CSIQ, a Chinese Solar Company Broke All Time High

CSIQ - a stock I recommended earlier (click Recent Picks), closed at $18.7 yesterday, broke all time high. Any retreat from this level is our buying opportunity.

Now, here is more information on Chinese solar energy companies:

With more than 10% growth per year, China's economy is an unstoppable train. I call it "the money train". The booming Chinese economy makes it heaven for the hyper-growing companies there. We as investors are having a once in a life time opportunity to benefit from these unique global market conditions. Our focus should be on the Chinese stocks, or ADRs traded on Wall Street.

Another unique opportunity comes from the global-warming issue. Coupled with high oil prices, global warming makes the renewable stocks a gold mine for investors. Governments all over the world are now willing to subsidize clean energy, and even the UN declared that massive investments should be done. For example, China's energy czar, Chen Deming, said that China needs $265 billion in investments to meet its renewable energy goals for the next 12 years. $265 Billion! The US has a 'twenty in ten' target, China has a 10% target for renewables by 2020, India has a 10% target by 2012, and EU countries have recently signed up to a 20% mandatory target for energy consumption from renewable sources. In 1997, Ernst & Young predicted global investment in renewable energy would reach US$70b by 2006. At the time, this figure was considered ambitious, but in fact, investment in the renewable and clean energy sector reached just over US$100b in 2006 and could rise to over US$750b by 2016 at current rates of growth.

Vertical integration in this context refers to integrating the different steps in the Polysilicon Based Solar Module production process. Module production involves four steps in chain event:

• Use the raw material sand (SiO2) to produce a very pure form of silicon called polysilicon.


• Use polysilicon to produce wafers and ingots.


• Use wafers and ingots to produce solar cells.


• Use solar cells to produce solar modules.

Manufacturers are yet to immerse in vertically integrating the whole process. There are a few getting their feet wet - Trina Solar (TSL), Yingli Green (YGE), Suntech Power (STP) and Canadian Solar (CSIQ).

• Trina produces solar modules from polysilicon and has plans in the offing for very large scale polysilicon manufacturing.


• Yingli also has business plans along similar lines. They are yet to announce any plans to produce polysilicon.


• Suntech is focused on the wafer to module business currently.


• Candian Solar started out focused solely on producing solar modules from cells but since then has expanded to wafer to solar cell production line and has announced plans for a polysilicon to wafer and ingot line.

The table below compares these 4 manufacturers (click to enlarge):



The sophisticated investor should try to enjoy both worlds of opportunity; if you seek cheap Chinese energy stocks, you will enjoy the benefits of fast growing industry (clean energy) in a comfortable economic environment (China). In the renewable stocks sector, there is the solar industry, which enjoys the fastest growth rate, so the sophisticated investor should look for his gold there.

But one should be careful in picking those stocks, since most of them are not as cheap as they used to be only few months ago. To name few: JA Solar (JASO) with expected P/E=56 for the year and f P/E=36 for 2008, Yingli Green Energy (YGE) with expected P/E=81 for the year and f P/E=42 for 2008, or Sunpower (SPWR), investor's favorite, with P/E=89 for the year and f P/E=59 for 2008.

Those are not so cheap, but if you're willing to give your trust to fresh IPOed stocks, you can check Canadian solar (CSIQ) with an expected forward P/E=13 for 2008, or Trina Solar (TSL) with an expected forward P/E=14 for 2008. Oil is now already above $90 and we should see another boom in the Chinese Renewable Stocks.


Enjoy,

Market Swimmer