So I just posted this in the cool tech stock thread as I hadn't noticed this one at the time, I guess I'll copy it to here too even though I'm sure its preaching to the choir.
"Even though its probably a stretch to include solar, I would like recommend looking into chinese solar. Generally solar is on the way up and has been so for a while, we all know that, prices have dropped a lot, is now reaching parity with fossils, and is still dropping around 10% a year, with demand increasing by much more than that, global demand is expected to increase around 30% in 2015, so a significant net increase in total revenue. Gross margins on modules have been depressed since the supply bubble in 2012, but demand has caught up and margins have been expanding a lot lately allowing for the Chinese solar stocks to start showing profit.
Another very important thing happening in the industry is the shift for the module makers to move downstream into projects, which sells for around 3 times the cost of the module and with higher margins to boot, now this seems to me to be a real game changer and the shift downstream is happening pretty fast. Trina solar went from building I think it was 100 MW of solar projects last year to a guidance of 700 MW this year. Jinko Solar went from like 200 last year to a guidance of 600-800 MW this year, or in that neighbourhood, just going off my memory here, has been some days since I looked into it. Those two companies are some of the biggest module producers in the world with around 3.5GW of production last year with guidance suggesting around a 20% increase this year. They are valued at around $1B (being the highest valued chinese solar stocks I believe if you discount CSIQ) with expected revenues around $2,5B this year.
Now they do have significant debt and the investment doesn't come without risk, but if they continue to increase module production and moves downstream with a lot more than they are doing today, which is the trend, then we could be looking at $5-7B in revenues for 2017. Say the achieved a 10% net profit margin and was priced at a P/E of 10, the market cap would match the $5-7B of revenue which would give you a return of 400-600%.
Give it a look, could make for a great investment but to repeat myself it doesn't come without serious risk too, obviously. For comparison american solar stocks are prices around 1.5-2 times their revenue, they are probably a decent investment as well but with the Chinese solar valued at a quarter of their american counterparts they do seem a lot more interesting. I have recently invested in TSL, JKS and JASO.
Lastly I want to mention that there are a few Chinese solar companies with a pretty large production valued very cheaply (and rightly so) like ReneSola at a mkt cap of $187M with 2014 revenue almost 10 times that, they have a very large debt though and not a lot of cash on hand, most of their debt is even due short term which puts them at significant bankrupt risk as I doubt banks are lining up to lend them capital considering their paperthin margins. If these companies like ReneSola goes under it will open up for the healthier, larger companies like TSL, JKS and JASO to increase market share and will probably lighten the margin pressure too."
Like I said I really think the shift to more projects will be a huge game changer, what do you guys think? Seems like the stars are aligning for the chinese solars.
