The solar sector is starting to pick up momentum on the expectation that President Obama will boost green energy in this country for the coming years; China also jumpstarted solar incentive to solar energy developers. However, keep in mind solar incentive in US will not kick off until 2010 according to the new administration. In a recent report from Chinadaily.com that the Chinese government has started to process the first round of project applications from domestic solar comapnies, these companies include Suntech Power (STP), ReneSola (SOL), Solarfun (SOLF), Yingli Green (YGE), etc. US solar companies, such as First Solar (FSLR), SunPower (SPWRA), are not eligible at this point.
Besides checking the PE of the company (see my previous article), it is always good idea to know its business models, and this may bring some insight to these companies.
STP: Suntech Power is the largest PV maker in terms of production, but sales have been disappointing so far in 2009. However the company has one of the lowest costs per watt to produce PV. The company also claimed to reduce cost to below $1/W by 2012. Analysts were dubious because the company has no control over the wafer cost, as it purchases wafers from ReneSola and LDK Solar (LDK).
SOL: ReneSola was a wafer provider in 2008, and its customers include Suntech Power and Canadian Solar (CSIQ). Recently, the company acquired JC Solar, a Chinese PV maker, whose sales reach across allover the world including Europe, China, Africa, Japan and North America. Suddenly, ReneSola become a vertically integrated PV maker, with a similar model as Yingli Green. Recently ReneSola received a 5MW project from Zhejiang province to kick off this province's first solar project, and more projects are expected to follow as ReneSola is the only solar company in Zhejiang. More importantly, ReneSola's cost base should be well below $1/W under the new model.
SOLF: Solarfun had constantly exceeded Wall Street's expectations in 2008, and it has the same model as Suntech Power and Canadian Solar, but the company has managed to lower cost in this tough enviroment. The company reported lower Q1 earnings, but expect 2009 sales to pick up the pace. The company may benefit from 2010 World EXPO as it is located in Shanghai, and solar is the topic of this event.
YGE: Yingli is another vertical integration name in solar space. It is known as a low cost PV producer because of its model. But valuation wise, YGE may be expensive here compared to ReneSola. Yingli is expected to report revenue of $1.1B in 2009, and ReneSola is expected $699M (JC Solar is not included yet), and based on yesterday's close, Yingli has market cap of $1.9B. ReneSola has a market cap of $320M. It is expected that ReneSola's stock price has some space to catch up.
CSIQ: Canadian Solar is actually headquarted in Canada, but most people believe it is a Chinese company. For that reason, it is unknown if the company is eligible for Chinese incentives. It has the same model as Suntech and Solarfun, and its cost base is not as competitive as SOL and YGE. The company has a low float of shares, so share prices were very volatile historically.
Disclosure: Author is long FSLR, SOL.
