Canaccord Genuity on Energy & Power Technologies: Downgrading CSIQ and HSOL
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Price: $14.55 -1.22%
Rating Summary:
13 Buy, 15 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
13 Buy, 15 Hold, 3 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Canaccord Genuity on Energy & Power Technologies by Jonathan Dorsheimer
Dorsheimer said, "Given our expectations for faster-than-expected price erosion and further margin pressures, we are downgrading both Canadian Solar (Nasdaq: CSIQ) and Hanwha SolarOne (Nasdaq: HSOL)) to HOLD from Buy. While perhaps our timing is slightly late given CSIQ is down 25% for the year and HSOL is down 35%, data from Intersolar indicates that industry fundamentals will likely get worse before they improve and we no longer expect upside in the near term. Both companies have adequate local support from the government, and in Hanwha’s case its parent company as well. Further, we do not foresee liquidity issues from an interest coverage perspective, and CapEx needs are declining with the introduction of JV strategies and capacity digestion. These factors should help limit downside and point to a fairly-valued risk/reward, in our opinion. While the balance of 2011 could pose difficulties, we believe margins should recover and even out in the mid-teens in 2012, pending a stabilization in ASPs and as the more gradual cost-reduction efforts such as debottlenecking, yield improvement and new cell architectures catch up to this year’s rapid deterioration in prices."
Dorsheimer said, "Given our expectations for faster-than-expected price erosion and further margin pressures, we are downgrading both Canadian Solar (Nasdaq: CSIQ) and Hanwha SolarOne (Nasdaq: HSOL)) to HOLD from Buy. While perhaps our timing is slightly late given CSIQ is down 25% for the year and HSOL is down 35%, data from Intersolar indicates that industry fundamentals will likely get worse before they improve and we no longer expect upside in the near term. Both companies have adequate local support from the government, and in Hanwha’s case its parent company as well. Further, we do not foresee liquidity issues from an interest coverage perspective, and CapEx needs are declining with the introduction of JV strategies and capacity digestion. These factors should help limit downside and point to a fairly-valued risk/reward, in our opinion. While the balance of 2011 could pose difficulties, we believe margins should recover and even out in the mid-teens in 2012, pending a stabilization in ASPs and as the more gradual cost-reduction efforts such as debottlenecking, yield improvement and new cell architectures catch up to this year’s rapid deterioration in prices."
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