Suntech's PV Module Shipments Could Triple Over Next 5 Years

| About: Suntech Power (STP)
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Suntech Power (NYSE:STP) ousted its biggest competitor in the solar industry, FirstSolar (NASDAQ:FSLR), to become the largest supplier of photovoltaic (PV) modules in the world last year. The company shipped 1,522 megawatt (MW) of PV modules in 2010, comfortably ahead of the 1,411 MW First Solar shipped across the globe. And these shipment figures are only expected to shoot up over the coming years. Here we take a look at the imminent boost in Suntech’s module shipments. Suntech Power is China’s largest U.S.-listed solar player by market capitalization and competes with other solar industry giants like LDK Solar (NYSE:LDK), SunPower (NYSE:SPWRA), and Yingli Green Energy (NYSE:YGE).

We maintain a $10.68 price estimate for Suntech Power, suggesting a premium to the current market price.

Suntech has significantly grown its PV shipment figures…

Suntech produces PV modules with capacities ranging from 2 to 290 watts, with higher output modules under development. These PV modules can be applied to homes, apartments, military compounds, farms and even different forms of transportation.

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The total energy capacity of the modules sold by the company increased from 358 MW in 2007 to 1,522 MW in 2010. This growth has been a result of the various benefits and subsidies provided by governments for solar energy adoption combined with a reduction in solar component prices due to lower input costs. Both these factors have driven demand for solar modules, driving sales for Suntech.

… and there are bigger factors in favor of growth in the future

In the years to come, demand for solar components is expected to continue to be driven by reducing average selling prices (ASP) of these components due to the combined effects of government subsidies and competitive pressures.

Government incentives aimed at environmental targets are expected to continue to be the biggest drivers for the solar energy demand, with research efforts also expected to help the solar sector to compete directly with fossil fuels in terms of per watt generation costs.

Suntech has also spread its production to the U.S. to be able to cater to local demands more efficiently. Also, the Pluto cell, the firm’s highest efficiency technology, is gaining popularity, and with mass production expected to start this year, this should also boost the company’s shipment sales.