Wednesday, August 31, 2011

Suntech (STP) (HSOL) (FSLR) (YGE) Margins Under Pressure

Suntech (NYSE:STP), Hanwha SolarOne (NASDAQ:HSOL), First Solar (NASDAQ:FSLR) Yingli Green Energy (NYSE:YGE) will be among those solar companies struggling because of the eroding margins in solar modules, according to Maxim Group’s Aaron Chew.

Chew wrote in a note to clients, “Module maker margins remain firmly 20 percent, with cell/wafer makers struggling to break even.”

The third quarter average selling prices will drop to $1.25 to $1.30 [per watt], on average, even as polysilicon costs remain at around $50 to $55, he wrotes. Suntech Power Holdings (STP), and other solar company margins could drop as low as 10 percent to 12 percent, said Chew.

Even so, according to, the price of silicon-based solar modules of has already dropped to $1.18 per watt, on average.

Chew has a "Sell" rating on Suntech and First Solar, and a "Hold" rating on Yingli Green Energy (YGE). He maintains a "Buy" rating on Trina Solar and STR Holdings.

Solar producers with higher costs will be the companies with the most risk, added Chew. He sees JinkoSolar (NYSE:JKS), Trina and Yingli as having valuations which should provide the companies with some protection from further share price erosion.

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