Suntech Power Holdings, STP: Suntech News, Investing in Suntech
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Suntech Power’s stock represents a good play on the alternative energy industry.
Suntech Power’s stock represents a good play on the alternative energy industry.
Suntech Power Holdings Co. Ltd. (STP) is a US-listed Chinese solar energy company with a market cap of over $5 billion. The producer of photovoltaic panels announced in late July that it had inked an agreement with Enel SpA. Under the terms of the agreement, Suntech Power would supply solar modules to Italy’s largest power company through 2009. Earlier this year, Suntech Power had signed a long-term agreement with German’s Wacker Schott Solar GmbH to supply silicon wafers.
In a joint effort with Hoku Solar, a subsidiary of Hawaii’s leading solar company Hoku Scientific Inc, Suntech Power has recently completed a 254 kilowatt photovoltaic solar power system for Paradise Beverages Inc.
CLSA issued a buy rating for Suntech Power, setting a target price of $48.9. The Hong Kong-based brokerage house said in its note to investors published in August that the company seems to have resolved the polysilicon supply issues that had been plaguing it recently. This would enable Suntech Power to lower costs as the price of photovoltaic panels begins to decline, CLSA added.
The company’s net income surged almost 114% to $55.8 million in the first quarter of 2008, from $26.4 million in the year-ago period. Revenues jumped 76% to $435 million, from $247.2 million in the first quarter of 2007. Suntech Power had achieved 125% growth in revenues in 2007, with earnings up almost 62%. This rapidly-growing company has significant cash in hand ($700 million), which it can invest into further growth initiatives.
Suntech Power has 11 strong buy ratings, 12 buy ratings, 5 hold ratings and 0 sell ratings, according to analysts polled by Thompson/First Call. In a research report published in February 2008, Citigroup analysts said that the company could emerge as the world’s largest supplier of photovoltaic cells and modules this year, having doubled capacity to 1 gigawatt by yearend.
Suntech Power’s shares have been under significant pressure since late last year on account of uncertainties in the sector. Although the company operates in a sector that is still in its nascent stages and, hence, there are significant risks involved, the almost 60% plunge in its share price since December 2007 appears overdone. With an ROE of 24.31% and a PEG ratio of 0.58, Suntech Power may be an interesting investment option to consider.
Alternatio Cirqui, EconomyWatch.com Energy Correspondent
