PDF《China Solar Sector》

C H I N A S E C U R I T I E S ( I N T '

L ) R E S E A R C H Please read the disclaimer on the last page.

Equity Research l China l Solar Power

29 September

2016 China Solar Sector Shifting dynamics, follow the leaders Mkt cap EPS growth (%) ROE (%) PER (x) PBR (x) Ticker Rec (US$m) Ccy Price 2016E 2017E 2016E 2017E 2016E 2017E 2016E 2017E Xinyi Solar

968 HK NR 2,768 HKD 3.18 60% 28% 29.9 31.4 10.7 8.4 2.8 2.3 GCL Poly

3800 HK BUY 2,589 HKD 1.08 -8% 4% 12.7 11.7 7.0 6.8 0.8 0.7 GCLNE

451 HK BUY 1,218 HKD 0.50 n.a. 221% 6.0 16.0 26.6 8.3 1.6 1.3 United PV

686 HK NR

474 HKD 0.76 -77% 57% 3.1 5.6 35.9 22.9 1.3 1.3 Source: Bloomberg, CSCI Research estimates for GCLNE, prices as of

27 Sep

2016 ? China announced the

6 th batch FiT catalogue on Sep 23, which together with collection of accrued subsidy receivables widely expected by end-16 would improve solar farm operators'

liquidity positions in our view. ? A downward trend in solar tariffs is inevitable in China, with signs of acceleration due to competitive biddings and Top Runner projects. All these developments have prompted solar farm developers to enhance project execution and cost control. ? Though global installations are likely to remain at a high level in 2H16-2017, solar manufacturers suffer from persisting industry glut. In the solar manufacturing space, we prefer PV glass plays given their more resilient prices and robust demand. Long-awaited announcement of the 6th batch of FiT catalogue was jointly made by the NDRC, MoF and NEA on Sep 23, and we view the related subsidy receivables on track to be collected by the end of this year, which will help improve the liquidity positions of solar farm operators. Inevitable downward tariff trend alongside declining system costs. NDRC is reportedly considering cutting FiT subsidies by over Rmb0.05/kWh among all regions in 2017, which we think is inevitable, and provincial governments have started to adopt competitive bidding for project quota allocation. Notably, Top Runner projects are leading the downward trend with the latest bidding tariff reaching as low as Rmb0.52-0.63/kWh. The plunge in module prices is favourable, but we expect only the leading developers to achieve satisfying returns with effective project execution and cost controls. 2H16-2017 demand remains strong;

prefer PV glass for more resilient pricing. After the unprecedented growth in 1H16, global installations are expected to reach 70GW in

2016 and to be largely flat in 2017. The anticipated demand pick-up in 4Q16 might be spilled over to

2017 without in sight tariff cuts or bottoming out in solar components prices. We believe the PV glass market shows better fundamentals fronting the pricing pressures, owing to high entry barriers, more prudent capacity expansion, and current low inventory level. Investment ideas: We reiterate BUY on GNE (451 HK) on the back of its robust growth prospects, entrenched leading position along with improvement in industry developments. UPV (686 HK) would be the major beneficiary of the 6th batch of subsidies and its recent share placement would help improve its financial position. Among manufacturers, Xinyi Solar (968 HK) has a good track record in weathering market downturns. Kexin Zhu (CE No.: BEZ998) zhukexin@csci.hk +852

3465 5653 China Solar Sector: Shifting dynamics, follow the leaders Please read the disclaimer on the last page.

2 29 September

2016 Solar power operators Long-awaited announcement of the 6th batch catalogue On Sep 23, NDRC, MoF and NEA jointly announced the registration results for the