July 10, 2014

2014 China Solar Installation Target Hard to Achieve

Recently, dozens of institutions warned about the risks Chinese PV makers are facing. According to an American research outfit, OTR Global’s July 8, 2014 report, China may not be able to meet set solar accumulated PV installation target of 14GW by the end of 2014. As a result, PV stock prices declined sharply during that trading day.

 

Many industry experts emphasized recently there’s a growing uncertainty about the PV industry in China, PV company business fundamentals and industry policy. However, there are still many institutions bullish on the potential growth of the China PV industry and PV companies. In addition, the price declines of these stocks have not established a clear downward trend and as a result the time is not right to affirm that a bear market has arrived for this industry.

 

Institutions Bearish on Sector Fundamentals

According to OTR Global’s July 8, 2014 report, one of the main reasons China may not be able to achieve their target of an installed 14GW PV base by the end of 2014 is because there is a lack of sustained credit support. It was reported that out of the 14GW target, 6GW to be supported by large public utility companies and 8GW will be financed in the private sector where credit is very tight for PV projects currently.

 

As of the close of the trading day on July 8, 2014, Chinese stocks have showed broad declines. JKS dropped by 8.85% to $26.99, YGE by 5.87% to $3.21, DQ by 4.9% to $29.52, SOL by 2.7% to $2.51, HSOL by 5.58% to $2.37, JASO by 1.92% to $9.73 and TSL by 4.23% to $11.33.

 

Deutsche Bank expressed similar views about the industry at the end of June before OTR Global published their report. Deutsche Bank reported they expected China was going to be able to hit their 14GW targets after one of analyst paid a visit to several renewable energy infrastructure projects located in western China. According to their report, the Chinese PV industry had hoped the government would shift some of distributor solar project quota in the private sector over to that of public utility projects to avoid tight credit in the private sector, but that did not happen. The main reason is that there is very complex project the public utility companies need to go through to get their quota’s increased. Deutsche Bank also said the wind industry is currently more favored by the Chinese government.

 

Support Still Exists for Chinese PV Companies

After the issuance of Deutsche Bank’s report, Chinese PV stocks plunged for a while, but some of the stocks rebounded afterwards. The industry had not established a clear downward pricing stock trend. So, some industry experts believe volatility in this sector may increase in the near future, it is still too early to confirm that a bear market has come to this sector.

 

First of all there are investors still bullish on a boom cycle in the PV industry. According to UBS emerging markets such as China accounted for as high as 71% of the new PV installment capacity in 2013 while European accounted for only about 28%. PV cost reduction and favorable policies are two reasons as to why the PV industry is growing in China. China is moving from a PV producer to a PV installer country.

 

Secondly, some of the PV companies have shown a clear improvement in their business performance. After cleaning up their 1Q14 results, many of them have turned around their share prices and beat market expectations. For example HSOL’s losses declined 41% yy to $21.46, net earnings for JKS was $1.5 million versus a loss of $20.60 million yy, TSL net earnings was $26-5 million versus a loss of $63.7 million yy. All of these companies expect their shipments will rise further.

 

Despite problems the solar industry is currently facing, there is much interest from prominent institutional investors and also private investors. For example the CEO of Tesla Motors acquired a solar panel maker, Silveo in the middle of June.

 

This article was published in Chinese and was found here: http://www.solarzoom.com/article-53225-1.html. OTR Global did not contribute in any way to the content of this article.

 

Translated by Dimitri Kaczmarek, OTR Global's Asia Director

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