Solar stocks have truly arrived. Another one of the big boys has initiated coverage. Wells Fargo has initiated coverage on a few China stocks – Trina Solar (TSL), ReneSola (SOL) and Suntech Power (STP). Hat tip to Street Insider for the analyst commentary.
ReneSola (SOL) gets an Outperform rating and a valuation range of $9.50 – $12. “Wafer pricing is trending higher, margins are improving, and the new OEM business can provide protection if the market softens in 2011…ReneSola is a big beneficiary of 2010 demand trends. Currently there is an undersupply of low-cost wafer capacity in China, prompting price increases; spot wafer pricing is up more than 10% from Q4 2009 levels. ReneSola’s ASPs will be lower than spot as the company sells to customers under long-term contracts, but we should see price improvement through H1.”
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Trina Solar (TSL) also gets an Outperform rating and valuation range of $31 – $35. “Trina’s industry-leading cost structure and growing brand recognition are big competitive advantages relative to peers, allowing the company to gain share in good markets and bad. We believe valuation is reasonable at 12x/11x 2010E/2011E EPS, the balance sheet is in good shape, and margins will continue to outshine peers. Whether you’re a solar bull or bear, Trina is a core holding, in our view.”
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Suntech (STP) gets a Market Perform rating with a valuation range of $11 – $14. “Suntech has one of the best brands in the industry, but we believe the company needs to revamp its cost structure and improve corporate governance, notably its relationship with 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, in our view.”