could remain that way for an extended period of time. The solar industry may experience periods of structural imbalance between global PV module supply and demand that result in periods of pricing volatility. If First Solar's competitors reduce module pricing to levels near or below their manufacturing costs, or are able to operate at minimal or negative operating margins for sustained periods of time, or if global demand for PV modules decreases relative to installed production capacity, First Solar's business, financial condition, and results of operations could be adversely affected.
2. The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, renewable energy targets, and other support for on-grid solar electricity applications, or other public policies could negatively impact demand and/or price levels for First Solar's solar modules. The imposition of tariffs on First Solar's products could materially increase its costs to perform under its contracts with customers, which could adversely affect its results of operations.
3. The loss of any of First Solar's large customers, or the inability of First Solar's customers and counterparties to perform under their contracts with First Solar, could significantly reduce its net sales and negatively impact its results of operations.
4. First Solar faces intense competition from manufacturers of crystalline silicon solar modules; if global supply exceeds global demand, it could lead to a further reduction in the average selling price for PV solar modules, which could reduce First Solar's net sales and adversely affect its results of operations.
5. Problems with product quality or performance may cause First Solar to incur significant and/or unexpected contractual damages and/or warranty and related expenses, damage its market reputation, and prevent us from maintaining or increasing its market share.
6. First Solar's failure to further refine its technology and develop and introduce improved PV products, including as a result of delays in implementing planned advancements, could render its solar modules uncompetitive and reduce its net sales, profitability, and/or market share.
7. Several of First Solar's key raw materials and components, in particular Cadmium Telluride (CdTe) and substrate glass, and manufacturing equipment are either single-sourced or sourced from a limited number of suppliers, and their failure to perform could cause manufacturing delays, especially as First Solar expands or seek to expand its business, and/or impair its ability to deliver solar modules to customers in the required quality and quantities and at a price that is profitable to First Solar.
8. First Solar's failure to effectively manage module manufacturing production and selling costs, including costs related to raw materials and logistics services, could render its solar modules uncompetitive and reduce its net sales, profitability, and/or market share.
9. First Solar's future success depends on its ability to effectively balance manufacturing production with market demand, effectively manage its cost per watt, and, when necessary, continue to build new manufacturing plants over time in response to market demand, all of which are subject to risks and uncertainties.
10. First Solar may be unable to generate sufficient cash flows or have access to the sources of external financing necessary to fund planned capital investments in manufacturing capacity and product development.
11. First Solar expects certain financial benefits as a result of tax incentives provided by the Inflation Reduction Act of 2022. If these expected financial benefits vary significantly from First Solar's assumptions, its business, financial condition, and results of operations could be adversely affected.
12. Existing regulations and policies, changes thereto, and new regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of PV solar products, which may significantly reduce demand for First Solar's modules.

Valuation

The expected return of an investment in the company over the next five years is ccc%, according to the consensus assumptions of the Stockhub users. In other words, an $100,000 investment in the company is expected to return $ccc in five years time. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level over five years is 10% per year, then an investment in the company is considered to be an 'suitable' one.

Key inputs

Description	Value	Commentary
Which time period do you want to use to estimate the expected return?	Between now and five years time	Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years. Accordingly, we suggest that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.
Which valuation model do you want to use?	Discounted cash flow	Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more/most accurate is the absolute valuation approach, so that's the approach that we suggest using to determine the estimated value of the company.
Which type of discounted cash flow model do you want to use?	Free cash flow	The company has never paid and it said that it does not expect to pay dividends on its common stock for the foreseeable future. Accordingly, we suggest valuing the business using the free cash flow valuation method (rather than the dividend discount model).
Which financial forecasts to use?	Stockhub	The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by us (the forecasts can be found in the financials section of this report), so we suggests using those.
Growth stage 2
Discount rate (%)	15%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	90%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 90%.
Growth stage 3
Discount rate (%)	10%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%.
Growth stage 4
Discount rate (%)	10%	There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
Probability of success (%)	100%	Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%.
Other key inputs
What's the current value of the company?	$22.146 billion	As at 10th March 2023, the current value of the First Solar is $22.146 billion.

Sensitivity analysis

The three main inputs that result in the greatest change in the expected return of the First Solar are, in order of importance (from highest to lowest):

1. The size of the total addressable market (the default size is $ccc billion);
2. First Solar peak market share (the default share is ccc%); and
3. The discount rate (the default time-weighted average rate is ccc%).

The impact of a 10% change in those main inputs to the expected return of the First Solar investment is shown in the table below.

First Solar investment expected return sensitivity analysis

Main input	10% worse	Unchanged	10% better
The size of the total addressable market	To be added	To be added	To be added
First Solar peak market share	To be added	To be added	To be added
The discount rate	To be added	To be added	To be added

Appendix

	2018	2019	2020	2021	2022
Cash Flow from Operations	-	+	+	+	+
Cash Flow from Investing	-	-	-	-	-
Cash Flow from Financing	+	+	-	+	+

Economic links to cash flow patterns

Economic links to cash flow patterns

Cash flow type	Introduction	Growth	Shake out	Mature	Decline
Operating	-	+	+/-	+	-
Investing	-	-	+/-	-	+
Financing	+	+	+/-	-	+/-