CNN reported today that as Hanergy Thin Film’s stock collapsed last week, Li Hejun, the company’s CEO, was joking with listeners at a renewable energy conference. In the time it took him to give his presentation, his personal fortune had dropped by $15 billion, and his corporation lay in ruins.
The Hanergy crash was just one of several high profile Chinese solar companies that have made headlines recently…and not in a good way. Recently, in its annual filing with the U.S. Securities and Exchange Commission (SEC), Chinese solar PV manufacturer Yingli Green Energy Holding Co. Ltd. said, “There is substantial doubt as to our ability to continue as a going concern.” Shortly after the report, Yingli stock fell to an all-time low of $0.72 after closing at $1.49 the previous day.
After the collapse of Chinese solar giant SunTech in 2013 and LDK Solar in 2014, many stock watchers are wondering if Yingli and Hanergy are headed down the same road. Yingli shows some signs of recovery recently, but Hanergy continues to plunge as regulators move in to investigate. What is going on here?
In April, Sneha Shah of Seeking Alpha wrote: “Last year, 61% of its (Hanergy’s) total revenues came from sales to its parent and affiliate companies. About 94% of its sales were made to its parent company in 2011, and no sale was reported to the outside parties in 2012 and 2013. This has raised questions as to the saleability of its solar modules, and also why the company is making such high margins when compared to global leaders like Trina Solar, Jinko Solar and others.”
In a shocking report at Bronte Capital, the author posted photos of a nearly empty Hanergy factory taken just six weeks ago. “I went to visit Hanergy’s main factory in China about a six weeks ago. It was almost entirely silent. There was essentially no production of solar cells at all and the accounts that suggest significant production and sales are entirely fraudulent.”
As for Yingli, the story is not as bad, but it certainly isn’t great. Yingli is taking a beating in both the US and European market, where it is subject to anti-dumping tariffs, due to its dubious past business practices. According to the NY Times: “The (Commerce) department announced anti-dumping duties of 26.71 percent to 78.42 percent on imports of most solar panels made in China, and rates of 11.45 percent to 27.55 percent on imports of solar cells made in Taiwan. In addition, the department announced anti-subsidy duties of 27.64 percent to 49.79 percent for Chinese modules.” These tariffs, along with similar ones levied by the nations of the European Union will likely prevent Yingli from showing much in the way of growth in the years to come.
A Few Bright Spots For Chinese Solar
According to the Motley Fool article entitled Need Another Reason to Avoid Chinese Stocks? How About This Solar Scandal?: “If you think Hanergy is an isolated incident of market manipulation or outright fraud from China, you might want to check the history of Chinese stocks as recently as a few years ago. Rino International, China MediaExpress, Puda Coal, Advanced Battery Technologies, Longtop Financial Technologies, and many more were found to be misrepresenting themselves to investors, and in some cases they didn’t have much of a business at all.” However, despite the fraud and mismanagement that seems to run rampant among some Chinese corporations, not all Chinese solar stocks are in the dumpster.
Trina Solar is looking strong, announcing this week that it will be the second big name to jump into the residential lithium-ion battery business, nipping at the heels of Tesla. Tesla’s CEO Elon Musk rolled out the new “PowerWall” last month to much hoopla, but Trina’s “soft launch” of their new battery looks promising. In addition, Trina reports that during the first quarter of 2015, net revenues were $558.1 million, a decrease of 20.8% sequentially and an increase of 25.5% year-over-year. Total shipments were 1,026.2 MW, consisting of 891.7 MW of external shipments which were recognized in revenue, and 134.5 MW of shipments to the Company’s downstream power projects.
Jinko Solar also beat first quarter expectations. Jinko reported $0.88 earnings per share (EPS) for the quarter, beating estimates of $0.46 by $0.42. The company had revenue of $443.50 million for the quarter, compared to estimates of $372.17 million. During the same quarter in the previous year, the company posted $0.20 earnings per share. The company’s revenue for the quarter was up 36.9% on a year-over-year basis.
Several analysts have recently commented on the stock. Analysts at TheStreet upgraded shares of JinkoSolar Holding Co. from a “sell” rating to a “hold” rating in a research note on Friday, May 1st. Separately, analysts at Zacks upgraded shares of JinkoSolar Holding Co. from a “sell” rating to a “hold” rating and set a $30.00 price target on the stock in a research note on Friday, May 1st.
ReneSola is also getting some modest love from investors. gurofocus calls ReneSola “ Good Stock To Buy For The Long-Term…Although ReneSola’s performance in the past has not been very exciting, we see it is indeed making the right moves to fuel its growth going forward.”
The bottom line seems to be, despite the horrifying headlines about Hanergy, savvy investors may still find good investments in Chinese Solar, as long as they do plenty of research.