Some Sun Shines on Chinese Solar Companies (STP, YGE, TSL, CSIQ, HSOL, FSLR, SPWR, TAN)

Even though solar PV stocks have plunged over the last 18 months, there is a ray of hope in the sector according to a report at Bloomberg. China’s five largest solar panel makers expect an increase in 2012 shipments by 27%-37% over 2011. Demand for the panels in China will offset declines in Europe, where subsidies have been and continue to be cut.

Bloomberg expects China to dominate solar panel sales growth in 2012 and to pass both Germany and Italy as the world’s largest solar market in 2013. The five Chinese companies that dominate sales in China are Suntech Power Holdings Co. Ltd. (NYSE: STP), Yingli Green Energy Holding Co. Ltd. (NYSE: YGE), Trina Solar Ltd. (NYSE: TSL), Canadian Solar Inc. (NASDAQ: CSIQ), and Hanwha Solarone Co. (NASDAQ: HSOL). Neither First Solar Inc. (NASDAQ: FSLR) nor SunPower Corp. (NASDAQ: SPWR) is expected to sell any panels in China.

These five combined expect to ship a total of 9,300-10,000 megawatts this year, up from 7,400 megawatts last year. Solar installations in China totaled 2,570 megawatts in 2011 and are expected to exceed 4,000 megawatts this year, although one estimate calls for 5,500 installed megawatts, nearly double last year’s total. A single megawatt is enough to provide power to about 800 homes.

Low — and still falling — panel prices cancel out much of the higher shipment volumes. Many of the Chinese solar panel makers had negative margins in the first quarter of this year and margins promise to be in the single digits at best for the rest of the year.

The thing to remember is that China’s government has declared solar energy development a strategic industry and the government has already poured billions of dollars in loans into the capacity expansion that drove prices down by nearly 50% last year. China’s solar industry will not be allowed to collapse, so none of the tier one makers is in any real danger of failing.

But it would be folly to expect share price growth for at least another year or two. While the fates of these Chinese solar makers may be safe, that does not mean that the companies’ shares are going anywhere.

Shares of Suntech are down -6.2% today at $1.61 in a 52-week range of $1.50-$8.18. At the same time, shares of Trina Solar are up nearly 4% at $6.39 in a 52-week range of $5.01-$22.76. The Guggenheim Solar ETF (AMEX: TAN) is down just less than -1% at $17.36 in a 52-week range of $2.42-$34.12.

Paul Ausick