JA Solar and Canadian Solar: Two Companies Set to Shine
by: Kelvin Schulle April 15, 2010
seekingalpha.com
These days, Solar industry analysts are all over the place-- it really depends on what you want to emphasize. For instance, First Solar's (FSLR) one year price target ranges from $90 to $205, depending who you listen to. A new analyst from Auriga, Mark Bachman, flipped his rating on Sunpower (SPWRA) from "buy" to "sell" in just 3 months.
One main reason behind this analyst mess is that solar energy demand is uneven globally. Also, some markets are ignored until demand is actually reported. For example, the Czech Republic reportedly installed 400MW solar panel in 2009, which is equal to almost 30% of overall German demand. However nobody even mentioned the Czech market in 2009. Canadian Solar (CSIQ) has been in the Czech Republic since 2008. It has a pretty established market share there along with Suntech Power (STP).
Another market that has been ignored is the Canadian solar market. Analysts only cite German markets (1.4 gigawatts installed in 2009) when it comes to rating a company, yet Canada has issued over 4GW of solar project for next 3 years. Ontario alone has awarded 2.5GW, British Columbia has over 1GW awarded.
The clearest beneficiary of this Canadian solar boom is Canadian Solar. The company moved its headquarters to Kitchener, Ontario in 2009 while leaving low cost manufacturing facilities in China. It is believed to be a strategic shift for the company to gain market share in a new solar world order. The company was recently granted projects of 176MW in Ontario.
Having said that, the Street is expecting 9GW of solar demand in 2010, while Credit Suisse issued a 12.7 gigawatt demand forecast. Demand may be stronger than many analysts are expecting due to emerging market demand.
For example, JA Solar (JASO) upped 2010 Q1 shipments by over 21% to 265MW. We have been following JA Solar for quite some time and believe the company is gaining market share on many frontiers. Based on recent developments in the solar industry and our deep roots in Chinese solar industry, we believe the following two companies are gaining significant market share: JA Solar and Canadian Solar.
1. JA Solar
JA Solar stock was one of the worst performing stocks in 2008 and 2009 when management was definitely unable to handle inventory efficiently in the face of shrinking global demand. Its marketing strategy was also disappointing as BP solar was its only major customer. However, the company has been aggressively entering emerging markets and improving PV panel efficiency. JA Solar panel demand has seen a big boost in the Chinese market. We expect the company to continue its momentum in 2010 and beyond.
2. Canadian Solar
Most investors believe this is a Canadian company. Well, that isn't 100% true. Let me put it this way: Canadian Solar is a Chinese solar company with deep roots in the Canadian solar market. Its solar panels are among the most efficient on the market. Customers get a lot of bang for their buck because of the company's lowest cost per watt figures as compared to its peers. One of the striking things about Canadian Solar that were noted in the company's 2009 year end report: Q4 sales jumped to $288 million from $44M in Q1. Q-over-Q growth is tremendous.
The company is also gaining market share in China, Japan, Canada and Europe, especially Eastern Europe. Its direct competitors are Suntech Power and Trina Solar (TSL). Canadian solar leads the top three in terms of cost per watt for customers. We expect the company will have significant upside in 2010 earnings due to its new strategy in overseas.
Disclosure: Long FSLR |
