August 31, 2011, 10:21 AM ET
Solar: Maxim Sees Shares Pressured By Margin Erosion
By Tiernan Ray
blogs.barrons.com
Maxim Group’s Aaron Chew today writes that the solar energy technology industry will see continued pressure on gross profit margin through the rest of this year as price declines in solar modules continue to have a greater impact than a pickup in shipments.
“Module maker margins remain firmly <20%, with cell/wafer makers struggling to break even,” writes Chew.
There is a rebound in demand, notes Chew, as remarks from five of the “leading publicly-traded European system integrators” for solar projects suggest second-half shipments should rise 30%, and inventories are coming down.
However, Q3 average selling prices will fall to $1.25 to $1.30 [per watt], on average, even as polysilicon costs stay at $50 to $55, he writes. Some, such as Suntech Power Holdings ( STP), are looking at margins as low as 10% to 12%, he writes.
(Axiom Capital’s Gordon Johnson notes this morning that pricing data from PVinsights.com shows a spot price for silicon-based solar modules of $1.18 per watt, on average.)
Chew maintains Sell ratings on First Solar ( FSLR) and Suntech, and a Hold rating on Yingli Green Energy ( YGE), and he has a Buy rating on STR Holdings ( STRI) and Trina Solar ( TSL).
Most at risk among the shares, he thinks, are “high-cost producers” such as STP and Hanwha SolarOne, while Trina, Yingli and JinkoSolar Holding ( JKS) have “reasonable valuations” that should prevent significant further downside from current share prices. |
