Check Out This 'Underfollowed' Solar Stock Roth Capital Is Buying

Hanwha Q Cells Co Ltd –ADR HQCL, formerly Hanwha SolarOne is a small-cap global solar energy company headquartered in South Korea. In a report issued Friday, Roth Capital analysts Philip Shen and Justin Clare initiated coverage on its stock with a Buy rating and $14 price target, noting this is an “underfollowed solar major.”

Some Context

Supported by Hanwha Corporation, Hanwha Q Cells was formed, in early 2015, by the merger of two companies Hanwha Corp. had acquired: Solarfun (2010) and Q CELLS (2012).

“As a testament to the bankability of the combined entity, management recently inked the industry’s largest single module order with attractive terms (1.5GW, $449mn upfront payment),” the analysts add. Moreover, this underfollowed solar major is the key player in the portfolio of Hanwha-backed companies with solar exposure -- polysilicon, machinery, materials, EPC, life insurance.

The note goes on to explain the importance of Hanwha Corporation’s backing. With roughly $125 billion in assets and more than $35 billion in yearly sales, the company has the ability to make big investments. After hefty outlays in the solar sector, the conglomerate (with Hanwha Q Cells) “is expected to have the leading cell capacity in the world by YE'15 (4.3GW). Finally, with a $100bn balance sheet, we expect Hanwha Life to serve as a meaningful future solar asset owner,” the experts append.

Other Key Points

The report points out three more elements to take into account before investing in Hanwha Q Cells:

• The company’s trade-compliant modules provide it with a “diversified, global market presence, and limited exposure to China (~15% of 2015 revenues).”
• Risks include historically not-great execution, and limited profitability and float.
• Roth Capital believes the stock deserves a valuation premium due to its leading capacity and aforementioned corporate support.