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雷达卡
Initiating China solar power coverage; Buy JA Solar, Sell Suntech
We initiate coverage of the China solar power industry in a separate report
today (“Solar initiation: asset-light model wins better cash return; Buy JASO”).
We see a depreciating Euro as a key swing factor in the near term but are still
positive on cost leaders of Chinese manufacturers assuming a Euro/US$ rate
of 1.2. We prefer asset-light business models with better cash returns (JA
Solar) to those with lower asset turnover and cash returns (Suntech).
No more gust but a steady wind may be better; Buy CHST
We see wind power as having the second largest share of non-fossil power
capacity in China (after hydro power). We estimate installed wind capacity
will rise to 150GW in 2020E from 16GW in 2009 (CAGR of 22%). We expect
high (but falling) power grid non-connection ratio (2011E: 32%) to keep
capacity growth in check in the near term. We believe consolidation among
wind turbine makers may retard margin compression. We think direct-drive
technology is promising but a short track record in China may imply only a
gradual shift in market share from gearbox technology.
Emergence of nuclear power capacity is not without risks
We think the strong growth phase of nuclear power in China has just
begun. We expect nuclear power capacity to rise to 86GW in 2020E from
9GW in 2009 (CAGR of 23%). We see strong order book support for nearterm
revenue streams of equipment makers. However, we see potential
risks ahead, especially the potentially higher volatility of uranium price and
supply as China’s uranium demand grows. We also think a scarcity in
stocks listed in Hong Kong with nuclear power exposure has resulted in a
P/E valuation premium to Dongfang Electric (H).
Buy China High Speed and JA Solar
We like China High Speed Transmission (CHST) for its leading position in
the wind gearbox market in China and new growth prospects in marine gear,
high-speed rail gear, and electro-mechanical integration products. The stock
trades at 12X 2011E P/E with a 2009-2012E EPS CAGR of 22%. Our 12-month
DCF-based target price is HK$22. We favor JA Solar for its improving cash
return and stronger-than-peer balance sheet. The stock now trades at 5X 2011E
P/E with a 2010E-2012E EPS CAGR of 13% (net loss in 2009). Our 12-month
CROCI-based target price is US$7.5. Key risks: lower-than-expected
sales/margins; depreciating Euro which may hurt exports potential.
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