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Solar panel demand is expected to increase globally owing to increased costs of energy and policy incentives. As a result, China’s solar companies, which command over 80% share in global solar panel manufacturing, are set to benefit from the rising demand, which makes China solar stocks attractive. Rooftop solar could especially become an economically attractive choice for many homeowners considering the skyrocketing price of electricity. According to Nomura Holdings, solar installations are expected to grow about 50% globally in 2022 as well as in 2023.
Several of these solar installations will come up in China, which invested 29 bn yuan ($4.3 bn) between January and April in solar energy this year. China alone added 31 GW during the first half of 2022 – twice more than the country’s new installed capacity in the corresponding period last year.
China solar stocks dominate
The International Energy Agency (IEA) in a report titled “Special Report on Solar PV Global Supply Chain” claimed that “the world will almost entirely rely on China for the supply of key building blocks for solar panel production through 2025.” According to the IEA, China is likely to manufacture over 95% of the renewable energy supply chain in the coming years. The agency states that “such level of concentration in any global supply chain would signify a considerable vulnerability.” Considering the agency’s observations, here are a few of the Chinese renewable energy stocks that are likely to gain from the country’s solar expansion.
JinkoSolar
JinkoSolar, headquartered in Shanghai, China, is among the largest and most advanced solar module manufacturers globally. The company supplies its solar products and sells solutions and services to a varied global utility, commercial as well as residential customer base in China and other countries. The earnings report of JinkoSolar for the first half of 2022 shows that the company’s performance improved considerably year-over-year, with operating revenue of $33.407 bn, up 112.44%. The company also shipped a total of 18.92GW solar products globally, up 79% year on year.
JinkoSolar owns about 14% of the solar module market globally. According to Allied Market Research, the global solar module market is expected to grow at a CAGR of 7.4%. The company invests heavily in renewable energy as its capital expenditure exceeds the industry standard by 668%.
The company is listed on the New York Stock Exchange and has a market cap of $3.04 bn. The PE ratio of JinkoSolar is 1.64, with a forward PE ratio of 20.11. The stock has a price-to-book ratio of 1.44. Analysts* expect the stock’s EPS to rise to 3.02 in 2023, from an expected EPS of 1.84 in 2022. Additionally, sales growth of the company is expected at 14.70% in 2023.
LONGi Green Energy Technology Co. Ltd.
China-based LONGi Green Energy Technology Co., Ltd. is the world’s largest solar technology company. Currently, the company is creating solutions for extensive power plants, different industries and households with its innovative development.
The H1 performance of LONGi shows the company’s revenue rose to 35.098 bn yuan ($5.06 bn), an increase of 74.26% compared to the same period of last year. Net profit attributable to shareholders reached 4.993 bn yuan ($711 m), up 21.30% over the prior-year period.
Listed in Shanghai, LONGi has a market cap of 403.19 bn yuan ($58.20 bn), and a PE ratio of 37.99. The stock has a forward PE ratio of 28.15 and a price-to-book ratio of 7.55. Analysts* expect sales to grow by 22% in 2023.
Daqo New Energy
Daqo New Energy Corp. is a China-based solar module manufacturer and is a top producer of high-purity polysilicon for the solar photovoltaic (PV) industry. In fact, Daqo is among the lowest-cost manufacturers of high-purity polysilicon globally. Daqo has a highly economical and technically innovative production facility in Xinjiang. Currently, China has an annual polysilicon production capacity of 70,000 metric tons.
Daqo Energy has American Depository Receipts listed in the US. The company has a market capitalization of $4.81 bn and a PE ratio of 3.12. The forward PE ratio is estimated at 3.44 and analysts* expect 2022 sales growth of 165.80% but see sales growth turn negative by 9.90% next year.
Canadian Solar
The last company in our list is Ontario-based Canadian Solar. Despite the name, it barely has any business in Canada. The company was established by Chinese businessman Xiaohua Qu, who has a PhD in metallurgy and materials science. Canadian Solar’s manufacturing is mostly based in China, and it has projects across the globe. Its profit rose at a three-year CAGR of 24.7% till 2022. Overall, Canadian Solar achieved a 16% gross margin for Q2 this year, doubling its gross profit sequentially to $371 m. Second quarter revenues grew 85% over the previous quarter to $2.3 bn.
Listed on NASDAQ, Canadian Solar has a market capitalization of $2.77 bn and a PE ratio of 20.29. The stock has a price-to-book ratio of 1.55. Analysts* expect the 2023 EPS to stand at 3.81 while seeing a 15.20% growth in sales.
Commodity prices may affect supply
Polysilicon, used for the manufacture of solar panels, is witnessing a three-fold price rise since 2021. The prices have surged further following the recent power outage in the Sichuan province of China. The spiralling prices of polysilicon may further disrupt the supply of this important commodity.
According to Nomura, the tightness in polysilicon supply may continue till the second half of 2022. The Bank of Japan said, in a statement, that polysilicon capacity is likely to double from the 2021 level by 2023, and most of this will also be in China. The steep rise in demand for non-fossil-fuel energy sources will be a bonanza for China’s solar industry.
*as per Yahoo Finance
All stock figures as of September 12, 2022.
