Deutsche Bullish on Chinese Solar Sector: Upgrades TSL, YGE, SOL, STP

February 25, 2010 9:29 AM EST
Get Alerts TSL Hot Sheet
Price: $9.91 -0.2%

Rating Summary:
    11 Buy, 18 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 29 | Down: 30 | New: 23
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Analysts at Deutsche Bank said they are "positive on the China solar energy sector and expect Chinese solar PV module manufacturers to be the major beneficiaries of the global demand growth in 2010E." The firm calls the risk/reward profile among this group attractive given "low-cost structure and increasing brand recognition" which will allow "Chinese manufacturers to weather a likely ASP decline and capture more market share." Deutsche names its top picks Trina Solar and Yingli.

Deutsche Bank upgraded the following Chinese solar manufacturers this morning:
  • Trina Solar (NYSE: TSL) from Hold to Buy, price target raised from $20.35 to $29.80. Deutsche notes that Trina has been a "significant outperformer" but also admits that valuation remains attractive. The firm said it believes "Trina's robust cost structure could allow it to weather a likely ASP decline and capture more market share from higher-cost western manufacturers." Deutsche sees Trina's module shipments remaining strong during the first half of this year, citing "rush orders from Germany ahead of an anticipated feed-in-tariff cut before June 2010."
  • Yingli Green Energy (NYSE: YGE) from Hold to Buy, price target raised from $11 to $15.20. The firm said it is attracted to Yingli's "strong pricing power on its low cost advantage, increasing brand awareness, proven quality track record, strong focus on R&D, and continued capacity expansion in light of markety recovery and competitive advantage." Deutsche sees Yingli reporting FY11 EPS of $0.95. The firm also said that poly cost at Yingli will fall to $75/kg in Q1 and to $60/kg in Q2.
  • Renesola (NYSE: SOL) from Hold to Buy, price target raised from $4.67 to $6.30. Deutsche Bank believes that Renesola is "out of the woods". The firm sees Renesola becoming profitable sometime during this year, citing high-cost polysilicon inventory which has been "mostly consumed" and benefits from vertical integration which have now started to kick-in. "With further downward pressure on module ASP, we believe Renesola is well poised to receive more orders as its vertically integrated OEM model offers a cost-efficient solution to some high-cost western manufacturers." The firm sees Renesola reporting a Q4 loss of $15 million (on March 10).
  • Suntech Power (NYSE: STP) from Sell to Hold, price target from $10.30 to $14.30. Deutsche says "long-term positive on its leadership position but rated Hold on valuation." The firm argues that Suntech's "profitability in 2010E has not yet normalized due to more rigid long-term raw materials supply contracts signed at higher cost compared to peers." Deutsche is modeling for Suntech to report Q4 shipments of 234MW, up 16% from Q3 and compared to the company's guidance of 10-15%. Still the firm expects Suntech's ASP to fall from $2.17/watt in Q3 to $1.53/watt in Q4.

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