Table of contents
Overview of global/China view and key assumptions/valuation 3
We think cash return is paramount to long-term competitiveness 6
Top stock pick: JA Solar offers a better risk/reward vs. peers 8
Valuation: We use a cash-based (CROCI) methodology 13
JA Solar excels in scenario analysis for Euro/US$ FX rate 16
JA Solar and Yingli excel in scenario analysis for supply/demand 18
Global solar industry – growing using less expensive funds 20
China’s solar market – the home of current capacity but future demand 22
Policy-related and other industry risk factors 26
JA Solar (JASO; Buy, CL): Buy on improving cash returns 29
Trina Solar (TSL; Neutral): Short-term impact from FX rate swing 32
Yingli Green Energy (YGE; Neutral): Low asset turnover drags cash return 35
GCL-Poly (3800.HK; Neutral): Fairly valued upstream player 38
Suntech Power (STP; Sell): Low asset turnover/high earnings risks 41
Appendix I: Supply – as capacity added, ASP should fall 44
Appendix II: Global solar PV module demand forecast 45
Appendix III: Chinese listed solar players’ industry landscape 46
Appendix IV: Chinese and global solar module ASP assumptions 47
Appendix V: EV/GCI historical trading charts 48
The prices in the body of this report are based on the market close of June 24, 2010.
The authors would like to thank Nick Xue and Xi Wang for their valuable contributions to this publication.