Roth Comments on Commerce Dept. Preliminary Anti-Dumping Duty; Trina is Winner, SolarCity on Losing End (SCTY) (TSL) (YGE)

China solar is largely mixed Monday following the preliminary anti-dumping duty tariff decision by the U.S. Department of Commerce regarding the import of certain solar PV products assembled in China using components from a third country.

Analyst Philip Shen highlighted key points of the decision.

-- What is the impact? We now expect most Chinese module manufacturers to revert to the 2012 tariff. We had written about this as a likely outcome on June 4 if the AD tariffs against Taiwan came in high. As a result, US module ASPs could approach 80c/W (vs. 70+c/W earlier this year). Our analysis suggests US GMs for Chinese solar vendors could be compressed by ~2-4 points. Overall, with module ASPs that are increasing by ~10%, system prices could rise by ~2-4% depending on the type of installation (residential, commercial, or utility), likely resulting in some incremental demand destruction in the US market.

-- Who benefits? By reverting to the 2012 tariff, TSL is a beneficiary, as it has the lowest tariffs vs. peers (combined tariffs of 23.0% vs. peers of 30.7%). This results in a material US GM advantage. Our analysis suggests TSL could see a ~5 point US GM advantage vs. peers. SOL, with its 1.1GW of OEM module assembly capacity, stands to benefit and expand GMs. The company can now take advantage of the excess supply of Taiwanese cells. ASPs for Taiwanese cells could fall ~3-5c/W vs. ~40+c/W prior, and this could meaningfully improve GMs for its EU business.

-- Who gets hurt? Taiwanese cell vendors (Motech, Gintech, and Neo Solar) were all down ~7% overnight. Although downstream US manufacturers have already prepared for this outcome, we see SolarCity (Nasdaq: SCTY) as negatively impacted on the margin as well.

-- What’s next? DOC expects to announce final determinations on or around December 16. Thereafter, the ITC is expected to make a final determination whether these imports materially injure, or threaten material injury to the domestic industry in Jan’15.

Names still being watched today include JinkoSolar (NYSE: JKS), Trina Solar (NYSE: TSL), JA Solar (Nasdaq: JASO), Renesola (NYSE: SOL), and Yingli Green Energy (NYSE: YGE), among others.

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