List of 3 best Solar Stocks to buy in 2016
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April 19, 2016Comparitive Performance of Top Chinese Solar Stocks – 2016
In this article, I have done a comparative assessment of Chinese solar companies over the past one year to pick the potential winners. With most companies reporting their 2015 results, I have done a comparative analysis of the Chinese Tier 1 solar companies to see who has emerged as a winner and in which area. I have tried to cover the important aspects of each of these companies, so that investors can make an informed decision about their investments. In my view, Jinko Solar (JKS), Trina Solar (TSL) and Canadian Solar (CSIQ) have emerged as top players. Renesola (SOL) which is expanding extensively into the downstream project business can also be looked at, though it is in the midst of a transition. Daqo New Energy (DQ) can also be looked into as a play on the turnaround of polysilicon prices, which are touching all-time lows.
Find the Top 10 Module manufacturers ranking in 2015 according to PV Tech.
Volumes and Shipments
Trina Solar was the global solar panel shipment leader in FY’15 and posted strong numbers for Q4’15 as well. China, USA and Japan were the company’s top markets in FY’15. Trina Solar also gave a robust shipment guidance for FY’2016, with JKS following closely.
| Shipments (in GW) | Q4’15 | FY’15 | FY’16 (outlook) | Top Markets |
| Trina Solar | 1.78 | 5.74 | 6.3-6.55 | USA, China & Japan |
| Jinko Solar | 1.7 | 4.2 | 6-6.5 | China, North America, Europe |
| JA Solar (JASO) | 1.36 | 4 | 5.2-5.5 | China, APAC |
| Canadian Solar | 1.43 | 4.7 | 5.4-5.5 | USA, China, Europe |
Margins and Profitability
Canadian Solar was able to achieve the highest net margins for FY’15, with JA Solar following closely. Canadian Solar has been the most successful Chinese solar company in the downstream project business and its high margins reflected that success. Jinko Solar and JA Solar also were not far behind though Trina lagged a fair bit.
| Revenues (in million $) | Net profit (in million $) | Gross Margin (in %) | Net Margin (in %) | |||||
| Q4’15 | FY’15 | Q4’15 | FY’15 | Q4’15 | FY’15 | Q4’15 | FY’15 | |
| Trina Solar | 961.9 | 3036 | 41.7 | 76.5 | 19.1 | 18.7 | 4.3 | 2.5 |
| Jinko Solar | 937 | 2535 | 53.9 | 105.1 | 19.5 | 20.3 | 5.8 | 4.1 |
| Canadian Solar | 1120 | 3470 | 62.3 | 171.9 | 17.9 | 16.6 | 5.6 | 5 |
| Renesola | 296.4 | 1282 | 6.7 | -5.1 | 16 | 14.7 | 2.3 | -0.4 |
| JA Solar | 709.3 | 2100 | 28.5 | 94.9 | 17.1 | 17 | 4 | 4.5 |
Existing Capacity & Expansion Plans
Both Trina Solar and Jinko Solar will reach a module capacity of 6 GW in 2016. Canadian Solar, JA Solar and Hanwha Q Cells are also following closely with expected capacity size of more than 5 GW. Trina Solar, JA Solar and Hanwha Q Cells will also have large cell capacities. Jinko Solar is planning to increase its wafer capacity to 3.5GW which will increase its margins, since wafer prices are witnessing a strong uptrend. While other companies will have to buy large quantities from outside, Jinko Solar will benefit from reduced costs. Renesola also plans to increase wafer capacity to 2.9GW from 2.4GW, by the end of 2016.
| Capacity (in GW) | Existing as on Dec’15 | Expected by Dec’16 | ||||||
| Ingots | Wafer | Cells | Modules | Ingots | Wafer | Cells | Modules | |
| Trina Solar | 2.3 | 1.8 | 3.5 | 5 | 2.3 | 1.8 | 5 | 6 |
| Canadian Solar | 0.4 | 2.7 | 4.3 | 1 | 3.9 | 5.73 | ||
| Jinko Solar | 3 | 2.5 | 4.3 | 3.5 | 3.5 | 6.3 | ||
| Hanwha Q Cells (HQCL) | 0.9 | 3 | 3 | 5.2 | 5.2 | |||
| JA Solar | 1.5 | 4 | 4 | 2 | 5.5 | 5.5 | ||
Downstream Project Business
In 2015, TSL connected 686 PV power projects to the grid of which about one-third were DG projects in China. Trina Solar also has a growing presence in the downstream utility project business in USA and Europe.
Canadian Solar has a project portfolio of 10.3GW as at the end of the year of which 2GW of projects are in late-stage of development and 8.3 GW in early to mid-stage of development. The project pipeline is spread across Canada, USA, Japan, China, UK and Brazil.
Jinko Solar connected 1007MW of solar projects to the grid during 2015, most of which were utility scale projects in China.
JA Solar’s project business is also growing with the company expanding in both utility and distributed generation projects. The company expects module shipments for its downstream projects to nearly double to 100MW in Q1’16 itself, from 53.5MW for the whole of 2015.
Renesola sold 73 MW of projects during 2015. Europe constituted more than 50% of Renesola’s project pipeline of 641 MW
Stock Performance
These stocks gave stellar returns in the last year. The performance at the end of the year improved greatly because of the ITC extension announcement. The last year was one of the worst years for the energy sector as even solar stocks received a heavy beating in the midst of falling oil prices. The broader S&P fell by more than 2% but most of these stocks gave high double digit returns.
View Stock performance here: Google Finance
Canadian Solar was the best performer over the last five years (ending December’15) returning more than 130%. JKS returned ~38% in the same time period.
Financial Position
Canadian Solar has the best financial position with respect to debt, amongst these companies with a strong cash position. Trina Solar and JA Solar have a relatively high debt, as compared to the other companies.
As on December, 31 2015
| (in million $) | Cash | Short term Debt | Long Term Debt |
| Canadian Solar | 1130 | 1160 | 606.6 |
| Jinko Solar | 654.4 | 508 | 714 |
| Trina Solar | 659.9 | 916.6 | 522 |
| JA Solar | 445 | 338.8 | 416.7 |
Conclusion
I hope the above analysis will help investors take an informed decision on which solar stock to buy. Given the massive growth of the solar industry going forward, it is almost unthinkable for an investor not to have an exposure to the solar industry. While many companies have failed in the past due to the growing pangs of a new industry, a few companies will emerge to be the leaders of this multi-billion global industry. Based on the current performance, Jinko Solar, Trina Solar and Canadian Solar are the top picks in my book.