Wednesday, October 20, 2010

Suntech Power (NYSE:STP), ReneSola (NYSE:SOL), Trina (NYSE:TSL) and Yingli (NYSE:YGE) Among Leading China Solar Companies

Deutsche Bank AG (NYSE:DB) continues to like the Chinese solar sector, and among its favorites are Suntech (NYSE:STP), ReneSola (NYSE:SOL), Trina (NYSE:TSL) and Yingli (NYSE:YGE).

Suntech they upgraded from "Hold" to "Buy."

Deutsche said, "We expect the leading China solar PV manufacturers to report strong sets of results in 3Q10E and 4Q10E, and believe this momentum should be further extended beyond 2010 due to a more stable module ASP outlook in 1Q11 qoq. Module ASP may start to drop in 2Q11E but we think this risk is likely to be overcome by the ongoing effort to reduce manufacturing costs. The sector trades at an inexpensive valuation of 5-7x 2011E P/E; we reiterate Buy on ReneSola, Trina and Yingli, and upgrade Suntech to Buy.

"We remain bullish on ReneSola despite the 66% increase in share price in the past three months. We reiterate Buy on Trina mainly on its manufacturing cost leadership. We also like Yingli but see possible near-term pressure on 3Q10E gross margins due to the additional ramp-up cost from its polysilicon facility and new production lines. We upgrade Suntech as we believe the stock now offers an attractive risk-adjusted reward return after a year of share underperformance and expect the company to secure new wafer capacity in the near term."

All the companies took hard hits Tuesday, with Yingli dropping to $11.83, falling $1.15, or 8.86 percent. Trina closed at $26.26, losing $1.67, or 5.98 percent. Renesola closed the session at $12.17, falling $1.22, or 9.11 percent. Suntech was down $8.85, down $0.59, or 6.25 percent.

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