Bachman Maintains BUY on Yingli (NYSE:YGE) - Reduces Price Target

Nov 22, 2010
Author: SCP Editor

November 22, 2010 – Analyst Comments – Auriga’s Mark Bachman maintained his BUY rating on Yingli (NYSE:YGE), but reduced his price target to $13 from $15, citing concerns that margins are peaking and an upside requires FY11 sales above his current estimates.

Key Takeaways:

·         Sales-beat for Q310 was impressive and in-line with Chinese peers, expects continued industry share gain on better pricing power which should offset expected margin decline in earnings;

·         Cost fears overblown, but concern is with peaking margins;

·         Cost reductions could be slowing, may not be sufficient to compensate for ‘disaster scenario’ for the industry if $1.40/watt materializes;

·         Modeling lower product margins for Q111;

·         $13 target is 10x new 2011 EPS estimate of $1.36, down from 15x prior EPS estimate of $1.01.

·         Note: Industry multiples have been compressed across the entire solar value chain, and investorsappear willing to sell these stocks as the out-year earnings multiple reaches double-digits.