BofA Offers Solar Stock Picks: Downgrades Trina, Yingli, Initiates Xinyi With Buy, Singyes With Neutral

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Bank of America issued a research note on solar companies in China Wednesday and was bullish on both “global solar demand and China’s solar capex wave.”

Analysts led by Vitus Leung expected 15 percent/14 percent growth in solar demand Year over Year in 2015/2016.

“China is the world’s fastest growing solar market as it targets solar installed PV capacity of 100GW by 2020, up from 28GW in 2014 (257 percent growth). For 2015-20, we see potential new capacity of more than 72GW (over 12GW per year), implying capex exceeding RMB500bn on solar farms,” according to the analysts.

Leung favored upstream/solar farms over Engineering, Procurement & Construction (EPC) stocks. China-based solar farms that showed strong earnings deserved premium P/B valuations, according to the analyst note.

Xinyi Solar Holdings Ltd (HKG: 0968) was initiated with a Buy rating and price target of HK$3.5.

The company was “the largest solar glass maker and can leverage its know-how to ensure module quality as it expands into solar farm,” Leung noted.

China Singyes Solar Technologs Hldgs Ltd (HKG: 0750) was initiated with a Neutral rating.

Singyes was “a well-known solar EPC company with a strong track record in solar installation” and was expected to “benefit from a rebound in solar installation, while its foray into the solar farm will help boost margins,” the analysts wrote.

Trina Solar Limited (ADR) TSL and Yingli Green Energy Hold. Co. Ltd. (ADR) YGE were downgraded to Neutral.

The downgrades were made due to China being “the largest end-market with low prices” and the expectation that solar system ASPs will fall, creating a margin headwind.

Amid the initiation of coverage, Xinyi Solar Holdings Ltd closed at HK$2.69 Wednesday, up 10.25 percent.

China Singyes Solar Technologs Hldgs Ltd closed at HK$12.44, up 9.31 percent.
 

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Posted In: Analyst ColorPrice TargetInitiationAnalyst RatingsBank of AmericaVitus Leung
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