Asia Taiwan
Energy
6 February 2009
Asian Solar Energy Sector
Medium-term cloudy but longterm
growth intact
Michael Chou
Research Analyst
(886) 2 2192 2836
michael.chou@db.com
Peter Lee
Research Analyst
(82) 2 316 8905
peterkj.lee@db.com
Ricky Liu
Research Analyst
(886) 2 2192 2823
ricky-hm.liu@db.com
Fundamental, Industry, Thematic, Thought-Leading
Deutsche Bank Company Research's Investment Policy Committee has deemed
this work F.I.T.T. for investors seeking differentiated ideas. We recommend
investors focus on those solar companies with higher barriers to entry and avoid
those threatened by sharp ASP/margin erosion and material earnings decline in an
industry facing material growth deceleration and shorter-term funding challenges.
Deutsche Bank AG/Hong Kong
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
FITT Research
Top picks
DC Chemical (010060.KS),KRW234,000.00 Buy
Suntech Power Holdings (STP.N),USD9.14 Sell
Motech Industries Inc (6244.TWO),TWD75.50 Sell
SAS Wafer (5483.TWO),TWD67.00 Sell
Companies featured
Motech Industries Inc (6244.TWO),TWD75.50 Sell
2007A 2008E 2009E
P/E (x) 46.2 7.5 12.4
EV/EBITDA (x) 18.8 5.6 8.8
Price/book (x) 5.5 1.3 1.3
DC Chemical (010060.KS),KRW234,000.00 Buy
2007A 2008E 2009E
P/E (x) 25.3 17.0 19.2
EV/EBITDA (x) 15.0 6.7 7.7
Price/book (x) 5.54 4.00 3.38
SAS Wafer (5483.TWO),TWD67.00 Sell
2007A 2008E 2009E
P/E (x) 33.6 7.7 10.6
EV/EBITDA (x) 19.0 5.7 8.7
Price/book (x) 9.5 2.0 1.9
Renesola (SOL.N),USD3.58 Hold
2007A 2008E 2009E
P/E (x) – 3.1 5.8
EV/EBITDA (x) – 3.7 5.6
Price/book (x) 0.0 0.5 0.4
Suntech Power Holdings (STP.N),USD9.14 Sell
2007A 2008E 2009E
P/E (x) 46.9 11.1 15.1
EV/EBITDA (x) 40.6 12.2 15.8
Price/book (x) 15.7 1.5 1.3
Trina Solar (TSL.N),USD7.68 Hold
2007A 2008E 2009E
P/E (x) 39.5 3.4 6.9
EV/EBITDA (x) 26.9 2.8 3.7
Price/book (x) 3.5 0.6 0.6
Yingli Green Energy (YGE.N),USD5.21 Hold
2007A 2008E 2009E
P/E (x) 66.0 7.0 8.6
EV/EBITDA (x) 23.9 4.2 5.1
Price/book (x) 6.9 1.0 0.9
Fundamental: Medium-term growth deceleration, reacceleration from 2011
We expect silicon-based solar PV (photovoltaic) module revenue CAGR to
decelerate to -19% during 2009-10 from 50% during 2007-08 due to 35-40% solar
module ASP YoY decline in 2009-10 and moderate unit growth in a weak global
macro climate. Longer term, we anticipate revenue CAGR to improve to 16%
during 2011-20 thanks to grid parity starting earlier than expected in Italy, Germany,
France, and the US during 2011-2015 based on our bottom-up surveys.
Industry: Analysis to identify long-term survivorship
We analyze the financial status of our Asian coverage universe and anticipate
limited financing risks for 2009 and 2010 as we believe these companies can still
obtain credit lines from banks. These companies’ balance sheets and scale are
superior to their Asian solar peers. We prefer upstream over downstream players
due to higher entry barriers.
Thematic: Margin contraction in 2009-10, but long-term growth story intact
We believe the Asian solar energy sector will continue to experience margin
contraction and earnings downside risks in 2009-10 owing to: 1) an overly
crowded market with low capex/technology requirements and 2) commoditized
products. Solar module ASP may fall at a faster pace than the price of polysilicon
due to low product differentiation. Longer term, we expect earnings growth to
recover from 2011-20 due to accelerated adoption as grid parity is achieved.
Thought-Leading: Accelerated grid parity, consolidation key for LT positives
Our solar grid parity and IRR analysis suggest that the sector should enter the next
upcycle with more stable, albeit lower, margins and sustained earnings growth
prospects from 2011. We expect mid/small players (mainly unlisted companies) to
start to exit the market in 2009-10 in light of limited capacity (poor economies of
scale), weak balance sheets, financing risks, and rising net losses with high nonpolysilicon
costs. An industry-wide shake-out and substantial solar module ASP
drop should create a healthier environment with fewer players by end-2010.
Top ideas: Buy DC Chemical and Sell Suntech, Motech, and SAS
Polysilicon maker DC Chem is our top Buy in the sector due to stronger margins
from higher entry barriers, stronger execution, and cost competitiveness. We
retain Sell on Suntech owing to its highest sales exposure to long-term contract
polysilicon. We downgrade Motech and SAS from Hold to Sell on demanding
valuations. However, we believe long-term sector momentum will recover from
late-2010 as we forecast margin stability and positive earnings growth in a more
favorable demand and pricing environment. Sector upside risks include strongerthan-
expected demand/lower ASP pressures if global credit markets rapidly
normalize and currency trends improve. Sector downside risks are weaker
demand, more

Table of Contents
Executive summary ........................................................................... 3
Theme #1 – Mid-term slowdown but stable long-term growth .... 6
Theme # 2 – Operating and funding environment to deteriorate
before stabilizing ............................................................................. 23
Theme #3 – Favor upstream over downstream ............................ 38
Risks.................................................................................................. 46
Appendix A....................................................................................... 51
DC Chemical..................................................................................... 66
Motech Industries Inc ..................................................................... 70
Renesola ........................................................................................... 76
SAS Wafer ........................................................................................ 82
Suntech Power Holdings ................................................................ 88
Trina Solar........................................................................................ 94
Yingli Green Energy....................................................................... 100