Solar stocks have truly arrived. Another one of the big boys has initiatedcoverage. Wells Fargo has initiated coverage on a few China stocks –Trina Solar (TSL), ReneSola (SOL) and Suntech Power (STP). Hat tip to Street Insiderfor the analyst commentary.
ReneSola (SOL) gets an Outperform rating and avaluation range of $9.50 – $12. “Wafer pricing is trending higher,margins are improving, and the new OEM business can provide protectionif the market softens in 2011…ReneSola is a big beneficiary of 2010demand trends. Currently there is an undersupply of low-cost wafercapacity in China, prompting price increases; spot wafer pricing is upmore than 10% from Q4 2009 levels. ReneSola’s ASPs will be lower thanspot as the company sells to customers under long-term contracts, but we should see price improvement through H1.”
Trina Solar (TSL) also gets an Outperform rating and valuation range of $31 – $35. “Trina’s industry-leading coststructure and growing brand recognition are big competitive advantagesrelative to peers, allowing the company to gain share in good marketsand bad. We believe valuation is reasonable at 12x/11x 2010E/2011E EPS,the balance sheet is in good shape, and margins will continue tooutshine peers. Whether you’re a solar bull or bear, Trina is acore holding, in our view.”
Suntech (STP) gets a Market Perform rating with avaluation range of $11 – $14. “Suntech has one of the best brands inthe industry, but we believe the company needs to revamp its coststructure and improve corporate governance, notably its relationshipwith Global Solar Fund (GSF); Suntech has a high ownership stake in this entity but does not consolidate results. Valuation of 17x 2010E EPS vs. the peer group near 15x leaves little room for stock appreciation, inour view.”
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