Thursday, February 28, 2008

Bright Future Seen For Suntech Power


With rising demand for solar energy in Europe and the United States, China-based Suntech Power Holdings is expected to increase its profit by 75% and become the world's No. 1 solar module manufacturer in 2008.

In a research report published Wednesday, Citigroup projected that Suntech Power would become the largest supplier of photovoltaic cells and modules in the world this year, with year-end capacity of 1 gigawatt, almost double the production scale it had in 2007. Headquartered in Wuxi, an industrial city in the coastal province of Jiangsu, Suntech was ranked the world's No. 3 solar module producer in 2007, with annual capacity of 540 megawatts.

Citigroup estimated Suntech's sales would grow 53%, to $2.06 billion, in 2008, from $1.3 billion last year. Net profit is forecast to soar by 75%, to $299.5 million, this year, up from the $171.3 million recorded in 2007.

Suntech has been expanding rapidly in the past few years. It was established in 2001 and listed on New York Stock Exchange in December 2005. With four production sites in Wuxi, Luoyang (in Henan province), Qinghai province and Shanghai, Suntech is currently the No. 2 photovoltaic module supplier in Germany, the world’s largest solar market, which accounted 50% of Suntech's sales in 2007.

Citigroup forecast a favorable outlook for China’s solar industry generally, with strong demand growth in Spain, Italy, South Korea and potentially the United States, as well as solid demand from Germany, driven by increased adoption of solar incentives by governments worldwide as a matter of policy. Nevertheless, Citigroup expected the present undersupply of solar polysilicon will continue only through 2008. "By second half in 2009 and entering 2010, a significant increase in new polysilicon capacity would likely cause industry oversupply, resulting in a potential industry cyclical correction which could drive down both polysilicon and module prices." Citigroup anticipated that the industry will be 33% oversupplied by 2010.

Amid fierce competition in the solar industry, the bank chose Suntech as its top pick in the field, the most capable of weathering the coming market correction: "We believe Suntech is among the best positioned in the sector, given its leading scale, low-cost China manufacturing and roadmap for improved cell efficiency." Citigroup initiated coverage on Suntech with a "buy/ high risk" rating, setting a target price of $55.

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