Roth Upgrades ReneSola (SOL) to Buy; Sees Outperformance Continuing on Strong Differentiation

March 25, 2014 8:53 AM EDT
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Price: $4.37 +5.56%

Rating Summary:
    6 Buy, 3 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 16 | Down: 16 | New: 12
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Roth Capital upgrades ReneSola Ltd. (NYSE: SOL) from Neutral to Buy and lifts its price target from $3.80 up to $5.

Analyst Philip Shen sees outperformance from ReneSola continuing amid the solar sector trading sideways as the analyst likes the company's differentiated strategy versus peers. While midstream manufacturing competitors focus on project development and module capacity expansion, SOL is focused on the integration of its 6k MT of polysilicon capacity and boosting its OEM module capacity with global manufacturing partners (240MW in India, 80MW in Japan, 180MW in Malaysia, 265MW in Poland, 78MW in South Africa, 60MW in South Korea, 120MW in Turkey). We believe the integration into poly differentiates SOL by allowing the company to preserve (and potentially even expand) GMs in an environment where spot poly pricing increases to $25/kg, which we now view as a realistic scenario. Additionally, we like SOL’s differentiated OEM approach to capacity expansion as it requires less capex vs. in-house expansion and allows for a more nimble manufacturing approach given the fluctuating state of global tariffs, the analyst said.

On guidance: Q1 module shipments are expected to range from 500-520MW, with GMs of 9-11%. For 2014, SOL expects 2.3-2.5GW of module shipments vs. prior ROTHe of 2.0GW. This implies mp +39% YoY growth in 2014 module shipments vs. Canadian Solar (Nasdaq: CSIQ of mp +37% YoY, JA Solar (Nasdaq: JASO) of mp +35% YoY, JinkoSolar (NYSEJKS of mp +59% YoY, Trina Solar (NYSE: TSL) of mp +43% YoY, and Yingli Green Energy (NYSE: YGE) of mp +28% YoY.

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