Outlook Clouded by the Uncertainties, Neutral · 2017. 7. 10. · According to Solar Power Europe (formerly EPIA), newly installed solar capacity in 2016 hit 76.6 GW, up YoY by 49.6%

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Sector Report: Clean Energy Sector – Solar Jun Zhu 朱俊杰

行业报告：清洁能源行业 - 太阳能 +852 2509 7592

[email protected]

10 July 2017

Outlook Clouded by the Uncertainties, “Neutral” 前景被不确定性所笼罩，“中性”

China will continue its spending on clean energy during the 13th

Five-Year Plan period. To optimize its energy structure and to meet its 2020

primary energy consumption target of 15%, China needs to have at least 770

GW of non-fossil fuel power generating capacity by 2020, implying a net

addition of nearly 180 GW of clean energy power capacity between 2016 and

2020.

The Chinese government has lowered its 2020 solar development target.

The 2020 solar installation target has been lowered from the previous 150

GW to 110 GW, signifying a change in attitude from the Chinese government.

Further, the 13th Five-Year Plan for solar development stressed the

importance of distributed solar energy and specified its installation target to be

60 GW by 2020. As the government hasn’t trimmed tariff subsidies for

distributed solar projects, we believe investment in distributed solar energy in

China will rise sharply.

Key solar installers in the world are all expected to experience a sharp

decline in installations in 2017. Solar installations globally are expected to

decline in 2017, as China, the United States and Japan are all expected to

experience a fall in solar installations. We expect global solar installations in

2017 to be between 55 GW and 65 GW (down from 76.6 GW in 2016), with

China expected to install between 25 GW and 28 GW during the period (down

from 34.5 GW in 2016).

Sector rating downgraded to "Neutral" amid concerns of the sector

outlook. The plunge in solar material prices in 1H17 and the expected fall in

solar installations globally in 2017 have caused uncertainties and concerns on

the outlook of the solar industry. Thus, we downgrade the sector rating to

“Neutral”.

中国将于十三五期间继续对清洁能源的投资。为了优化能源结构以及实现国家 2020 年一

次能源消费占比达 15%的目标，中国必须在 2020 年时拥有至少 770 吉瓦的非化石燃料发

电装机容量，意味着 2016 至 2020 年间约 180 吉瓦的净新增清洁能源发电装机。

中国政府调低了 2020 年的光伏发展目标。2020 年的光伏发展目标由早前的 150 吉瓦被下

调至 110 吉瓦，预示着中国政府对光伏发展态度的转变。另外，光伏发展十三五规划强调

了对分布式光伏发展的重要性并列出了分布式需于 2020 年时达到 60 吉瓦的装机目标。由

于政府未下调分布式光伏项目的电价补贴，我们相信国内对分布式光伏的投资将显著上升。

全球主要光伏装机国预计均将于 2017 年出现装机倒退。全球光伏装机预计将于 2017 年出

现倒退，主要由于中美日三国均将于期内出现对光伏装机的回落。我们预计 2017 年全球

新增光伏装机将介于 55 吉瓦至 65 吉瓦之间（较 2016 年的 76.6 吉瓦回落），而中国则预

计于期内新增 25 吉瓦至 28 吉瓦（较 2016 年的 34.5 吉瓦回落）。

在行业前景的忧虑下，下调行业评级至“中性”。光伏材料于 2017 上半年的价格暴跌以

及全球光伏装机年内预计将有所回落均为太阳能行业的前景增添了不确定性及忧虑。我们

因此下调行业评级至“中性”。

Rating: Neutral Downgraded

评级：中性 (下调)

1-Year Performance of Solar Sector 太阳能行业过去 1 年的股价表现

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Hang Seng Index GCL Poly

Xinyi Solar Singyes Solar

Source: Capital IQ, Guotai Junan Internat ional.

Company Name

公司名称

Code

编号

Price

股价

(HK$)

Rating

投资评级

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市盈率

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净资产收益率

(%)

17 P/B

市净率

(x)

17 Yield

股息率

(%)

GCL Poly 03800 0.850 Neutral 9.4 6.9 6.4 7.2 0.7 0.0

Xinyi Solar 00968 2.150 Accumulate 8.6 6.9 6.0 27.0 2.2 7.0

Singyes Solar 00750 3.050 Accumulate 4.3 3.9 3.6 12.5 0.5 1.9

Weighted Average. 市值加权平均

Neutral 8.6 6.7 6.0 16.8 1.4 3.4

Source: the Companies, Bloomberg, Guotai Junan International.

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Clean Energy Sector – Solar


Industry Updates

As a national energy development strategy, China will continue its

investment on renewable energy during the 13th

Five-Year Plan period.

According to BP, non-fossil fuels contributed 14% of global primary energy

consumption in 2015 and that ratio is set to further rise to 15.9% and 17.6%

by 2020 and 2025, respectively. Non fossil fuels contributed 11.8% of

China’s total energy consumption in 2015, and, under the existing 13th

Five-Year Development Plan for energy development, that ratio is to reach

15% by 2020. To achieve this goal, China has to have 770 GW of non-fossil

fuel power capacity installations in place by 2020 (from 592 GW in 2016),

representing 39% of the nation’s total power capacity and contributing 31%

of the total power supply. As a national strategy, China will continue to invest

in renewable energy power sources over the next decade.

Solar capacity in China has to reach at least 110 GW by 2020 under the

existing solar development plan. Under the 13th Five-Year Development

Plan for solar energy, there shall be no less than 110 GW of solar power

generating capacity in China by 2020, including at least 60 GW of

distributed solar projects and 5 GW of solar thermal capacity. The

development target was officially rolled out earlier this year, and was below

the previous target of 150 GW. The decline was a major hit to the solar

industry as demand for solar materials is expected to decrease. Meanwhile,

the 60 GW of distributed solar projects pointed out by the government is a

clear sign that solar energy development will be tilted towards distributed

solar project (roof-top solar projects) investment. The sudden change in

2020 development targets has triggered concerns that the government is

not as supportive as it previously was on the solar energy.

Solar electricity FIT for 2017 was officially trimmed in late 2016. In late

2016, the NDRC and NEA of China officially announced the solar electricity

FIT cut for new solar projects that are approved in 2017. Projects approved

in 2016 and completed by the end of June 2017 will continue to enjoy the

solar electricity FIT before the new FIT adjustment. The new solar FIT for

concentrated solar stations across the three solar resource zones in China

was adjusted to RMB 0.65 / kWh, RMB 0.75 / kWh and RMB 0.85 / kWh,

respectively. The extent of the solar tariff cut was between 13.3% and

18.7%. However, the tariff subsidy for distributed solar projects was

untouched and remained at RMB 0.42 / kWh. The government’s supportive

attitude on distributed solar projects is quite clear and we expect more

distributed solar project to be built in China from 2017 to 2020 as investment

return becomes more attractive with FIT cuts on concentrated solar stations.

Further, the bidding process for solar projects (光伏竞价上网) is expected to

lower the actual solar FIT of concentrated solar stations in China, making

distributed solar projects even more attractive.

Newly installed global solar capacity reached 76.6 GW in 2016, the

highest level in history. According to Solar Power Europe (formerly EPIA),

newly installed solar capacity in 2016 hit 76.6 GW, up YoY by 49.6% from

the 51.2 GW installed in 2015, pushing the cumulative solar capacity

installed in the world to 306.5 GW, up YoY by 33.3%. In 2016, China (+128%

YoY), the United States (+97% YoY), Japan (-22% YoY), the EU (-21% YoY)

and India (+125% YoY) together contributed 90.2% of new solar installations

in the world. Furthermore, China, the United States and Japan added 34.5

Figure-1: China’s Energy Strategy

11.8% 15.0%20.0%

88.2% 85.0%80.0%

0%

25%

50%

75%

100%

2015A 2020E 2030E

Non-fossil fuel Fossil fuel

Source: NEA, NDRC, Guotai Junan International.

Figure-2: Global Energy Development

Trend

32.9% 31.9% 31.1% 30.4% 29.6%

23.9% 24.4% 24.9% 25.1% 25.6%

29.2% 27.8% 26.4% 25.4% 24.7%

4.4% 5.0% 5.1% 5.2% 5.0%

6.8% 6.8% 7.1% 7.2% 7.4%

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2015A 2020E 2025E 2030E 2035E

Oil Natural Gas Coal Nuclear Hydro Renewables

Source: BP, Guotai Junan International.

Figure-3: Key Energy Consumers

10.3%16.4%

22.9% 24.5% 25.8% 26.1%

24.7%21.5%

17.3% 16.7% 15.2% 14.3%

19.3% 16.6% 12.4% 11.5% 10.4% 9.5%

2.9% 3.6% 5.3% 6.1% 7.1% 8.2%

42.7% 41.9% 42.0% 41.3% 41.4% 41.9%

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1995A 2005A 2015A 2020E 2025E 2030E

CHINA US EU INDIA Others


Figure-4: Global Energy Consumption

Trend

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GW, 14.8 GW and 8.6 GW in 2016, respectively, and contributed 75.6% of

total installations during the period. Except for Japan’s decline, China and

the United States recorded substantial YoY growth in solar installations,

thanks to strong support from both governments.

Key solar system installers in the world are expected to slow their

pace in 2017. The medium scenario estimate of Solar Power Europe

suggests that global solar installations will reach 80.5 GW in 2017, while the

low scenario indicates that only 58.5 GW will be installed during the year.

The low scenario implies a sharp drop of nearly 18 GW YoY and the key

reasons behind the expected drop can be attributable to the change of solar

energy policy among the key solar installers in the world (i.e. China, the

United States and Japan). We expect new installations in 2017 to be lower

compared to that in 2016, mainly because: 1) China trimmed its 2020 solar

development target and slashed its solar FIT in 2016; 2) the Trump

administration announced that they would pull back from the Paris

Agreement which aims to curb global emissions and will instead focus on

fossil fuel consumption; and 3) Japan may further cut its solar electricity

subsidy that is set to hurt the nation’s solar investment. If the three nations

were to experience a sharp drop in installations in 2017, the newly added

global solar capacity will drop significantly.

Newly installed solar projects in China in 1Q17 reached 7.2 GW. The 7.2

GW in new solar projects installed in 1Q17 are similar to the scale of solar

installations in the same period of 2016. Of the 7.2 GW of solar projects

installed, 4.8 GW were from concentrated solar stations, down 23% YoY,

and 2.4 GW from distributed solar projects, up 151% YoY. The sharp rise in

distributed solar projects is in line with the existing national strategy of the

Chinese government, wherein distributed solar projects will be the key focus

of solar energy within the 13th

Five-Year Plan. By the end of 1Q17,

cumulative solar capacity nationwide reached 84.6 GW, wherein 85% was

from concentrated solar stations and 15% from distributed solar projects.

New solar installations in the first quarter of 2017 were mainly located in

provinces such as Zhejiang, Shandong, Anhui and Jiangsu. These eastern

region provinces hold some of the key energy consumers in China. Based

on the existing solar development, we expect China to install an average of

20 GW of solar capacity all the way to 2020.

Solar materials price dropped sharply in 1H17. According to PVinsights,

the YTD ending June 28th

ASP for poly-silicon, multi wafer, cell and module

recorded YoY decline of 0.9%, 30.6%, 34.1% and 35.6%, respectively.

While the ASP of mono wafer during the first 6 months only recorded YoY

decline of 11.0% due to its increasing demand and limited supply. Boosted

by the solar installation rush in China that started in 2Q17, ASP of solar

materials experienced a sharp recovery over the 1-month period in June,

and the extent was between 5% and 12%. However, we believe that the

price recovery is not sustainable and prices will start to fall again in 3Q17

when demand is expected to slow again following the installation rush that

ended in June 2017. The sharp price decline for solar materials in the first

half of 2017 can be attributable to the lower solar FIT in China, as well as a

slowdown in global demand (i.e. overcapacity within the industry). We

expect nationwide new solar installation in 2017 to be between 25 GW and

28 GW, implying a YoY decline of between 18.8% and 27.5%.

Figure-5: Solar On-Grid FIT

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Source: NDRC, NEA, Guotai Junan International.

Figure-6: New PV Installations Globally

Source: Solar Power Europe, Guotai Junan International.

Figure-7: Total PV Installations Globally


Figure-8: Solar Energy Development Plan


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Actual solar FIT in China may be substantially lower than the current

solar FIT set by the NDRC and NEA. The bidding process for solar

projects (光伏竞价上网) and solar front runner program (光伏领跑者项目)

are both aimed at enhancing solar module efficiency and, more importantly,

to further lower on-grid tariffs of new solar projects nationwide, resulting in

more price cutting pressure to upstream solar material makers. Companies

that can’t achieve production cost reductions in 2017 will inevitably suffer

from significant YoY earnings decline or even turn red (i.e. net loss). We

note from the 1Q17 quarterly results announced by certain solar materials

makers that although external shipments in 1Q17 was tantamount to the

volume shipped in 1Q16, acute ASP decline has caused most of these

companies to suffer dramatic YoY earnings decline. Meanwhile, the

continued drop in ASP of solar materials is benefiting downstream solar

station investors and is a crucial step in realizing the grid parity of solar

energy (to be as competitive as thermal power) – the ultimate goal of the

energy strategy of China. From plunging solar material prices, we believe

solar grid parity in China will come sooner than expected.

Trading of green certificates in China officially started on 1 July 2017.

In January 2017, the NDRC, Treasury Department of China and NEA jointly

announced the《关于试行可再生能源绿色电力证书核发及自愿认购交易制度

的通知》 / Notification on implementation of the trading system for

renewable energy electricity green certificate issued and voluntarily

subscribed. The policy aims to implement nationwide green certificate

issuance and voluntary subscription, and targets to officially launch the

green certificate trading system on 1 July 2017. It was rumored that green

certificates will replace the renewable energy tariff subsidy on solar

electricity, but this was later denied and clarified by the solar sector

authority. Green certificates are a proof to non-hydro renewable electricity

generated as well as proof of green energy consumption. It is a

supplementary document and not a replacement to current electricity

subsidies on wind and solar energy in China. There were previously 3

batches of green certificates issued by the government, and the majority of

these certificates were for wind power. We expect solar power to be more

involved in green certificate trading going forward.

Challenges for the solar industry are still around but have been

alleviated to some extent. The solar industry chain is quite huge and each

segment is a bit different from one another. All in all, the entire sector relies

on support from the Chinese government, and the recent change in the

government’s supportive attitude is a major attack on the once promising

outlook of the solar industry. The government has been under pressure as

coal producers and coal-fired IPPs are suffering from overcapacity, and the

rise of renewable energies is, to some extent, a big hit to conventional

energy. We believe that the government will need to balance the two

(conventional energy and renewable energy) and figure out a way for more

sustainable development, especially for renewable energies. The key

challenges lying ahead for Chinese solar players are plunging PV material

prices, delayed electricity subsidy payments, solar curtailment issues, a

cooldown in nationwide solar investment, and overseas solar materials

demand decline. To help alleviate the curtailment issue, various ultra high

voltage transmission lines are under construction and are expected to

reduce the curtailment rate of both solar and wind power IPPs in China. We

believe that the government will continue to support PV investment and

solve the current issues facing the industry.

Figure-9: Historical PV Cost in China


Figure-10: Historical Cell & Module Price

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2013-01 2013-07 2014-01 2014-07 2015-01 2015-07 2016-01 2016-07 2017-01 2017-07

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Source: PVinsights, Guotai Junan International.

Figure-11: Historical Poly and Wafer Price

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Wafer (left) Poly (right)

Source: PVinsights, Guotai Junan International.

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Key Forecasts / Projections

As both the 2020 solar development target and on-grid solar FIT have been

trimmed, we expect China’s solar installations in 2017 to fall to between 25

GW and 28 GW, sharply down by between 18.8% and 27.5% from the 34.5

GW installed in 2017.

With the expected fall in solar installations from the key solar installers (i.e.

China, the US and Japan) in 2017 due to the change in respective

government’s renewable energy policies, we expect global solar

installations to fall back to between 55 GW and 65 GW in 2017, a sharp YoY

decline of between 15.1% and 28.2% from 76.6 GW installed in 2016.

In the recently announced 13th

Five-Year Plan for solar energy development,

distributed solar project capacity has to reach at least 60 GW by 2020 from

the current cumulative capacity of 12.7 GW (as at 1Q17). The tariff subsidy

for distributed solar power remained unchanged at RMB 0.42 for every kWh

of electricity generated (either for self-use or on-grid), signifying the

government’s strong support for distributed solar development. We expect

distributed solar projects to emerge sharply from 2017 to 2020, with at least

10 GW of annual installations in China during the period. Distributed solar

projects are unaffected by the solar bidding process policy and the solar

front runner program.

Several factors determine the ultimate project return and per kWh electricity

cost of a solar project. The efficiency of the PV module, the cost of project

investment, operating and financing expenses, and the utilization hours of

the region. Per watt investment cost for a solar project is definitely one of the

key factors determining the cost of per kWh electricity generated, and we

expect that the sharp fall of solar materials will help solar grid-parity to be

realized within 3 years. However, with plunging solar material prices, the

industry could be experiencing a wave of consolidation and bankruptcy,

especially for solar material makers unable to lower their production costs to

meet the low product selling price and for those that are highly leveraged.

Global demand for solar materials will rise dramatically when the cost of

solar electricity becomes cheaper than that of conventional energy and

when solar energy becomes a global consensus - the ultimate sustainable

energy. Cost and competitiveness is definitely the key to a global solar

investment spree. We expect that to happen within 7- 10 years given the

currently sharp fall in the solar material prices and the gradual increase in

solar module efficiency. Solar energy will no longer be a luxury and will soon

become an affordable energy source for every nation, either developing or

developed.

Figure-12: CPIA’s Solar Market Estimates

Source: CPIA, Guotai Junan International.

Figure-13: Global Solar Market Estimates


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Conclusion

Plunging solar material prices and an uncertain global solar outlook

have led to concerns over the upstream solar industry in 2017; we

downgrade the sector rating to “Neutral”. Due to the uncertainty on global

solar installations in 2017 and the plunging of solar material prices in 1H17,

we are cautious on upstream solar materials makers within the industry. The

ASP of solar materials dropped substantially during the first 2 quarters of the

year, and we don’t think solar materials makers are capable of achieving the

same levels of cost reductions in such a short period of time, thus the

earnings are set to drop significantly in 1H17 even if the same level of

shipment volume in 1H16 is achieved. Our assumption was proven by some

solar companies that had their 1Q17 results released. We expect the

situation to get worse in 2H17 as the solar installation rush ended in June

2017, which is set to impact solar material prices even further as demand in

China is expected to slow down in 2H17. Moreover, the revised 2020 solar

development target (from previous 150 GW to 110 GW) and the bidding

process for solar projects in China are both expected to put more pressure

on solar materials demand and keep the price of materials from recovering.

At the moment, we are bullish on downstream solar EPC service providers

and solar projects investors, and we do not favor upstream solar material

makers. We believe that solar materials makers will be hit hard by the recent

plunge in solar material prices. Overall, we downgrade the sector rating to

“Neutral”.

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Figure-14: Sector Performance in Relation to the Hong Kong Hang Seng Index

Market cap

Target price Rating (Mn) 1 Week 1 Month 3 Month 6 Month YTD 1 year 52W High 52W Low

HANG SENG INDEX HSI Index HKD 25,340.85 16,039,639 (1.6) (2.6) 4.4 11.4 15.2 23.2 26,090.3 20,468.5

HANG SENG CHINA ENT INDX HSCEI Index HKD 10,251.83 4,594,340 (1.1) (3.2) (0.0) 6.1 9.1 20.1 10,727.1 8,482.7

NASDAQ COMPOSITE INDEX CCMP Index USD 6,153.08 9,538,104 0.1 (0.9) 4.6 10.8 14.3 24.1 6,341.7 4,901.3

SOLAR Sector

GCL-POLY ENERGY HOLDINGS LTD 3800 HK HKD 0.87 0.90 Neutral 16,171 2.4 14.5 (14.7) (9.4) (6.5) (23.7) 1.2 0.7

CHINA SINGYES SOLAR TECH 750 HK HKD 3.04 5.00 Accumulate 2,536 (7.0) (12.9) (11.9) (18.6) (16.1) 10.4 4.7 2.7

XINYI SOLAR HOLDINGS LTD 968 HK HKD 2.15 3.00 Accumulate 15,961 (3.6) (7.7) (12.5) (13.9) (11.8) (29.5) 3.3 2.1

Simple Average (2.8) (2.0) (13.0) (13.9) (11.5) (14.3)

Weighted Average (1.1) 2.3 (13.5) (12.1) (9.6) (23.9)

Price Range

Company Ticker Currency Last price

Absolute Return %

Source: Capital IQ, GTJA International.

Figure-15: PER Band of GCL Poly

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07/13 07/14 07/15 07/16 07/17

1 Year Forward PER Band AverageMin: 3.4xAverage: 6.1xMax: 10.7x

Source: Bloomberg, Guotai Junan International.

Figure-16: PER Band of Xinyi Solar

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Figure-17: PER Band of Singyes Solar

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Table-1: Peers Comparison

Company Stock Code Currency Last price Market

Cap HKDmn

PE PB ROE (%) EV/EBITDA

16A 17F 18F 19F 16A 17F 18F 19F 17F 17F

Polysilicon & Wafer

Comtec Solar Systems Group 00712 HK HKD 0.285 441 n.a. n.a. n.a. n.a. 1.9 n.a. n.a. n.a. (90.7) n.a.

Daqo New Energy Corp-Adr DQ US USD 20.400 1,676 4.9 3.8 3.4 n.a. 0.8 n.a. n.a. n.a. 17.6 3.5

Gcl-Poly Energy Holdings Ltd 03800 HK HKD 0.870 16,171 6.7 7.4 7.2 6.6 0.7 0.6 0.6 0.5 8.8 5.8

Oci Co Ltd 010060 KS KRW 87,600.000 14,139 8.6 28.0 21.4 16.8 0.7 0.6 0.6 0.6 2.6 7.5

Rec Silicon Asa REC NO NOK 1.165 2,769 n.a. n.a. n.a. n.a. 0.4 0.5 0.5 0.5 (13.1) 48.7

TBEA Co Ltd 600089 CH CNY 10.150 43,396 15.5 14.2 12.4 10.7 1.5 1.4 1.2 1.1 9.9 10.5

Wacker Chemie Ag WCH GR EUR 95.059 44,176 26.3 25.0 19.9 16.8 2.0 1.7 1.6 1.5 6.4 6.1

Xian Longi Silicon Materia-A 601012 CH CNY 18.310 42,017 21.3 18.9 15.0 11.7 3.6 3.2 2.6 2.2 17.1 12.4

Simple Average

13.9 16.2 13.2 12.5 1.4 1.3 1.2 1.1 (5.2) 13.5

Weighted Average

18.4 18.8 15.3 12.8 2.0 1.8 1.6 1.4 9.5 9.6

Cell & Module

Canadian Solar Inc CSIQ US USD 15.560 7,050 13.8 12.3 6.3 7.9 1.0 0.9 0.8 0.8 10.7 9.1

Hanwha Q Cells Co. HQCL US USD 6.720 4,369 4.4 36.3 29.2 n.a. 1.4 n.a. n.a. n.a. 2.9 n.a.

Ja Solar Holdings Co Ltd-Adr JASO US USD 6.200 2,304 2.8 24.8 12.7 10.3 0.3 1.6 1.5 1.5 n.a. 4.2

Jinkosolar Holding Co-Adr JKS US USD 20.180 5,044 2.3 9.1 6.7 6.9 0.7 0.7 0.6 0.6 3.8 5.9

Renesola Ltd-Adr SOL US USD 2.440 382 n.a. n.a. n.a. n.a. 0.1 n.a. n.a. n.a. n.a. n.a.

Yingli Green Energy Hold-Adr YGE US USD 2.350 334 n.a. n.a. n.a. n.a. (0.0) n.a. n.a. n.a. n.a. n.a.

Simple Average

5.8 20.6 13.7 8.4 0.6 1.0 1.0 1.0 5.8 6.4

Weighted Average

7.2 18.6 12.5 7.9 0.9 0.9 0.9 0.8 6.5 7.2

Solar Glass

Ancai Hi-Tech 600207 CH CNY 7.570 7,511 n.a. n.a. n.a. n.a. 3.4 n.a. n.a. n.a. n.a. n.a.

AVIC Sanxin 002163 CH CNY 8.530 7,881 n.a. n.a. n.a. n.a. 9.3 n.a. n.a. n.a. n.a. n.a.

Changzhou Almaden 002623 CH CNY 28.870 5,311 n.a. 39.5 27.8 n.a. 2.1 n.a. n.a. n.a. n.a. n.a.

CSG Holdings 200012 CH HKD 5.430 18,436 12.2 9.0 7.9 n.a. 1.3 n.a. n.a. n.a. n.a. n.a.

Flat Glass 06865 HK HKD 1.510 2,718 3.8 4.3 3.6 n.a. 0.8 n.a. n.a. n.a. 18.7 n.a.

Xinyi Solar Holdings 00968 HK HKD 2.150 15,961 7.4 6.6 5.7 5.7 2.4 1.8 1.5 1.3 30.3 6.7

Simple Average

7.8 14.8 11.2 5.7 3.2 1.8 1.5 1.3 24.5 6.7

Weighted Average

9.5 11.6 9.3 5.7 3.0 1.8 1.5 1.3 28.6 6.7

PV System Integrators (EPC)

Abengoa ABG SM EUR 0.035 2,351 n.a. n.a. n.a. 7.0 (0.0) (0.2) (0.3) (0.4) n.a. n.a.

China Singyes Solar Tech 00750 HK HKD 3.040 2,536 3.9 4.6 4.3 4.1 0.5 0.5 0.4 0.4 11.9 5.0

Concord New Energy Group 00182 HK HKD 0.335 2,907 5.4 4.4 3.8 3.6 0.5 0.5 0.4 0.4 10.8 10.1

First Solar Inc FSLR US USD 39.400 32,096 n.a. n.a. n.a. 28.4 0.8 0.8 0.8 0.7 1.0 13.5

Guodian Technology & Envir-H 01296 HK HKD 0.530 3,214 9.1 n.a. n.a. n.a. 0.6 n.a. n.a. n.a. n.a. n.a.

Jiangsu Linyang Electronic-A 601222 CH CNY 7.710 15,638 27.5 18.9 15.2 12.8 1.7 1.6 1.4 1.3 8.3 11.5

Sunpower Corp SPWR US USD 8.740 9,519 n.a. n.a. 99.3 15.1 1.2 1.9 3.4 4.3 (26.8) 36.7

Simple Average

11.5 9.3 30.6 11.8 0.8 0.8 1.0 1.1 1.1 15.4

Weighted Average

20.0 15.2 39.4 19.9 1.0 1.1 1.2 1.3 (0.5) 16.1

Solar System Operators

Gcl New Energy Holdings Ltd 00451 HK HKD 0.380 7,248 46.4 8.3 5.9 5.4 1.0 1.3 1.1 0.9 14.2 8.6

Jiangsu Akcome Science & T-A 002610 CH CNY 2.440 12,599 61.0 28.4 35.4 n.a. 1.9 1.6 n.a. n.a. 6.7 n.a.

Kong Sun Holdings 00295 HK HKD 0.350 5,238 76.8 n.a. n.a. n.a. 0.7 n.a. n.a. n.a. n.a. n.a.

Shunfeng International Clean 01165 HK HKD 0.430 1,855 n.a. 1.0 n.a. n.a. 0.3 n.a. n.a. n.a. 22.8 n.a.

United Photovoltaics Group L 00686 HK HKD 1.060 9,507 11.9 n.a. n.a. n.a. 1.8 n.a. n.a. n.a. n.a. n.a.

Simple Average

49.0 12.6 20.6 5.4 1.2 1.5 1.1 0.9 14.6 8.6

Weighted Average

46.8 19.3 24.6 5.4 1.5 1.5 1.1 0.9 10.6 8.6

Source: Bloomberg.

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Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition

Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable.

Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral.

Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition

Outperform Relative Performance >5%; or the fundamental outlook of the sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral.

Underperform Relative Performance <-5%; or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS

(1) Except for Shenzhen International Holdings Limited (00152 HK), the Analysts and their associates do not serve as an officer of the issuer

mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for SMI Holdings Group Limited (00198 HK), Guotai Junan International Holdings Limited (01788 HK), Binhai Investment

Company Limited (02886 HK), Link Holdings Limited (08237 HK), GFI MSCI A I-R (CNY) (83156 HK), GFI MSCI A I (03156 HK) and CAM SCSMALLCAP (03157 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have had investment banking relationships with China Singyes Solar Technologies (00750 HK) mentioned in this Research Report within the preceding 12 months.

(5) Guotai Junan and its group companies are not making a market in the securities mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of any issuers mentioned in this Research

Report. There is no officer of any issuers mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities

(Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. © 2017 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

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