Renesola and GCL could be big Solar Winners in 2014

Upstream solar stocks such as GCl, Renesola, Wacker, REC etc. have lagged behind the spectacular multi-bagger performance of downstream solar stocks such as Jinko Solar, Canadian Solar etc. Note upstream solar stocks generally have a lag to the performance of the downstream cell and panel stocks. It takes time to build capacity in poly and wafers, which means that oversupply and undersupply conditions remain longer for upstream companies. The solar wafer and poly prices fell much after the prices of the solar cells and panels declined. Now as solar panel prices have increased, poly and wafer prices have not increased much.

However we think that this is going to change, as no capacity has been added to poly and wafer segments in recent times (see GTAT
solar equipment orders). Demand has been increasing at a 20% CAGR, while supply has stopped increasing. Taiwanese solar wafer makers are indicating that the solar wafer prices may increase by almost 15% in the next few months. Solar wafer prices have already increased by 10-15% and many of the wafer producers are now starting to the break even level on the net margin front. GCL and Renesola are the two biggest solar wafer producers in the world. GCL is also a top 5 poly producer and has already seen its stock price increase quite a lot in the last 6 months. With poly and wafer prices increasing, these companies stand to benefit a lot. REC will also gain but it faces anti dumping duties from China which makes its poly business risky. Other major poly makers such as OCI, Hemlock should also gain though their performance depends on the solar trade wars brewing between China and others.