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In addition to manufacturing and marketing of photovoltaic (PV) products, Suntech Power (NYSE:STP) provides integration services like engineering and maintenance in building solar power systems, as well as equipment automation. Suntech’s revenue from these integration services has risen from $3 million in 2007 to $80 million in 2009 led by the firm’s aggressive strategy in upstream integration. Suntech mainly competes with FirstSolar (NASDAQ:FSLR), SunPower (NYSE:SPWRA), and Yingli Green Energy Holding Com (NYSE:YGE).

With geographically diversified operations and a good number of contract wins, we expect Suntech’s PV systems revenues will continue to rise steeply in the coming years. While we anticipate Suntech’s PV systems revenues will rise to $1.2 billion by the end of our forecast period, Trefis members forecast the revenues to reach $1.4 billion, implying a modest upside to our price estimate for STP stock.

We currently have a price estimate of $10.68 for Suntech Power’s stock, which is about 20% ahead of market price.

Chart created using Trefis' app

Globally Diversified Operations

Suntech is involved in high scale solar projects across Europe, the Americas, and Asia Pacific. In Q3 2010, the company supplied a 5 MW project in Thiva, one of the largest grid connected solar projects in Greece. It won the phase II of a 44 MW project in Thailand. Suntech also recently opened its module manufacturing facility in Arizona, which is expected to serve rising demand in North and South America. [1]

Suntech also completed its acquisition of Rietech, Glory Silicon’s wafer subsidiary, which is a step ahead in its integrated manufacturing strategy. In its Q4 2010 earnings calls, the company reported $24 million equity income from Rietech’s earnings. [2]

More Contract Wins

Revenue from PV Systems depend highly on the number of contracts won. As Suntech expands its presence in the systems segment across the globe, it will have a higher chance of bidding for projects. The ability for Suntech Power to manufacture at a lower cost will help it win more contracts as these cost savings will eventually be passed to end consumers.

Notes:

  1. Suntech Power’s Q3 Profit Rises as Revenues, Shipments Reach New High, SeekingAlpha, Nov 18, 2010
  2. Suntech Q4 2010 Earnings Call Transcript, SeekingAlpha.com, March 9, 2011

Disclosure: No positions

Source: Outlook for Suntech's PV Systems Revenues