FBR Capital Said China Solar Subsidies Will Not Save The Stocks; News Already Baked In (FSLR, STP, TSL)

FBR Capital Markets issued some cautious comments on solar stocks on the heels of news about China solar subsidies. FBR said, the "Golden Sun Program" will not save solar stocks entering earnings season.

Earlier today the China Ministry of Finance provided additional details about solar PV subsidies. The news is driving shares of a number of China-related solar plays higher.

FBR notes: The translated version of the press release issued by CMF suggests that the central government in China decided to support financially any electricity generated by solar PV projects of no less than 500MW BUT over a period of 2-3 years. Additionally, CMF is considering subsidizing 50% of PV systems and related transmission equipment cost, and up to 70% of those cost in rural area with no electricity.

FBR's take on the news - We are already assuming 300MW of installation in China in CY09, 750MW in CY10 and well over 1GW/yr after CY10. Thus, the real material impact from the China market may be already baked into our industry estimates! However, the China news, in our view, is providing good PR for China-based companies. Yet, in our opinion, it may be insufficent to offset the expected shortfall to CY09 earning expectations. We simply do not believe that the full extent of disappointing results is baked into stock prices. In fact, in addition to weak fundamentals, we encourage investors to focus more on the dilution impact of de-leveraging balance sheet that is currently underway among China-based solar PV companies, rather than buying into hyper-inflated expectations from the China market.

FBR said would use today's rally, driven by inaccurate assessment and conclusions about the CMF news, as a catalyst to revisit their Underperform-rated rated stocks: First Solar (Nasdaq: FSLR), Suntech (NYSE: STP), and Trina Solar (NYSE: TSL).

Solar stocks moving on today's announcement:

• Suntech Power Holdings Co Ltd (NYSE: STP) +8%
  
• Yingli Green Energy Holding Co Ltd (NYSE: YGE) +9%
  
• Trina Solar Ltd (NYSE: TSL) +6%
  
• JA Solar Holdings Co Ltd (Nasdaq: JASO) +4%
  
• ReneSola Ltd. (NYSE: SOL) +4%
  
• LDK Solar (NYSE: LDK) +9%
  
• Claymore/MAC Global Solar Energy (NYSE: TAN) +4%

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