- 金币:
-
- 奖励:
-
- 热心:
-
- 注册时间:
- 2005-3-7
|
|
Suntech Power: The Future Is Bright
Suntech is a reasonably valued, low-cost manufacturer in an industry where pricing is paramount and valuations tend to be sky-high.
By Will Frankenhoff
April 17, 2006
As readers might have noticed from past articles such as "Can Oil Still Power Portfolios?," I'm a fervent believer in the prospects of the oil industry over the next few years. However, being bullish on oil doesn't mean I'm blind to the growing opportunities in alternative energy in general or, more specifically, in the realm of solar power.
I believe the combination of continued growth in world energy demand, the ever-increasing affordability of photovoltaic (PV) cells and modules, and growing government incentives for renewable energy sources should drive the global market for solar energy significantly higher over the coming months and years.
There are many ways to invest in the emergence of solar power as an economically feasible energy source, ranging from major oils with significant investments in solar, such as mighty BP (NYSE: BP), to conglomerates like Kyocera (NYSE: KYO) and wafer manufacturers like MEMC Electronic Materials (NYSE: WFR). My favorite pure play in the sector, however, is a recent IPO -- Suntech Power Holdings (NYSE: STP), a low-cost Chinese manufacturer of PV cells and modules.
Now, I recognize that I'm highlighting a company that could be perceived as a poster child for risk -- the very words "solar," "China," and "IPO" tend to have a chilling effect on investors sometimes -- but appearances can sometimes be deceiving. Don't get me wrong -- investing in Suntech isn't for the faint of heart, nor is it a place to put Grandma's savings. But for a patient, long-term investor, the risk/reward ratio certainly looks favorable.
Let's begin by taking a quick look at the solar market in general:
World energy demand
According to the U.S. Department of Energy, worldwide electricity demand is expected to jump from 14.3 billion megawatt (MW)-hours in 2002 to 26 billion MW-hours in 2025 -- an increase of 82%. According to Solarbuzz, an independent solar research firm, solar energy production presently accounts for less than 0.01% of this total -- a mere 5,000 MW. This statistic will have to change, given the tightness (and finite supply) of traditional sources of supply such as oil, natural gas, and coal.
Solar energy affordability
The inhibitor to wide-scale adoption of solar power has always been cost, yet this factor is slowly but surely changing. Over the past 15 years, solar energy (PV) prices have declined by an average 4% per year, driven by increased conversion efficiencies (the average solar module currently has an efficiency of 15%) and economies of scale. As a result, electricity can now be generated for $0.22-$0.40 per kilowatt/hour without government incentives. However, where government incentive programs exist, this cost drops down to around $0.10-$0.12 per kilowatt/hour. This compares to the average U.S. residential electricity price of $0.085 per kilowatt/hour.
Government incentives
Obviously, as illustrated above, government incentive programs will continue to be key factors in driving future adoption of solar power. A quick look at a few countries shows that incentives remain strong. In Spain, the government-subsidized PV projects to the tune of $230 million in 2004. In Germany, banks approved loans for more than 250 MW of PV systems by the end of 2003. In the U.S., the California Solar Initiative is an 11-year, $3.2 billion incentive program that aims to install 3,000 MW of solar power. And in China, the government is considering more favorable tax incentives on top of the 50% break awarded to investors in renewable energy.
PV market growth
The combination of these three drivers (as well as soaring prices for fossil fuels) bodes well for growth in the solar market. Indeed, the trend toward increased solar energy demand is already evident in the fact that the global PV market, as measured by annual PV system installations, jumped from 254 MW in 2000 to more than 1,450 MW in 2005 -- a compound annual growth rate in excess of 37%. This growth shows little sign of slowing, and Solarbuzz projects that PV annual installations in 2010 will total between 3,200 and 3,900 MW, generating industry revenues of approximately $18.6 billion-$23.1 billion. That's not a small chunk of change, especially when you compare it to worldwide industry revenue of just $6.4 billion in 2004. Suntech Power is well-positioned to grab a piece of that proverbial pie.
Suntech Power
As I mentioned at the beginning of this article, Suntech Power is a China-based manufacturer of PV cells and modules. The key to this story (aside from the generally positive trend in the overall solar market) is its position as a low-cost manufacturer -- a factor that enables it to post margins significantly better than its competitors'. This point is amply illustrated by Suntech's gross margin of 28% in the fourth quarter of 2005, compared with the 20% and 14% gross margins posted by competitors Sunpower (Nasdaq: SPWR) and Evergreen Solar (Nasdaq: ESLR), respectively. Suntech also earned money in the quarter (to the tune of $10.6 million, or $0.09 per diluted share), while both Sunpower and Evergreen bled red ink.
This cost advantage will enable Suntech to better withstand the upward pressure on silicon prices currently affecting the industry. The company's expected ramp-up to around 205 MW of production capacity by the end of 2006 (compared with just 85 MW in 2005, according to Morgan Stanley) should further enhance its market position and profitability.
Additional drivers include the company's expected grant of reception of the Underwriter's Lab Certification this month (which will allow it to enter the U.S. market), the Chinese government's stated objective of having renewable energy supply make up 15% of its total energy needs by 2020 (up from 7% currently), and the possibility that Suntech will invest in an upstream silicon manufacturer to obtain a secure supply of material.
Sounds interesting, but what about the valuation?
Suntech Power went public just last December at $15 per share. Shares of this low-cost solar play have found a receptive audience, now trading at around $33.50 per share, or around 30 times forward earnings estimates of $1.14 per share.
Looks a bit pricey, no?
Well, as I said before, appearances can be deceiving. Consider this: Competitor Sunpower trades at around 54 times forward earnings, while Evergreen Solar sports a mind-numbing multiple of closer to 725 times fiscal 2007 earnings. Furthermore, at 30 times fiscal 2007 earnings, Suntech trades at a significant discount to its projected earnings growth rate of 84% -- a growth rate likely to be proved conservative because of the company's planned capacity expansion, its imminent approval to enter the U.S. market, and its pole position in China.
All in all, I think investors with healthy risk appetites who are looking for a bit of diversity in their energy portfolios should take a look at shares of Suntech Power. Just don't forget to wear your shades.
要点：Will Frankenhoff 评尚德－－尚德有充分的理由被认为是有价值的，作为一个低成本制造商，在一个价格极其重要而估值高到天上去的行业 |
|
|
[复制链接]
发表于 2006-4-20 20:01