LDK May Receive Boost As Chinese Stimulus Looks Likely

by Trefis Team
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Solar equipment manufacturer LDK Solar (NYSE:LDK) could see some good news come its way with increasing odds of a stimulus from the Chinese government. According to several reports, China may come up with a $314 billion stimulus plan to bolster economic growth in 2012. A significant portion of the spending may be targeted towards the energy sector, with the solar industry set to receive special attention. [1]

Chinese solar companies including panel manufacturer like Yingli Green Energy (NYSE:YGE) are hoping for a large increase in domestic sales of equipment as demand from Europe is set to see a drastic fall and the U.S. recently imposed tariffs of up to 250% on Chinese solar imports. China has already passed a total of 1.7 GW of solar projects for the year 2012 under its Golden Sun program. [2] Greater support for the industry from government programs will be a welcome relief for Chinese solar manufacturers, who are facing falling demand from key international markets.

We have a $3.67 price estimate for LDK Solar, which is at a significant premium to its current market price.

Click here for our full analysis of LDK Solar.

Government action

On May 30th, the Chinese cabinet named new energy as one of the seven strategic industries that would receive special attention from the government. [1] The Chinese government is looking to encourage local consumer demand in a bid to reduce its reliance on exports. China is set to become one of the biggest markets for solar panels as demand from traditional markets in Europe is set to decline.

Chinese solar equipment manufacturers like LDK Solar are hoping that demand will rise further to help the companies offset setbacks in the European and the American market. The possibility of a future stimulus could further brighten the industry’s hopes. Yingli estimates that it will capture 30% of its revenues for 2012  from sales within China. [2]

Another possible panacea for the problems facing the Solar industry could come from other emerging markets. According to experts, Saudi Arabia, which has recently announced a major plan to develop solar energy may choose to source equipment from China in order to deepen the relationship between the two countries. [1] Capturing demand from emerging markets will be key for solar companies like LDK Solar to survive the industry downturn.

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Notes:
  1. Investors Could Gain From Beijing Power Shift, Barrons [] [] []
  2. Yingli Quarterly Results, Yingli [] []
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  • commented 3 years ago
  • tags: YGE FSLR LDK TSL STP
  • Why bother with LDK? Yingli has the market share, the growth, and the rising revenue. YGE is incredibly undervalued and overlooked, just the way I like it. buy low. sell high.