one of the three policy banks of the PRC (People's Republic of China), primarily responsible for raising funding for large infrastructure projects, including most of the funding for the Three Gorges Dam and Shanghai Pudong International Airport. The bank was established by the Policy Banks Law of 1994. Debts issued by CDB are fully guaranteed by the central government of the People's Republic of China. CDB is one of the biggest issuers of bonds in the PRC.
After a significant multi-day decline in the stock market, almost all of the solar stocks are trading at bargain levels. The solar stocks have been pushed down by concerns over profit margins; however, more signs are appearing that the rest of the year will bring stronger results as inventory levels have been worked off. Trina Solar (NYSE:TSL) expects to show stronger results for the rest of 2011, and recently stated, "We expect a significant improvement in production costs and an increase in shipment volumes in Q3."
While all of the solar stocks listed below have strong upside potential, there is one that appears to have the most potential due to a number of factors, one of which is the implied backing of the company by the Chinese government. This point seems to be missed by many shorts, analysts and other investors, so let's look at the facts as to why it appears that LDK Solar (NYSE:LDK) is backstopped by none other than the Chinese government, similar to how the US government has backstopped certain industries and companies. This type of backstop just about guarantees access to financing, contracts, government subsidies, etc. No other solar company in China appears to have this backstop. Here are the three facts that support this:
1. The China Development Bank is basically an arm of the Chinese government, has invested multi-millions in LDK and given it a multi-billion line of credit. LDK has received a massive line of credit multi-billion line of credit from this government bank.
2. The China Development Bank recently invested $240 million in LDK Solar. According to Wikipedia, the CDB is
3. The Chinese government is backing the entire solar industry indirectly with a program called "Golden Sun," which provides subsidies for solar projects. With the strong direct and indirect investment and backing by the Chinese government, it makes sense to invest in solar stocks, and in particular LDK Solar.
All of the solar stocks below are worth considering. This sector has been heavily shorted and slowly but surely the fundamentals and technicals are improving. Investors and shorts waiting for the all clear signal could be paying much higher prices for these same stocks in the near future.
LDK is trading at $6.44. The 50-day moving average is $6.87 and the 200-day moving average is $10.37. LDK has very strong earnings for a stock trading below $7, and based on guidance from the company, it appears it could earn over $3 per share in 2011. This puts the PE ratio at about 2.5. The company appears to have very strong backing by the Chinese government and longer term investors could see significant gains when buying while the solar market is still depressed and before a potential Hong Kong IPO for the polysilicon division at LDK. Furthermore, it's becoming more clear that LDK was better positioned to withstand the pricing pressures compared to other companies.
Jinkosolar Holding Co., Ltd. (NYSE:JKS) is trading at $21.90. The 50-day moving average is $24.08 and the 200-day moving average is $25.76. JKS has earnings estimates of about $6.35 per share for 2011 and $5.52 for 2012. This puts the PE ratio at under 4. These shares have received multiple buy ratings with price targets of about $40.
JA Solar Company, Ltd. (NASDAQ:JASO) trades at $4.69. The 50-day moving average is $5.18 and the 200-day moving average is $6.68. JASO has earnings estimates of about $1 per share for 2011. This puts the PE ratio at about 5. JASO has a book value of $6.76, so these shares are trading below book value and the PE ratio also indicates this stock is too cheap.
Trina Solar, Ltd. has pulled back to about $16.84. The 50-day moving average is $19.93 and the 200-day moving average is $24.73. TSL is estimated to earn $3.14 per share in 2011. TSL has a book value of $17.41, so these shares are now trading below book value.
Yingli Green Energy Holding Co., Ltd. (NYSE:YGE) closed at $6.82 yesterday. The 50-day moving average is $8.06 and the 200-day moving average is $10.54 so the shares are trading well below support levels. Estimates for YGE are about $1.19 per share in 2011. This puts the PE ratio at about 6, which is higher than the other names above, but it is still a huge discount to the stock market average.
Hanwha SolarOne Company (HSOL) shares are trading at $5.14. Hanwha SolarOne is a leading maker of wafers and solar modules and is based in China. The 50-day moving average is about $5.68 and the 200-day moving average is $7.60. Earnings estimates for HSOL are expected to be 82 cents for 2011 and 95 cents for 2012. HSOL has a book value of $9.85, so these shares are trading way below book value.
Daqo New Energy Corp. (NYSE:DQ) closed at $7.51 today. DQ is a leading polysilicon manufacturer, based in China. The 50-day moving average is $7.89 and the 200-day moving average is $11.20. Estimates for DQ are about $2 per share in 2011. This puts the PE ratio at about 3, which is a huge discount to the stock market average. Book value is $8.56 per share. This stock has started to rebound from recent lows.
First Solar Inc. (NASDAQ:FSLR) shares trade for $115.25. The 50-day moving average is $122 and the 200-day moving average is $136.94. FSLR has earnings estimates of about $9.22 per share for 2011 and $10.86. This puts the PE ratio at about 11. Book value is listed at $41.43 per share. The last time I wrote about FSLR, the stock was trading around $150, but now these shares are cheap and worth accumulating as well.
Disclosure: I am long LDK