PREPARED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES (TAIWAN) LTD THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 34
Wait on the sidelines
n Downstream business is still too small to move the needle
The 1H results were a surprise, with sales and profit growing 86%
and 165% h-h. Momentum is likely to persist in 2H13 thanks to a
stable equipment business. However, concerns lie in the fact that
parent company Hanergy Group (not listed, 63% stake) is also the
sole customer. High reliance on the parent is a double-edged sword:
Hanergy Solar receives both technical and financial support, but
does not have total control over its business strategy. Expansion into
downstream solar farms is a way out, as it could diversify the
customer base, yet at 7% of projected sales in 2014, it is still too
small to move the needle.
n Environment friendly for TF, but cost-competitiveness unproven
We think the environment is favourable for Thin-Film (TF) given its
exemption from Europe’s price undertaking agreement, and lower
conversion requirement for distributed PV subsidies in China. Recent
IP acquisitions from global TF leaders MiaSolé and Solibro could
hasten CIGS-type TF’s commercialisation, however, its cost-
competitiveness remains to be seen.
n Initiate with a HOLD and a TP of HKD1.34
We initiate coverage with a HOLD, our HKD1.34 TP is based on 9.5x
2014E EV/EBITDA. We like the company’s smooth expansion into
downstream and decent 2014 and 2015 ROE of 17% and 16%, but
are cautious on its single-customer dependence. We suggest waiting
on the sidelines for now. Faster ramp-up on solar farm projects would
be a positive sign, as it implies a more diversified customer base.
Hanergy Solar’s sales mix: Moving into downstream solar farms
Sources: Hanergy Solar; BNP Paribas estimates
0
20
40
60
80
100
1H12 2H12 1H13E 2H13E 1H14E 2H14E 1H15E 2H15E
(%) Equipment Downstream
18 NOVEMBER 2013
INITIATION 34TAIWANHONG KONG / ALTERNATIVE ENERGY/TECHNOLOGY
HANERGY SOLAR 566 HK
HOLD
TARGET PRICE HKD1.34
CLOSE HKD1.25
UP/DOWNSIDE +7.4%
PRIOR TP HKD CHANGE IN TP %
HOW WE DIFFER FROM CONSENSUS MARKET RECS
TARGET PRICE (%) 52 POSITIVE 1
EPS 2013 (%) NA NEUTRAL 0
EPS 2014 (%) NA NEGATIVE 1
Esther C Chen [email protected]
+886 2 8729 7065
Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contact your salesperson for
authorisation. Please see the important notice on the back page.
KEY STOCK DATA
YE Dec (HKD m) 2012A 2013E 2014E 2015E
Revenue 2,756 4,556 5,275 6,182
Rec. net profit 1,316 2,955 2,985 3,264
Recurring EPS (HKD) 0.10 0.11 0.11 0.12
EPS growth (%) 47.0 8.0 1.0 9.4
Recurring P/E (x) 12.8 11.8 11.7 10.7
Dividend yield (%) 0.0 0.0 0.0 0.0
EV/EBITDA (x) 9.5 7.0 8.6 7.2
Price/book (x) 1.4 2.2 1.8 1.6
Net debt/Equity (%) (6.2) (14.2) (1.8) (4.8)
ROE (%) 11.9 21.4 17.2 15.9
Share price performance 1 Month 3 Month 12 Month
Absolute (%) (6.7) 76.1 363.0
Relative to country (%) (5.5) 74.1 352.6
Next results February 2014
Mkt cap (USD m) 4,502
3m avg daily turnover (USD m) 29.0
Free float (%) 37
Major shareholder Hanergy Group (63%)
12m high/low (HKD) 1.43/0.26
3m historic vol. (%) 67.7
ADR ticker -
ADR closing price (USD) -
Issued shares (m) 27,927
Sources: Bloomberg consensus; BNP Paribas estimates
(6)
94
194
294
394
0.24
0.74
1.24
Nov-12 Feb-13 May-13 Aug-13 Nov-13
(%)(HKD) Hanergy Solar Rel to MSCI Hong Kong
Hanergy Solar 566 HK Esther C Chen
2 BNP PARIBAS 18 NOVEMBER 2013
Investment thesis
Unlike c-Si, TFPV has higher technology entry barriers and broader applications than the conventional c-Si PV. In this field, First Solar (FSLR US, Not Rated) is currently the only large-scale over one gigawatt (GW) production size TF solar manufacturer in the world, followed by Solar Frontier (not listed). As such, the TF supply chain is healthier than that for c-Si. Hanergy Solar has recently acquired the CIGS (a type of TF) leaders MiaSolé and Solibro, which should hasten CIGS’s commercialisation. However, its cost-competiveness remains to be proved.
The downstream solar farm business is progressing smoothly, with 120MW capacity to be on-grid by the end of 2013. Hanergy Solar can leverage its parent company Hanergy Group’s expertise. We believe the expansion into the downstream solar farm business is a key move as it will diversify the customer base and ease investors’ concerns on the current single-customer issue. However, our estimation of a 7% sales contribution in 2014E is still too small to move the needle. This diversification is more like a story for beyond 2015E.
Catalyst
Smooth progress on solar farm projects with 120MW to be on-grid in China by the end of 2013. This will start contributing sales and bring cash flow in 1Q14 but still a small amount.
The environment for TF is favourable, as it is exempt from Europe’s anti-dumping levies; this provides a window for TF to gain market share.
Risks to our call
Key upside risks to our TP are faster-than-expected expansion in the downstream solar farm business, and earlier-than-expected commercialisation of CIGS technology.
Key downside risks are anti-dumping disputes on TF and subsidy cuts from the China government.
Company background Key assumptions
Hanergy Solar offers field-proven turnkey solutions for large-
scale thin-film (TF) solar cell production systems. The company
acquired global TF leaders MiaSolé and Solibro in September
2013. It is actively seeking investment opportunities in
downstream solar projects (solar farms) and moving towards
the global photovoltaic power generation market.
2012 2013E 2014E 2015E
Equipment installation (MW) 500 1,030 1,122 1,184
Solar farm installation (MW) - - 280 370
Equipment ASP (USD/watt) 0.71 0.57 0.56 0.55
Solar farm ASP (USD/watt) - - 0.16 0.16
Source: BNP Paribas estimates
Principal activities (2013E to 2014E sales mix) Earnings sensitivity
Year-end ------ Base ------ ------ Best------ ------ Worst -----
31 Dec 2014E 2015E 2014E 2015E 2014E 2015E
Equipment installation (MW) 1,122 1,184 1,234 1,302 1,010 1,065
Change (%)
10 10 (10) (10)
Solar farm installation (MW) 280 370 308 407 252 333
Change (%)
10 10 (10) (10)
Sales (HKD m) 5,275 6,182 5,803 6,800 4,748 5,564
Change (%)
10 10 (10) (10)
Key executives Source: BNP Paribas estimates
Age Since Title
Mingfang Dai (Frank) 49 2010 Chairman/CEO
Dr. Li Yuan-min 54 2009 Deputy Chairman/CTO
Chen Li 40 2011 Executive Vice President
Hui Ka Wah (Ronnie), J.P. 49 2009 Finance Director and Senior VP
Li Guangmin 36 2002 Financial Controller
http://www.hanergysolargroup.com
We believe the key factors for sales momentum are the
installation of equipment and solar farms.
A 10% increase in equipment and solar farm installation
would raise 2014E and 2015E sales by 10% and 10%, all
else being equal.
A 10% increase in equipment and solar farm installation
would raise 2014E and 2015E sales by 10% and 10%, all
else being equal.
Solar equipment
100.0%
Solar equipment
92.7%
Solar farm7.3%
Hanergy Solar 566 HK Esther C Chen
3 BNP PARIBAS 18 NOVEMBER 2013
Focused on Thin-Film technology
Why Thin-Film Photovoltaic?
Instead of jumping into the competitive c-Si PV (crystalline silicon photovoltaic)
arena, Hanergy Solar focuses on TFPV (Thin-Film Photovoltaic) technology.
According to EPIA, TF accounted for c.15% of global PV market share in 2012
(Exhibit 1) with only a few players (around 10 active players vs. around 150 players
in the c-Si field). Although TF’s conversion efficiency is lower than c-Si PV currently;
we think it will gradually gain traction thanks to technology advances and the higher
technology entry barriers, as well as its multiple advantages, which we outline below:
1. Semiconductor technology: While the c-Si solar cell is produced on a physical process, TF production, similar to semiconductor production, combines physical and chemical processes. Thus, it has higher entry barriers and fewer physical limitations, leaving more room for conversion efficiency to be improved.
2. Higher tolerance to hot temperatures: When the temperature is above 25ºC, conversion efficiency decreases accordingly. However, TF has a higher tolerance to hot temperatures: every 1ºC of decrease in temperature causes an approximately 1% reduction in c-Si PV vs c.0.5% for TF. As such, a TF module could generate a higher energy yield then c-Si in regions with average temperatures over 25ºC, such as South Africa, South America, and South-East Asia.
3. Better performance under weak light: TF could deliver a more-stable performance than c-Si when the irradiance is weak (e.g., at twilight, dawn, or during winter time), implying longer ultraviolet solar hours. TF could also work under shadow with indirect light, whereas shadows may cause significant power loss or even damage to c-Si panels.
4. More applications especially BIPV (Building-integrated Photovoltaics): TF could be easily installed on any type of rooftop without racks as it is thinner and lighter. This could also lower BOS cost (Balance of System, including inverter, labour, cables, wire, racking, frames, etc). Furthermore, as flexibility and transparency is achievable, TF could be applied in the growing BIPV market where c-Si is absent.
According to EPIA, TF’s production market share is expected to stabilize at c.15%
with a 6-9% CAGR range in 2013-17, depending on the type of TF technology. Given
rapid evolution, CIGS (Copper Indium Gallium Selenide) may gain the spotlight with
8.7% CAGR. Upside could be driven by improving efficiency, new government
subsidy programmes, and the growing BAPV/BIPV markets.
Worth noting is that TF companies are exempt from the recent price undertaking
agreement (27 August 2013) following the European Commission’s anti-dumping and
anti-subsidy tariffs against Chinese solar panels. In the agreement, the minimum
price for Chinese c-Si module imports will be EUR0.56/watt (10% higher than the
prior level) with the volume ceiling at 7GW. As such, we think this will create a
window for TF to gain market share.
TF supply chain is healthier than c-Si,
while conversion efficiency needs to
be improved
TF is exempt from the price
undertaking agreement
(EUR0.56/watt)
Hanergy Solar 566 HK Esther C Chen
4 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 1: Global annual installation capacity EXHIBIT 2: PV company numbers
Sources: EPIA; BNP Paribas estimates Sources: EPIA; BNP Paribas estimates
EXHIBIT 3: TF vs c-Si - 2013-2017 CAGR by technology EXHIBIT 4: TF production market share
Sources: EPIA; IHS Solar; PV Insider and SNE Research Sources: IHS Solar Research (Jan 2013)
TF is more environmentally friendly. Energy payback time (EPBT) is the time in which
the energy input required to produce a module will be paid back from the electricity
generated over its lifetime. This includes the electricity used to provide the raw
materials for making a module. In general, c-Si PV modules require 2-3 years to pay
back the electricity they used during production while TF modules take about one
year, even with lower conversion efficiency. In addition, the by-product of the
production of poly-silicon, Silicon Tetrachloride (SiCl4), is deadly to marine life and
toxic to humans if poly-silicon manufacturers do not dispose of it safely and in an
environmentally-friendly manner.
The key weakness of TF is its higher cost as poly prices have dropped tremendously
since 2008 (from around USD475 in 2008 to merely USD16 in early 2013).
Nevertheless, we think the bottom of poly prices has passed, given production
control from c-Si PV makers; thus its impact on TF will be milder.
For more details regarding the TF supply chain, SWOT analysis, and applications in
BIPV please refer to appendices.
10
11
12
13
14
15
16
17
18
0
5
10
15
20
25
30
35
40
2009 2010 2011 2012 2013E
(%)(GW)c-Si (LHS) TF (LHS) TF % (RHS)
0
100
200
300
400
500
600
700
800
2010 2011 2012 2013E
(nos)
8.70
5.95
(2.98)
3.17
6.34
(4)
(2)
0
2
4
6
8
10
CIGS CdTe a-Si TF modules(inorganic)
c-Simodules
(%)
Thin-Film
0
2
4
6
8
10
12
14
16
18
2000 2002 2004 2006 2008 2010 2012
(%) CdTe a-Si CIGS
Hanergy Solar 566 HK Esther C Chen
5 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 5: TF vs crystalline silicon PV
Crystalline Thin Film
Environmentally friendly Energy payback time 2-3 years c.1 years
Impact from side product SiCl4 + H2O è acid *
Raw material bottleneck Polysilicon Nil
Performance Conversion efficiency 11-18% 7-14.6%
Energy Yield ☼ ☼ ☼ ☼ ☼
Tolerance to hot temperature ☼ ☼ ☼ ☼
Weak light performance ☼ ☼ ☼ ☼
Performance under shadowing ☼ ☼ ☼ ☼
Light absorption bandwidth ☼ ☼ ☼ ☼ ☼
Commercialisation Production cost ☼ ☼ ☼ (lower) ☼ ☼ (higher)
Suitable applications Rooftop; BAPV Solar farm; BIPV; BAPV
Maturity of technology Commercialised for over 30 years Commercialised for 10-15 years
Sources: EPIA; BNP Paribas estimates
TF could be categorised into three major technologies: silicon-based, CdTe
(Cadmium Telluride), and CIGS (Copper Indium Gallium Selenide). With higher
efficiency and lower cost, CdTe is the leading technology among TF. First Solar
(FSLR US) is currently the only large-scale production-size CdTe TF manufacturer in
the world with more than 1GW of annual production. It is also the largest solar cell
producer globally with 1.6-1.7GW production in 1Q-3Q13. However, the key issue of
CdTe is the use of a highly toxic material – Cadmium – and there are concerns about
whether these panels pose a fire hazard. As such, Cadmium is restricted by the
RoHS (Restriction of Hazardous Substances) directive in the European Union, as
well as by the China government.
EXHIBIT 6: Thin-film PV comparison
Silicon based CdTe CIGS
Energy payback time ≤1 year 1 year 0.9 – 1 years
Toxic element N/A Cadmium N/A
Feedstock N/A Tellurium Indium
Conversion efficiency (commercialised level)
6-7% single tandem; 8-9% double tandem; 8-13% triple tandem
9-13.9% 11-14.6%
Tolerance to hot temperature ☼☼☼ ☼☼ ☼
Performance under weak light condition
☼☼☼ ☼☼ ☼
Light absorption bandwidth ☼☼ (single) - ☼☼☼ (triple) ☼☼ ☼☼☼
Maturity of technology Commercialised for over 10 years Commercialised since 2005 Commercialised in 2008
Key players Sharp; Astronergy; NexPower; Trony Solar; Terra Solar; Hanergy Solar
First Solar Solar Frontier; Hanergy Solar (Solibro, MiaSolé)
Source: BNP Paribas
Thin-Film PV conversion efficiency is improving
Although TF’s conversion efficiency is lower than c-Si at the moment (maximum
14.6% vs c-Si’s 18% on production level), it is expected to improve, CIGS in
particular. According to NREL, mc-Si PV has encountered a bottleneck after reaching
20.4% lab conversion efficiency in 2004 with little improvement afterwards, while
CIGS continued to hit record highs with a new record of 20.4% in 2013.
Many TF companies have recently announced record-high conversion efficiencies
from multiple technologies (Exhibit 8). Improving conversion efficiency in small-size
substrates is easy, whereas manufacturing of large sizes is difficult. CdTe expert First
Solar stated a world record high efficiency at 14.1% in October 2013. CIGS thin film
PV manufacturer MiaSole (not listed), recently acquired by Hanergy Group (the
parent company of Hanergy Solar), achieved 15.5% aperture area efficiency in
flexible PV modules. Solar Frontier’s research centre also achieved 14.6% for its
champion module in June 2013.
Hanergy Solar 566 HK Esther C Chen
6 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 7: Conversion efficiency comparison by TFPV type
EXHIBIT 8: TFPV makers announced record-high efficiencies
Company Date Comments
First Solar Oct-13 Perrysburg facility’s conversion efficiency reached 14.1%. Lead production line averaged module efficiencies was 13.9% at end-3Q13 and expected all lines to reach 13.9% over the next few quarters.
Solibro Oct-13 Solibro‘s thin-film modules offer world record efficiencies up to 13.4 % in serial production.
MiaSolé Sep-13 Reached 17.9% at the experimental setting, 15.5% for standard size module, 14.0% for its largest scale commercial production lines. 15.5% for flexible TF (aperture area efficiency)
Solar Frontier Jun-13 Solar Frontier’s latest champion module has achieved 14.6% conversion efficiency. Aperture area efficiency reached 17.8%
Sharp Apr-13 Conversion efficiency of 37.9% achieved (at the research level) for a triple-junction compound solar cell.
Sources: NREL (Jan 2013); BNP Paribas Sources: Companies; BNP Paribas
Hanergy Solar is well positioned in Thin-Film PV
Hanergy Solar has been developing amorphous silicon (a-Si) and silicon-germanium
(SiGe) since 2009, currently in mass production with stable conversion efficiency at
8-10% (Exhibit 11). In June 2013, Hanergy Solar announced further technology
breakthroughs on its “Fab 2.0 Program”, which significantly improved its conversion
efficiency, output speed, and production capacity.
Triple Tandum: In 2012, Hanergy Solar upgraded its operational processing method
from a double tandum to a triple tandum SiGe manufacturing line, which
tremendously reduced the consumption of key material gases (germane, silane, and
trimethylboron). Gases accounts for around 20% of cost; with the breakthrough of
the triple-tandum process, Hanergy Solar could reduce direct material cost by 12.7%
per watt.
Shorten PECVD process cycle : Hanergy Solar has successfully reduced the
process cycle time of PECVD from 5.5 hours to 3.2 hours by upgrading the tools for
laser scribing (from 48 seconds to 35 seconds), annealing, soldering, packaging, and
lamination systems. Daily PECVD unit production was increased from 300 pieces to
over 520 pieces and cost per module was reduced by 9.34%. The number of
required workers was also reduced by 16% due to automation and production
efficiency.
Nano-Crystal silicon (nc-Si): A new type of PECVD for nc-Si is under development,
targeting mass production by mid-2014. nc-Si could achieve higher conversion
efficiency; more importantly, it could be adopted in flexible PV.
EXHIBIT 9: Less usage of gases, higher conversion efficiency EXHIBIT 10: Cost could be reduced by 9.34%
Sources: Hanergy Solar; BNP Paribas Sources: Hanergy Solar; BNP Paribas
31
1815
13 1210
2
0
10
20
30
40
50
60
70
CPV (3J) c-Si mc-Si CIGS CdTe a-Si OPV
(%) Theoretical maximum Best research-cell
Typical module production
40
60
80
100
120
140
Jan-1
2
Mar-
12
Jun-1
2
Dec-1
2 (
PE
CV
Dbre
akth
rough)
May-1
3 (
Fab 2
.0P
rogra
m)
Dec-1
3(e
xpecte
d)
(%)
Conversion efficiency
SIH4 Silane consumption
TMB Borane consumption
GEH4 Germane consumption
0
20
40
60
80
100
Before Fab 2.0 Program After Fab 2.0 Program
(%)
Raw material Depreciation
Facility operation Labour
Equipment operation
Hanergy Solar 566 HK Esther C Chen
7 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 11: Hanergy Solar: Technology roadmap
Sources: Hanergy Solar; BNP Paribas estimates
Hanergy is an aggressive participant in the consolidation trend
Hanergy Solar collaborates with its parent, Hanergy Group, which transfers
technology know-how from the Group to Hanergy Solar (Exhibit 13). On 19 April
2012, Hanergy Solar signed a Technology Transfer Agreement with the Group to
obtain 5 TF patents and the nc-Si technology at an expense of HKD246m (34% of
2012 cash). In 2012-2013, the Group acquired two leading CIGS companies: Solibro
and MiaSolé. Earlier than our expectation, in September 2013, Hanergy Solar bought
the two companies’ IP (intellectual property) from the Group for HKD353m and
HKD445m respectively.
Solibro GmbH (not listed) is a Germany-based company specialising in CIGS
technology with its R&D centre located in Sweden. The company had sold 140MW to
Q.SMART (QCE GR) to 2012; conversion efficiency is >14%. After the acquisition,
Hanergy Group intends to ramp Solibro’s annual production to 100MW. On 7
October 2013, Solibro announced an efficiency breakthrough of its CIGS TF module
at 18.7% (aperture area efficiency).
MiaSolé (not listed) is a US Silicon Valley-based TF company with expertise in CIGS
and also has know-how in flexible PV technology. Ahead of its rivals, MiaSolé has
achieved 15.5% conversion efficiency for its champion standard-size module and
flexible PV in September 2012. Cost per watt is targeted to be improved from the
current USD0.79 to USD0.5 thanks to localisation and economies of scale.
Also worth noting is that, to expand into the downstream residential solar market, the
Group acquired another UK solar installation company Engensa (not listed) in May
2013. Engensa has successfully launched a financing model which allows customers
to install solar panels with no upfront cost, an attraction for the Hanergy Group.
Given Hanergy Group's past moves, we think further acquisitions for more
CIGS/flexible PV IP are likely. The environment seems to be favourable for Hanergy
Group as many US/Europe-based solar makers are still struggling. We believe the
trend of consolidation in the industry will remain intact. Its strong cash position offers
the Hanergy Group an opportunity to become one of the TF leaders in the future.
However, the conversion efficiency of CIGS remains to be proved.
Year
Conversion
efficiency
2009 2010 2012 1H14 1H14
6-7% 8-9% 8-10% 10-13% 14-16%
Technology
Tandem Double Double Triple Triple
Cost
(USD/watt)0.3-0.5 0.3-0.5 0.5 0.5-0.7 > 0.8
Key product Target: 0.5
TCO
a-Si
a-Si
ZnO
Glass(1-4mm)
Glass(1-4mm)
TCO
a-Si
a-Si-Ge
ZnO
Glass(1-4mm)
Glass(1-4mm)
TCO
a-Si
a-Si-Ge
ZnO
Glass(1-4mm)
Glass(1-4mm)
a-Si-Ge
TCO
a-Si
nc-Si
ZnO
Glass(1-4mm)
Glass(1-4mm)
a-Si-Ge
TCO
Sulphide n
Mo metal
ZnO
Glass(1-4mm)
Glass(1-4mm)
CIGS p
a-Si a-Si - SiGe a-Si – SiGe - SiGe a-Si – SiGe – nc-Si CIGS
Hanergy Solar 566 HK Esther C Chen
8 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 12: Production of top TFPV makers (2012)
Sources: Companies; BNP Paribas estimates
0
200
400
600
800
1,000
1,200
1,400
1,600
FirstSolar
SolarFrontier
Sharp Astronergy NexPower
TronySolar
MiaSolé T-Solar 3Sun Solibro
(MW)
Acquried by Hanergy Group
Type CdTe CIGS c-base c-base c-base c-base CIGS c-base c-base CIGS
Hanergy Solar 566 HK Esther C Chen
9 BNP PARIBAS 18 NOVEMBER 2013
Upstream business: Hanergy Group is the sole customer
Hanergy Solar provides TFPV equipment (Plasma Enhanced Chemical Vapor
Deposition/PECVD, Plasma Vapor Deposition/PVD) and turnkey solutions to its
parent company, Hanergy Group, which is also its sole customer. Hanergy Group
(“the Group”) is one of the leading clean energy companies in China, and is engaged
in hydro, wind, and solar power. The Group currently owns a 63% stake in Hanergy
Solar. The Group’s solar business includes both midstream businesses (solar panels)
and downstream businesses (solar power plants, roof-top projects), it has signed
several solar power plant construction agreements with governments in Europe,
America, and China for a total capacity of around 10GW.
After Apollo Solar was acquired by the Group in 2009, the price of poly collapsed due
to significant over-production in the solar industry. Therefore, customers reduced or
delayed their investments in manufacturing and R&D, some even ceased the whole
operation. Hanergy Group, with its solid experience in the renewable energy field
(hydropower, wind power) and close relationship with the Chinese government,
decided to enter solar industry, and thus became the sole customer of the Apollo
Group (renamed to Hanergy Solar in January 2013).
EXHIBIT 13: Business model: Hanergy Group and Hanergy Solar
Sources: Hanergy Solar; BNP Paribas
Working closely with the Group, Hanergy Solar’s key R&D team is located in
Chengdu, Sichuan. There are two factories with six production lines each; to achieve
400MW of annual production upon completion, every production line requires seven
sets of PECVD and seven of PVD.
PECVD (Plasma-enhanced chemical vapor deposition): Dual vacuum pumping
systems and multi-RF electrode stabilisation technology enables stable plasma
without interference among the RF sources. Hanergy Solar’s PECVD could process
72 pieces of substrate (cells) in a single batch with total surface area of 57 square
metres. Its competitor, Applied Materials (AMAT US) could process seven
independent chambers with each substrate reaching 5.7 square metres, leading to a
total area of 40 square metres, 30% less than Hanergy Solar. In addition, Hanergy
Solar is developing a new generation of PECVD for nc-Si PV, this PECVD will be
able to process 48 pieces of substrate at the same time, and total area could reach
65-68 square metres.
Hanergy Group
Hanergy Solar
Advanced Integrated
System Group (Upstream)
Global Solar Power &
Applications Group (Downstream)
63% holdings, will increase to 70%+
Equipment
(contract base)
New shares, options (contract base)
Solar cells
EPCBuild and
operateBuild and sell
Solar farms, roof-top projects
$Patents R&D know-how
Upstream
Downstream
7% 18%
2014E 2015E
Hanergy Group is the parent
company of Hanergy Solar with a
63% stake
Hanergy Solar 566 HK Esther C Chen
10 BNP PARIBAS 18 NOVEMBER 2013
PVD: A 10-chamber structure PVD with eight targets enables continuous deposition
of a robust set of thin film targets for back electrodes, such as AZO, Ag and Al. It can
also run fully automated, and is capable of connecting to other process equipment.
Hanergy Solar’s PVD could be used for future nc-Si PV and flexible PV. Applied
Materials’ ATON PVD 5.7 seems to have fixed the size at 5.7 square metres for both
PECVD and PVD, leaving lower flexibility for future applications. However, its newly-
launched “TopMet™ 4450” is a PVD for depositing ultra-thin aluminium films for
flexible packaging applications. Applied Materials announced it is the world’s largest
and fastest roll-to-roll machine, which allows up to 12 different thin film layers to be
deposited simultaneously on flexible materials, enabling complex structures to be
created in a single pass. This is a potential threat to Hanergy Solar if it does not
manage to bring about synergies with MiaSolé’s R&D team.
Competition in the TF equipment market is intense, as equipment giant Applied
Materials is the pioneer in this field. Hanergy Solar enjoys a high gross margin of
above 70% given that more than 50% of its parts are procured from multiple Chinese
suppliers. However, its competitiveness remains to be seen, since the parent
company is also the sole customer.
EXHIBIT 14: Hanergy Solar provides turnkey solutions EXHIBIT 15: PECVD (left) and PVD (right)
Source: Hanergy Solar Source: Hanergy Solar
A contract-based business with its parent company Hanergy Group
Hanergy Solar entered into two contracts with the Hanergy Group, in May 2010 and
September 2011, respectively. A 10GW capacity plan bundling with a series of share
subscription agreements was clearly stated in these two contracts. The Group will be
able to purchase Hanergy Solar’s new shares at an agreed price; subscription is
based on the progress of installation and payment (Exhibit 16). For instance, when
the total payment of the first tranche reached HKD3.3b, the first subscription could
take place, which is 1,965m of the new share issuance (capital increase) and a 10%
holding increase.
There are three tranches in each contract plus an incentive agreement. To the end of
September 2013, Hanergy Group had completed the conditional payment for the first
tranche of the 2010 contract, and the first and second tranche of the 2011 contract,
lifting its shareholding to 63%. Without taking options and convertible bonds into
consideration, the Group’s stake in Hanergy Solar will reach 73% when both of the
contracts are completed. We are expecting the conditional payment of the 2011
contract, tranche 3, to be completed by end-2014, which will inject HKD2.7b to the
top line and HKD0.9b cash from new share issuance. The heavy cash requirements
for solar farms could be partially eased.
Hanergy Solar 566 HK Esther C Chen
11 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 16: 2010 and 2011 contracts with Hanergy Group
Date Tranche
Installed
volume
Total
payment
Down
payment
Condition payment for
share subscription
Share to
be subscribed
Share
subscribed
% of total
shares Price
(MW) (USD m) (USD m) (HKD b) (m shares) (m shares) (%) (HKD)
5/20/2010 1
1,000 850 425 3.3 1,965 1,965 13 0.239
Equipment only 2
1,000 850 425 1.7 1,473 - 5 0.120
3
1,000 850 425 1.0 1,473 - 5 0.100
3,000 2,550 1,275 6.0 4,912 1,965 -
9/18/2011 1
2,000 1,700 850 1.8 6,000 6,000 28 0.100
50% equipment, 50% service
2
2,000 1,700 850 1.8 6,000 6,000 22 0.100
3
3,000 2,550 1,275 2.7 6,000 - 21 0.100
9/28/2011 Incentive agreement
3,000 - 11
7,000 5,950 2,975 6.3 21,000 12,000 -
Sources: Hanergy Solar; BNP Paribas
Installation progress is on schedule
The installation of production lines is divided into four phases: move-in and
installation, start of production (SOP), end of ramping (EOR), and lastly, mass
production. Sales and cost are recognized according to the progress of these four
phases. Hanergy Group has targeted eight bases in China with 7.55GW to be
installed upon completion, while location of the remaining 2.45GW has not been
finalised yet. Approximately 1.7GW of a-Si/SiGe PV capacity had been installed by
June 2013; we forecast at least 200-250MW of new capacity will be installed per
quarter.
EXHIBIT 17: Hanergy Group’s module manufacturing bases EXHIBIT 18: Installation progress (to June 2013)
Bases Plan Completed ------------ Phrases ------------
City (MW) (MW) move-in SOP EOR
1. Chengdu 1,000 400 v v v
2. Heyuan 1,000 200 v v
3. Haikou 1,000 300 v
4. Wujin 1,000 200 v v
5. Yucheng 1,000 200 v v
6. Changxing 1,000 200 v v
7. Shuangyashan 300 200 v
8. Nanjing 1,250 -
TBD 2,450 -
Total 10,000 1,700
Sources: Hanergy Solar; BNP Paribas Sources: Hanergy Solar; BNP Paribas *TBD: to be determined
7
1
2
3
45
6
8
Hanergy Solar 566 HK Esther C Chen
12 BNP PARIBAS 18 NOVEMBER 2013
Smooth downstream expansion, but still too small to move the needle
In January 2013, when Apollo Solar was renamed Hanergy Solar, the company
structure was also reorganized into two divisions: Hanergy Advanced Integrated
Systems Group and Hanergy Global Solar Power & Applications Group (Exhibit 13),
representing upstream and downstream businesses respectively. This shows
Hanergy Solar’s determination to go into the downstream solar business.
Unlike other solar module companies, Hanergy Solar is not manufacturing the solar
module. Instead, it purchases modules from the Group, builds solar farms/roof-top
power plants, and then either sells them out or operates them by itself. Besides,
Hanergy Solar also acts as a contractor to design and build for others. There are
three typical models for a solar farm business:
Build and operate: build and operate the solar farms/rooftop power plants.
Electricity may be connected to the power grid, or supplied directly to the underlying
for rooftop projects. Hanergy Solar is targeting an unleveraged IRR of 8% or above,
which implies a leveraged IRR of 20% or above, assuming 75% leveraged ratio.
Currently several projects are ongoing in Europe and Asia. Note it is the only
segment we have factored into our model as its progress is running ahead of the
other two segments.
Build and sell: build and sell the solar farms/rooftop power plants to long-term
investors, e.g. pension funds or mutual funds. Finance through financial instruments
such as securitisation, real estate investment trusts (REIT) or other forms of trusts to
transfer the interests in these projects. While some projects are already at the initial
stage, we believe it will take another 2-3 years for the finance regulation to be ready,
and for the investors to fully understand these structured products. PV securitisation
is maturing in the US while it is still at the early stages in Asia.
EPC (Engineering Procurement and Construction): act as contractors to design
the installation, procure the solar panels and build the solar farms or rooftop projects.
The service content of EPC is negotiable; customers could choose the panel supplier
by themselves and only outsource BOS to contractors. In June 2013, the Group
signed an agreement with IKEA: the Group will install 383MW TF PV modules for
IKEA’s outlets in the PRC over the next three years. We think Hanergy Solar is likely
to get involved in this project as a coordinator.
It’s worth noting that in April 2012, Hanergy Solar signed a Master Supply Agreement
with the Group, which allows Hanergy Solar to purchase TF solar panels at a price
not higher than either: 1) the prevailing market price; or 2) USD1/watt. This makes
Hanergy Solar’s cost structure more competitive than peers. The cap of the total
power generation capacity in this agreement is 1.5GW (400MW, 500MW, and
600MW for 2012, 2013, and 2014).
Downstream business could bring stable cash inflow
Hanergy solar recently announced progress on two new solar farm projects in China,
with a total capacity of 120MW being connected to the grid by end 2013. As the
locations of these two solar farms (Qinghai and Xinjian) are high-latitude areas, the
average sunshine hours could reach 2,500-3,500 hours. FiT is anticipated to be
RMB1.0 per kWh, resulting in an unleveraged IRR of more than 10%.
We believe the build and operate solar plant business will run ahead of other two
sub-segments (build and sell, EPC). We forecast downstream business to account
for 7% of sales in 2014 and reach 18% in 2015. However, the net margin for solar
farms is much lower than the upstream equipment business for the first two to three
years as hefty upfront capex leads to high depreciation and in high interest expense
(at 75% of leverage ratio). We model a 14% net margin for the downstream business
in 2014E vs 60% for upstream equipment. As such, we expect the downstream
business to only contribute 2% and 6% of 2014 and 2015 net profits.
Hanergy Solar 566 HK Esther C Chen
13 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 19: Hanergy Solar sales mix EXHIBIT 20: Hanergy Solar net profit mix
Source: BNP Paribas estimates Source: BNP Paribas estimates
The business of solar plants is based on long-term contracts with the government,
typically 15-20 years at a fixed FiT (Feed-in Tariff). As upfront capex is heavy, IRR
(Internal Rate of Return) becomes a key factor. Hanergy Solar has conservatively set
the minimum unleveraged IRR at 8%. However, we believe 10% of unleveraged IRR
is achievable thanks to its superior cost structure. Despite some ongoing projects
being from Europe, where the FiT is higher than other regions, we conservatively use
USD0.16/kWh (RMB0.95/kWh) as our FiT assumption for 2014E. This leads to 13%
of unleveraged IRR and 23% leveraged IRR on 75% leverage ratio.
Under the assumptions of 10% conversion efficiency, 1,700 sunlight hours per year,
5% opex (indirect labour, utility and others), 7% annual interest rate, and 17%
effective tax rate, we think 280MW installation in 2014E will require a front-end
investment of HKD939m in cash, which is 25% of total capex, given 75% financial
leverage (Exhibit 21). The capex payback and cash payback periods are around 17
and 5 years, respectively. As to the P&L, we estimate net profit margin will grow from
15% in 2014 to 43% in 2033 at an accelerating speed as interest expense will
decrease as principal is repaid.
EXHIBIT 21: Cash flow of 2014E downstream projects EXHIBIT 22: Net profit of 2014E downstream projects
Source: BNP Paribas estimates Source: BNP Paribas estimates
Exhibit 23 shows the cash flow and margin trends for downstream projects in the
next two years (2014-15E). We forecast 280MW and 370MW of new installation in
2014E and 2015E respectively. A stable annual cash inflow at HKD550m-650m is
estimated in 2016-34 with net margin improving from 14% to 46% during the same
period.
In the long term, we expect Hanergy’s downstream business to continue to expand
on both organic growth and M&A. Its close relationship with the Group will be a plus
0
20
40
60
80
100
1H12 2H12 1H13E 2H13E 1H14E 2H14E 1H15E 2H15E
(%) Equipment Downstream
0
10
20
30
40
50
60
70
80
0
20
40
60
80
100
1H12 1H13E 1H14E 1H15E
(%)(%)
Equipment (LHS) Downstream (LHS)
Equipment NM (RHS) Downstream NM (RHS)
(1,000)
(800)
(600)
(400)
(200)
0
200
400
2013E
2018E
2023E
2028E
2033E
(HKD m)Capex payback period: 17 years
Cash payback period: 5 years
15
43
10
20
30
40
50
0
50
100
150
200
250
2014E
2017E
2020E
2023E
2026E
2029E
2032E
(%)(HKD m)
Principle Repayment (LHS)
Interest Expense (LHS)
Net profit margin (RHS)
Hanergy Solar 566 HK Esther C Chen
14 BNP PARIBAS 18 NOVEMBER 2013
as the Group has started constructing solar farm projects (Exhibit 24) in both
overseas countries and in China. The Group stated that a total of 10GW of capacity
has been signed with various governments. Catalysts for the downstream business
should come from: 1) increasing conversion efficiency for TF, 2) increasing demand
for BIPV; 3) China government’s future subsidy programmes.
EXHIBIT 23: Cash flow and margin trends for 2014-2015 downstream projects
Source: BNP Paribas estimates
EXHIBIT 24: Hanergy Group: Ongoing downstream projects as at 1H13
Location Type Planned installation Installed Completed
(KW) (KW) (Date)
Overseas
Russia Rooftop 5,000 101
Italy - L'Aquila Rooftop 837 837 Jun-12
Greece - Solel Achaias Ground-mounted 2,000 grid-connected Jan-13
Greece - Solel Imathias Ground-mounted 2,000 grid-connected Jan-13
China
Guangdong Rooftop 1,554 1,554 Oct-12
Wujin BIPV 66 grid-connected May-12
Ningxia Wuzhong Taiyangshan Power Plant
Power Plant 20,000 grid-connected Late-2012
Hainan BIPV 3,000 under construction
Beijing Olympic Forest Park BIPV 2,000 under construction
Beijing BIPV (CIGS) 335 under construction
Qinghai Ground-mounted 50,000 under construction
Partnership with IKEA EPC 383,000 under construction
Total 469,792
Sources: Hanergy Solar; BNP Paribas
14
46
0
10
20
30
40
50
60
70
(1,000)
(800)
(600)
(400)
(200)
0
200
400
600
800
2013E 2015E 2017E 2019E 2021E 2023E 2025E 2027E 2029E 2031E 2033E
(%)(HKD m)Cash flow (LHS) Gross margin (RHS)
Operating margin (RHS) Net margin (RHS)
Hanergy Solar 566 HK Esther C Chen
15 BNP PARIBAS 18 NOVEMBER 2013
Valuation and financial statements
HOLD with TP of HKD1.34, 7% upside
Hanergy Solar is currently trading attractively at 8.6x 2014E EV/EBITDA, the higher-
end of TF equipment peers’ 6-9x range. We like the company’s smooth progress in
downstream solar farm expansion, as well as its decent 2014 and 2015 ROEs of
17% and 16%. However, our concerns lie with the issue of its reliance on one sole
customer. Downstream business should diversify its customer base and relieve
investors’ concerns, but this is still too early to gauge. As such, we initiate with a
HOLD rating and a HKD1.34 TP, based on 9.5x 2014 EV/EBITDA. We suggest
investors to wait on the sidelines, while a faster-than-expected ramp of solar farms
would be a positive sign.
EXHIBIT 25: Peer comparison
Market Share --------P/E-------- -------P/BV------- --------ROE------- ---EV/EBITDA---
Company BBG code Rating cap price 2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E
(USD b) (LC) (x) (x) (x) (x) (%) (%) (x) (x)
Global TF equipment suppliers
Hanergy Solar* 566 HK HOLD 4.5 HKD1.25 11.8 11.7 2.2 1.8 21.4 17.2 7.0 8.6
Applied Materials AMAT US NR 21.1 USD17.56 16.1 13.6 2.8 2.5 17.0 18.4 9.4 7.9
Oc Oerlikon OERL SW NR 0.7 CHF13.40 19.7 16.8 2.2 2.0 9.3 12.3 6.9 6.0
Ulvac 6728 JP NR 0.7 JPY1336.00 11.8 10.5 1.3 1.2 9.3 9.8 8.2 7.4
Global TF module makers
First Solar FSLR US NR 6.4 USD64.28 14.8 18.5 1.4 1.3 9.2 6.3 7.8 7.4
Sharp 6753 JP NR 4.9 JPY286.00 282.9 14.7 2.4 2.4 4.7 34.8 7.8 7.1
China c-Si module makers
GCL-Poly* 3800 HK BUY 5.2 HKD2.58 n.a. 27.8 2.2 2.0 (5.0) 8.1 15.1 9.9
Yingli – ADR YGE US NR 1.1 USD6.35 n.a. n.a. 3.4 5.9 (48.8) (7.0) 33.0 15.1
Trina Solar – ADR TSL US NR 1.3 USD16.28 n.a. n.a. 1.5 1.5 (14.1) 1.8 130.9 14.8
Canadian Solar CSIQ US NR 1.5 USD31.88 31.3 9.0 3.3 2.1 10.0 34.4 11.6 5.1
Hanwha SolarOne – ADR HSOL US NR 0.4 USD4.37 n.a. n.a. na na n.a. n.a. n.a. n.a.
JA Solar – ADR JASO US NR 0.5 USD12.03 n.a. n.a. na na n.a. n.a. n.a. n.a.
LDK – ADR LDK US NR 0.3 USD1.48 n.a. n.a. na na n.a. n.a. n.a. n.a.
Solargiga Energy 757 HK NR 0.2 HKD0.38 1.4 0.8 na na n.a. n.a. n.a. n.a.
Singyes Solar Tech 750 HK NR 0.7 HKD8.64 8.7 7.3 2.4 1.9 23.2 23.1 6.0 5.3
Price as at 15 Nov 2013; Ulvac: year-end 31 Mar.; Applied Materials, Oc Oerlikon: year-end 31 Oct Sources: *BNP Paribas estimates; all others (not rated) are Bloomberg consensus estimates
EXHIBIT 26: 12-month forward P/E bands EXHIBIT 27: 12-month trailing P/E bands
Sources: Bloomberg; BNP Paribas Sources: Bloomberg; BNP Paribas
0.0
0.5
1.0
1.5
2.0
Nov-09 Nov-10 Nov-11 Nov-12 Nov-13
(HKD)
14x
2x
5x
9x
0.0
0.5
1.0
1.5
2.0
Nov-09 Nov-10 Nov-11 Nov-12 Nov-13
(HKD)
14x
2x
5x
9x
Hanergy Solar 566 HK Esther C Chen
16 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 28: 12-month forward P/BV bands EXHIBIT 29: 12-month trailing P/BV bands
Sources: Bloomberg; BNP Paribas Sources: Bloomberg; BNP Paribas
DCF model: Weight more on debt implies lower WACC
Our DCF model shows a conservative WACC at 14.7%, derived from 5.1% after-tax
cost of debt and 15.8% cost of equity, leading to an implied share price of HKD1.30,
close to our HKD1.34 TP. Normally solar equipment peers such as Applied Materials
and Oc Oerlikon have lower debt weighting in WACC (Applied Materials: 10%, Oc
Oerlikon: 9%) while downstream solar cell/module companies borrow more capital
via debt, especially Chinese companies (e.g., First Solar: 19%, Suntech Power: 85%,
Yingli Green Energy: 87%).
EXHIBIT 30: DCF valuation
WACC calculation (%) Enterprise value
Target Capital Structure Present value of Free Cash Flow 6,264
Debt to Total Capitalization 9.8
Equity to Total Capitalization 90.2 Terminal Value 41,362
Debt to Equity Ratio 11.7 Discount Factor 0.3
Present Value of Terminal Value 10,473
Cost of Debt (after tax) 5.1 % of Enterprise Value 63
Cost of Debt (before tax) 6.0
Taxes 15.0 Enterprise value 16,737
Less: Total debt -
Cost of Equity 15.8 Plus: Cash and Cash Equiv. 721
Risk-free rate 1.9 Net Debt (721)
Market risk premium 11.5
Levered Beta 1.2 Implied Equity Value 17,458
Outstanding shares 13,431
WACC 14.7 Implied share price 1.30
Sources: Bloomberg; BNP Paribas estimates
EXHIBIT 31: WACC sensitivity analysis EXHIBIT 32: Share price sensitivity analysis
WACC ----------------------- Equity to total capital -----------------------
Beta
80 85 90 95 100
1.0 11.81 12.23 12.65 13.07 13.49
1.1 12.73 13.21 13.69 14.16 14.64
1.2 13.66 14.19 14.72 15.26 15.79
1.3 14.58 15.17 15.76 16.35 16.94
1.4 15.50 16.15 16.80 17.45 18.10
Price ------------------------ Perpetuity growth ------------------------
WACC
2.0% 2.5% 3.0% 3.5% 4.0%
12.7 1.57 1.64 1.73 1.83 1.94
13.7 1.36 1.43 1.49 1.57 1.65
14.7 1.19 1.24 1.30 1.36 1.43
15.7 1.05 1.09 1.14 1.19 1.24
16.7 0.93 0.97 1.00 1.04 1.09
Source: BNP Paribas estimates Source: BNP Paribas estimates
0.0
0.5
1.0
1.5
2.0
Nov-09 Nov-10 Nov-11 Nov-12 Nov-13
(HKD)
2.2x
0.2x
0.8x
1.5x
0.0
0.5
1.0
1.5
2.0
Nov-09 Nov-10 Nov-11 Nov-12 Nov-13
(HKD)
2.2x
0.2x
0.8x
1.5x
Hanergy Solar 566 HK Esther C Chen
17 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 33: DCF assumptions
Year-end 31 Dec 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E
(HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m)
Revenue 4,556 5,275 6,182 6,367 6,558 6,755 6,958 7,166 7,381 7,603
COGS (905) (1,172) (1,519) (1,565) (1,566) (1,644) (1,688) (1,732) (1,790) (1,842)
Gross profit 3,651 4,103 4,662 4,802 4,992 5,111 5,269 5,434 5,591 5,761
OpEx (241) (386) (387) (379) (351) (326) (319) (312) (305) (311)
Operating Profit (EBIT) 3,410 3,717 4,275 4,423 4,641 4,785 4,951 5,123 5,286 5,450
Net interest income (63) (205) (435) (428) (416) (404) (390) (375) (360) (343)
Tax (392) (527) (576) (599) (634) (657) (684) (712) (739) (766)
Net income 2,955 2,985 3,264 3,396 3,591 3,724 3,877 4,035 4,187 4,341
Add back
Depreciation & amortization 54 212 457 509 509 509 509 509 509 509
Interest expenses (net of tax) 56 174 369 364 354 343 331 319 306 291
EBITDA 3,072 3,402 4,156 4,868 5,088 5,234 5,402 5,576 5,741 5,908
Less
Capex (1,817) (4,242) (2,926) (1,463) (731) (512) (410) (205) (123) (123)
Change in working capital (2,415) (2,058) (1,864) 502 (214) (175) (284) (292) (301) (310)
Unlevered FCF (1,569) (3,430) (1,208) 3,309 3,508 3,889 4,024 4,366 4,578 4,708
Discount period (year) 0.8 1.8 2.8 3.8 4.8 5.8 6.8 7.8 8.8 9.8
Discount factor 0.89 0.78 0.68 0.60 0.52 0.46 0.40 0.35 0.31 0.27
Present value of FCF (1,399) (2,666) (819) 1,954 1,806 1,745 1,574 1,489 1,361 1,220
Sources: Hanergy Solar; BNP Paribas estimates
CBs and Options: 14% potential EPS dilution
At end-2012, Hanergy Solar had HKD848m of outstanding convertible bonds with an
exercise price of HKD0.27, transferrable into 3,116m shares. Maturity date has been
extended from November 2013 to December 2014. These convertible bonds imply
10% share dilution. On top of this, outstanding options held by Hanergy Option
Limited and management will lead to another 4% dilution (Exhibit 34). The 14% total
dilution is likely to bring downside pressure to its share price. Hanergy Group’s stake
has risen from 20% in early 2013 to 63% at present.
EXHIBIT 34: EPS dilution from CBs and options EXHIBIT 35: Shareholder structure
CB & Options Convertible/exercisable
share number EPS dilution
(m shares) (%)
Convertible bonds (maturity to be extended to 31-Dec-2014, exercise price: HKD0.27)
3,116 10.04
Option A (5-Nov-2009) 2.4 0.01
Option B (18-Sep-2011) 758 2.64
Option C (6-Sep-2012) 422 1.49
Total 4,298 14.18
Sources: Hanergy Solar; BNP Paribas Sources: Hanergy Solar; BNP Paribas
Hanergy Group63.0%
Individuals21.0%
Institutions9.0%
Funds7.0%
Hanergy Solar 566 HK Esther C Chen
18 BNP PARIBAS 18 NOVEMBER 2013
Potential risks
Continuous deterioration of macro economy: The solar industry is still a cost-
driven industry. Before reaching grid parity, it is highly correlated to government
subsidy programmes and macroeconomics. When the economy turns down,
governments invest less money in subsidy programmes, they may delay launches,
cut total rebates, or, more commonly, lower the FiT (Feed-in Tariff). A recent example
is August 2012, when the UK government cut FiT from GBP21p to GBP16p per kwh
and shortened the subsidy contract from 25 years to 20 years. As the UK economy is
still in turmoil, further FiT cuts seem likely.
Highly reliant on Hanergy Group, a private company: It is obvious that Hanergy
Solar is highly reliant on its parent company, especially in upstream businesses.
Therefore, the credibility and financial liquidity of the Group becomes key. Hanergy
Group is the largest private-owned hydropower energy company in China; upon the
acquisition of MiaSolé in January 2013, Li Hejun, the chairman, stated that its
hydropower dams could generate several hundred million dollars a year in free cash
flow, which should be sufficient for the solar investment. However, as it is a private
company, its financial liquidity is still a wild card to investors.
Refinancing risks: High capex for solar farms will require long-term debt or
syndicated loans. It is not common for banks to sign a 20-year loan, therefore
Hanergy Solar may face refinancing risks when the debt/loan reaches maturity,
usually in 7-8 years. Refinancing risks include interest, liquidity, credit, financial
environment risks upon maturity. Hanergy Solar has set a credit account in the CDB
(Central Development Bank) with amounts of RMB30b and USD5b, but it can be
activated only when the solar farms start generating stable cash inflow.
Other risks include possible levy punishment from the European Commission on
China TF solar makers, slower-than-expected improvement of conversion efficiency,
challenges associated with marketing if entering into the residential market,
breakthrough of other technologies where Hanergy Solar does not have a presence
such as HCPV (High Concentrated Photovoltaic) and OPV (Organic Photovoltaic).
Grid parity: cost of solar modules ≤
the price of electricity grid
Hanergy Solar 566 HK Esther C Chen
19 BNP PARIBAS 18 NOVEMBER 2013
Financial statements analysis
Assumptions and P&L analysis
We assume solar equipment to be shipped steadily at 200-250MW installation per
quarter with a stable ASP of USD0.56 per watt. While the contribution of the
downstream business is still too early to gauge, we forecast 280MW/370MW
capacity to be installed in 2014E/15E, and sales contributions to reach 7% and 18%
respectively, which is around 5-6% of global TF market share when fully utilised.
With promising sales contribution from upstream equipment, and the expansion into
downstream solar power plants, we forecast 2013 and 2014 sales will grow 65% and
16% y-y. Solar farm projects will lower its net margin from 65% in 2013E to 57% in
2014E, but will bring a stable operating cash flow.
EXHIBIT 36: Key assumptions: Both upstream and downstream, ASP, volume, sales mix
Key assumptions 1H12 2H12 1H13E 2H13E 1H14E 2H14E 1H15E 2H15E 2012E 2013E 2014E 2015E
Sales mix (%)
Solar equipment 100 100 100 100 95 90 85 80 100 100 93 82
Solar farm
5 10 15 20
7 18
Net profit mix (%)
Solar equipment 100 100 100 100 99 98 95 92 100 100 98 94
Solar farm
1 2 5 8
2 6
Installed capacity (MW)
Solar equipment 285 215 468 562 545 577 577 606 500 1,030 1,122 1,184
Solar farm
130 150 170 200
280 370
ASP (USD/Watt)
Solar equipment 0.74 0.67 0.57 0.57 0.56 0.56 0.55 0.55 0.71 0.57 0.56 0.55
Solar farm - FIT
0.16 0.16 0.16 0.16
0.16 0.16
Sources: Hanergy Solar; BNP Paribas estimates
Hanergy Solar 566 HK Esther C Chen
20 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 37: Quarterly P&L
Year-end Dec 1H12 2H12 1H13 2H13E 1H14E 2H14E 1H15E 2H15E 2012 2013E 2014E 2015E
(HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m) (HKD m)
Revenue 1,637 1,119 2,080 2,476 2,505 2,770 2,937 3,245 2,756 4,556 5,275 6,182
Depreciation (14) (14) (21) (32) (80) (132) (192) (265) (28) (54) (212) (457)
COGS (540) (250) (405) (500) (539) (633) (704) (816) (790) (905) (1,172) (1,519)
Gross profit 1,097 870 1,675 1,976 1,966 2,137 2,233 2,429 1,967 3,651 4,103 4,662
Other income 2 3 64 8 13 12 14 14 5 72 25 29
Operating expense (98) (148) (139) (173) (212) (199) (206) (210) (246) (313) (411) (416)
Operating income 1,001 725 1,599 1,811 1,767 1,950 2,042 2,234 1,726 3,410 3,717 4,275
Net Interest Income (29) (31) (32) (32) (77) (128) (185) (250) (60) (63) (205) (435)
Net Other Income - - - - - - - - - - - -
Pre Tax profit 972 694 1,568 1,779 1,690 1,822 1,857 1,984 1,666 3,347 3,512 3,841
Tax (200) (150) (125) (267) (254) (273) (279) (298) (350) (392) (527) (576)
Net profit 772 544 1,442 1,513 1,437 1,548 1,578 1,686 1,316 2,955 2,985 3,264
EPS (HKD) 0.06 0.04 0.11 0.07 0.05 0.06 0.06 0.06 0.10 0.11 0.11 0.12
Margins (%)
Gross margin 67.0 77.7 80.5 79.8 78.5 77.1 76.0 74.9 71.4 80.1 77.8 75.4
Operating margin 61.1 64.8 76.9 73.1 70.5 70.4 69.5 68.8 62.6 74.8 70.5 69.2
EBITDA margin 61.7 66.6 77.9 74.4 73.7 75.1 76.1 77.0 63.6 76.0 74.5 76.6
Net margin 47.1 48.6 69.3 61.1 57.4 55.9 53.7 52.0 47.7 64.9 56.6 52.8
Sequential growth (%)
Revenue (7) (32) 86 19 1 11 6 10 7 65 16 17
Gross profit (8) (21) 93 18 (1) 9 5 9 22 86 12 14
Operating profit (1) (28) 120 13 (2) 10 5 9 65 98 9 15
Net profit 1 (29) 165 5 (5) 8 2 7 83 125 1 9
EPS 1 (29) 165 (35) (26) 8 2 7 48 8 1 9
Sources: Hanergy Solar; BNP Paribas estimates
Balance sheet and cash flow analyses
Downstream solar farm business requires heavy front-end capex investment for solar
modules and other materials; hence we forecast capex intensity (capex/sales) to rise
significantly from 0.02x in 2012 to 0.80x in 2014E. The capex may come from: 1)
stable operating cash flow; 2) continued new share subscription from the Group,
based on the upstream equipment contracts; and 3) issuance of new debt.
In 2012, the company turned net debt to net cash, given the payback of long-term
debt. To ramp up downstream business, we expect the company to issue new debt.
As such, we factor in HKD3b/4b of long-term debt in 2014E/15E. Nevertheless, we
forecast net cash to remain, with gearing ratio being controlled within a reasonable
range (up from the current 0% to 18% in 2015E vs peers’ 15-30% in 2013E, Exhibit
40). The company should be able to turn net debt to net cash within three to five
years on the back of stable operating cash flow. Free cash flow will suffer in 2014E
when ramping up solar farm capacity, while it should gradually turn positive after
being connected to the grid.
Compared to equipment rivals, Hanergy Solar’s AR days are much longer (Exhibit
43), implying a weaker receivables term due to the sole-customer issue. As at June
2013, HKD2.1b of outstanding receivables was due from the Hanergy Group.
Although Hanergy Solar stated the Group’s intention to settle HKD0.5b of due
payment in October, HKD0.6b in November, and HKD1.0b in December 2013, this
payment delay has caused investors some concern.
Hanergy Solar 566 HK Esther C Chen
21 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 38: Downstream business will weigh on capex… EXHIBIT 39: …while net cash and gearing remains healthy
Sources: Hanergy Solar; BNP Paribas estimates Sources: Hanergy Solar; BNP Paribas estimates
EXHIBIT 40: Gearing ratio comparison – TF equipment EXHIBIT 41: Gearing ratio comparison (2013E)
Sources: Bloomberg; BNP Paribas estimates * Equipment makers Sources: Bloomberg consensus; BNP Paribas estimates
EXHIBIT 42: Operating cash flow EXHIBIT 43: AR days comparison
Sources: Hanergy Solar; BNP Paribas estimates Sources: Bloomberg; BNP Paribas estimates
DuPont analysis
Based on our DuPont Analysis, Hanergy Solar's ROE improved to 11.9% in 2012
from 7.7% in 2011 mainly thanks to higher net margin, while both asset turnover and
financial leverage remained stable.
(0.2)
0.0
0.2
0.4
0.6
0.8
1.0
(1,000)
0
1,000
2,000
3,000
4,000
5,000
2009 2010 2011 2012 2013E 2014E 2015E
(x)(HKD m)
Capex (LHS) Depreciation (LHS)
Capex intensity (RHS)
0
5
10
15
20
25
30
35
40
45
50
(3,000)
(2,000)
(1,000)
0
1,000
2,000
3,000
2009 2010 2011 2012 2013E 2014E 2015E
(x)(HKD m)
Net debt / (cash) (LHS) Gearing (RHS)
0
20
40
60
80
100
2009 2010 2011 2012 2013E 2014E 2015E
(%)
Hanergy Solar Applied Materials
Oc Oerlikon Ulvac
First Solar
0
200
400
600
800
1,000
LD
K
Yin
gli
Canadia
n
Hanw
ha
Trina
JA
Sola
r
Ap
plie
dM
ate
rials
*
Oc
Oerlik
on*
First S
ola
r
Hanerg
yS
ola
r*
(x)
(3,000)
(2,000)
(1,000)
0
1,000
2,000
3,000
4,000
2009 2010 2011 2012 2013E 2014E 2015E
(HKD m) Operating cash flow Free cash flow
0
100
200
300
400
500
2010 2011 2012 2013E
(days) Hanergy Solar Applied Materials Oc Oerlikon Ulvac
Hanergy Solar 566 HK Esther C Chen
22 BNP PARIBAS 18 NOVEMBER 2013
Looking forward, the solar farm business will add pressure to the net margin and
increase fixed assets (solar plants), and hence will lift financial leverage; however, it
will be partially offset by the increasing equity due to share subscription agreements.
Net net, we forecast ROE to improve to 21% in 2013 but slightly lower to 17% and
16% in 2014 and 2015 when solar farms commence operation.
EXHIBIT 44: DuPont analysis
Source: BNP Paribas estimates
(30)
(20)
(10)
0
10
20
30
40
50
60
70
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2009 2010 2011 2012 2013E 2014E 2015E
(%)(x) Asset turnover (LHS) Asset / Equity (LHS)
Net profit margin (RHS) ROE (RHS)
Hanergy Solar 566 HK Esther C Chen
23 BNP PARIBAS 18 NOVEMBER 2013
Appendix 1: Company background and management
Hanergy Solar Group Limited (Hanergy Solar)
Hanergy Solar Group Limited, formerly known as Apollo Solar Energy Technology
Holdings Limited, provides integrated solutions for large-scale thin-film solar cell
production systems. Hanergy Solar is one of the suppliers of equipment production
and integrated solutions for world-class thin-film solar PV modules. Hanergy Solar is
actively seeking investment opportunities in downstream solar projects, and moving
towards the global photovoltaic power generation market.
The company’s turnkey systems offer automated high yield, short time-to-market and
low-maintenance manufacturing solutions. These systems could provide customers
the best performance in the industry's thin-film silicon PV production equipment, at
the lowest production cost per watt. The company also provides customised modular
designs, which facilitates further upgrades of the system and capacity expansion,
allowing truly scalable production.
The company has a global presence with employees worldwide; currently the
company has full-range research and development teams comprising an equipment
and manufacturing research and development team based in Beijing, a technology
research and development team based in Chengdu and a silicon-based research
and development team in Tianjin, providing global customer support and training
through sales and service centres in Mainland China and Hong Kong.
Hanergy Holding Group, Ltd. (Hanergy Group)
Hanergy Holding Group, Ltd., Hanergy Solar’s parent company with 63% stake, is
China’s largest privately-held energy enterprise encompassing hydroelectricity, wind
electricity and solar electricity generation. Its headquarters are located in Beijing,
China, with branch offices in several Chinese provinces, North America, Europe, and
the Asia Pacific region. More than 5,000 scientists, engineers, technicians, and
management and professional support staff are dedicated to providing clean energy.
Hanergy Group has completed total installed capacity of 6GW of hydroelectric
projects and 131MW of wind electricity projects. Additionally, Hanergy Group has
been heavily investing in solar photovoltaics (PV) research and manufacturing
facilities in several Chinese provinces. It is anticipated that Hanergy Group’s total PV
production capacity will reach 3GW by end-2013, making it the largest thin film PV
producer in China. Hanergy Group is actively involved in developing power plants
worldwide. It has entered into various power plant construction agreements with
authorities and project owners in China, the U.S.A and Europe. The total capacity of
these solar electric power plant agreements is in excess of 10GW. Hanergy Group
has become a fully integrated clean energy enterprise in the energy industry from
technology research, facilities manufacturing, and PV cell production to solar power
utilization.
Hanergy Solar 566 HK Esther C Chen
24 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 45: Hanergy Solar’s management and R&D team
Name Title Experience
Frank Mingfang Dai
Chairman and Chief Executive Officer
Mr. Dai is a senior vice president of Hanergy Holding Group Limited. Mr. Dai has extensive experience in asset restructuring, mergers and acquisitions, international financing and development of photovoltaic business. Prior to Hanergy Holding Group Limited, Mr. Dai was engaged for many years in business management and market development in the PRC, Hong Kong and the United States. Mr. Dai graduated from the Faculty of Industrial Economy Management of Shenyang University in 1984 and later obtained an Executive Master of Business Administration degree in 2000 from the University of Texas at Dallas, the United States.
Dr. Li Yuan-min
Vice Chairman and Chief Technology Officer
Dr. Li joined the Group in 2009 and is the Chief Technology Officer of the Group. Dr. Li graduated from the Department of Modern Physics at the University of Science and Technology of China in 1982. Dr. Li obtained a Master's degree in physics from Harvard University in 1984 and a PhD in applied physics from Harvard University in 1989. Dr. Li has over 30 years of experience in international thin-film materials preparation, characterisation and deposition technologies, photovoltaic (PV) devices design, synthesis, analysis and optimisation, large-area PV module manufacturing and related process engineering, displays and optoelectronic devices and materials. Dr. Li is the co-inventor of numerous patents in relation to thin-film materials preparation and technologies and PV devices design. Dr. Li is currently a member of the Technical Advisory Board of SEMI (China) PV Committee, an organisation promoting the PV industry headquartered in Shanghai. Dr. Li is also the President and Chief Technology Officer of a thin-film PV company in New Jersey, the United States and a consultant to a number of other PV companies in the People's Republic of China, Taiwan and the United States
Hui Ka Wah, Ronnie J.P.
Finance Director and Senior Vice-president
Mr. Hui joined the Group in 2009 as Chief Financial Officer of the Group, a position which he later vacated following his appointment as an Executive Director and the Chief Executive Officer of the Company in August 2011. Mr. Hui is a specialist in Paediatrics and also a Chartered Financial Analyst. Mr. Hui holds a Master of Business Administration (MBA) degree conferred by Universitas 21 Global. Mr. Hui is a member of the Energy Advisory Committee and the Small and Medium Enterprises Committee of the Government of the Hong Kong Special Administrative Region ("HKSAR") and also a non-official member of the Women's Commission of the Government of the HKSAR.
Chen Li
Executive Vice-president
Mr. Chen has many years of experience in financial management, risk management and arranging finance. He obtained a Master's degree in business administration from the University of International Business and Economics in 2006. Mr. Chen is currently the Executive Vice-president of the Company. He is also the Vice-president and the Chief Head of Finance Management of Hanergy Holdings Group Company Limited. Before joining Hanergy, Mr. Chen was employed by the Jinan branch of the Bank of China, responsible for the credit business
Li Guangmin
Financial Controller Mr. Li joined Hanergy Holdings Group Company Limited in 2002 and is currently the Senior Deputy Financial Controller. Mr. Li was previously employed by Beijing Crane Factory from 2000 to 2002. He graduated from Northern Jiaotong University, currently known as Beijing Jiaotong University with a bachelor's degree in accountancy in 2000.
R&D Team
Dr. Xu Xixiang
Chief Technology
Officer
Dr. Xu has over 30 years of experience in silicon-based thin-film solar cells, thin-film process technology & materials characterisations, & semi-conductor process development. He has developed a nc-Si:H process with over 12% efficiency for large-area solar cells based on nc-Si (world record confirmed by National Renewable Energy Laboratory/NREL, February 2011). He has significantly improved a-SiGe based solar cells with 11% stable large-area efficiency (world record confirmed by NREL, September 2010). Dr. Xu has a PhD in Materials Science from Kanazawa University in 1990.
Dr. Shan Hongqing
General Manager of R&D center
Dr. Shan has over 20 years of experience in semiconductor and photovoltaic industries, specialising in plasma diagnostics, plasma processing and plasma and photovoltaic devices developments. He is also the inventor of 67 granted US patents. Prior to Hanergy Solar, he was the leader of a series of successful semiconductor-processing equipment developments at Applied Materials and Mattson Technology. Dr. Shan has a PhD from Stanford University.
Dr. Zhang Jinyan
Deputy Director of R&D
center
Dr. Zhang has over 20 years R&D experience in thin-film & semiconductor integrated circuit manufacturing fields. Dr. Zhang is the inventor of a number of patents. Prior to Hanergy Solar, he was the CTO of a photovoltaic company. He has a PhD in Materials Science from Kanazawa University.
Source: Hanergy Solar
Hanergy Solar 566 HK Esther C Chen
25 BNP PARIBAS 18 NOVEMBER 2013
Appendix 2: Thin Film technology and its application in BIPV
In the solar PV industry, crystalline PV technology has been commercialised for over
25 years. Traditional crystalline silicon photovoltaic technologies are generally
classified as 1st generation (Gen 1). Thin film PV technology (TFPV) has also been
on the market for a long time. Low power amorphous silicon PV solar cells have
been present in calculators and watches for decades. We classify amorphous silicon
(a-Si), as well as CIGS and CdTe solar cells as 2nd generation (Gen 2) technology.
For 3rd generation (Gen 3), we refer to emerging technologies like organic solar cells
and dye sensitized solar cells (DSSC). The primary distinction between each of the
segments has been the use of different target materials and configurations for
producing the absorber layer of the photovoltaic cell.
EXHIBIT 46: Classification of TFPV technologies
Source: BNP Paribas
EXHIBIT 47: Classification of Thin-film Structure
Source: BNP Paribas
PV
Gen 1: Crystalline
Gen 2: Thin film
Chemical
compound
Gen 3: Emerging
Mono-crystalline (c-Si)
Multi-crystalline (mc-Si)
Amorphous (a-Si)
Micromorph/Tandem (a-Si/µc-Si)
Other a-Si-alloy multi-junction
Cadmium Telluride (CdTe)
Copper Indium Diselenide (CIS)
Copper Indium Gallium Diselenide
(CIGS)
III-V : GaAs
Dye sensitized (DSSC)
Organic
Silicon based
Polymer
CdTe cell structure
TCO
P-CdTe
N-CdS
Back metal
Buffer layer
Substrate glass
uc-Si
a-Si
Back metal
Tandem cell structure
TCO
Substrate glass
CIS cell structure
ZnO
Cu(In,Ga)Se2
Back metal
ZnO: Buffer layer
Mo
Substrate glass
Thin film structure
Hanergy Solar 566 HK Esther C Chen
26 BNP PARIBAS 18 NOVEMBER 2013
Amorphous silicon technology
Today most amorphous silicon (a-Si) PV solar cells use a p/i/n device configuration
rather than a p/n junction configuration because amorphous silicon solutions have
higher defect densities. This results in lower minority-carrier lifetimes adding to costs
and processes for efficient collection of carriers. The majority of amorphous silicon
production technology is focused on multi-junction substrate strategies because
single-junction cell-efficiencies have long demonstrated that enhancements in single
junction would show diminishing cost/performance returns in cell efficiency against
multi-junction approaches. Multi-junction structures use several layers of thin film and
allow the cell to capture more of the solar spectrum in order to convert it to electricity.
Over the past three decades, researchers have developed more efficient alloys that
use hydrogenated amorphous silicon and new material deposition process
technologies to produce devices with higher conversion efficiencies. Currently,
amorphous thin film technology uses a tandem or multi-junction approach. Because
lower conversion efficiencies command lower selling prices, single-junction
amorphous thin film technology is being phased out in major markets like Europe
and Japan.
Amorphous silicon uses plasma enhanced chemical vapor deposition (PECVD)
method, a process used to deposit thin films from the usage of target materials to a
substrate. The process is key to making good thin film panels with higher stability,
resulting in more reliable performance of the products it can produce. There are not
many quality PECVD vendors in the world – major equipment providers using
amorphous-based silicon thin-film technology offering turnkey solutions include
Applied materials (AMAT US), Oerlikon Solar (OERL EU) and ULVAC (6728 JP).
CdTe technology
CdTe thin-film PV technology involves using Cadmium Telluride (CdTe) and
Cadmium Sulfide (CdS) as materials to build p/n junctions for the absorber layer.
First Solar (FSLR US) is currently the only large-scale production-size CdTe thin-film
solar manufacturer in the world with more than 1GW of annual production. It is also
the largest solar cell producer globally (cumulative product surpassed 7GW in 2012).
The company recently entered the India market and aimed to reach 25% market
share (10GW accumulative installation) in the following three years. First Solar’s
production cost has also dramatically decreased from USD0.87/W in 2009 to
USD0.59/W in 3Q13 with conversion efficiency being improved from 11% to 13.3%
over the same period.
Although First Solar has been successful in the solar sector, the major issue with the
technology is the use of a highly toxic material, Cadmium, to produce its panel, and
there are concerns about whether these panels pose a fire hazard. Cadmium is
restricted in the RoHS (Restriction of Hazardous Substances) directive in the
European Union. If the RoHS directive is eventually applied to solar modules, it
would become a hurdle to further business development.
CIGS/CIS technology
As a relatively new technology, the main issue with CIS/CIGS technology is still on
the capability of its commercialisation. There are several layers to build up the p/n
device in absorber layer. The panel has to pass through many chambers to deposit
Cu, In/Ga and Se on the substrate. Stability of the process is very important, with
even slight deviation in the thickness of each target material potentially causing
incompatibility in the electrical performance of the panel. Another problem is the
feedstock of Indium, which may become a bottleneck to CIS/CIGS manufacturers if it
ever becomes the dominant mainstream solar technology.
Hanergy Solar 566 HK Esther C Chen
27 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 48: CIS manufacturing process and product structure
Source: BNP Paribas
Substrate
Thin film on plain glass 1.8mm
Strengthen glass 3.2mm
Backsheet
EVA
Junction boxAl frame
sunlight
Roll in substrate
Glass cleaning
Glass ID marking
Mo-layer Sputtering
Laser scribing
H2S coating
Light absorbing
Buffering layer sputtering
Cutting by needles
ZnO2 deposition by MOCVD
Cutting by needles
Plasting ribbons on
ribbon cells
Solar Cell
Fabrication
(front end)
Roll in strong glass
Place EVA
Place thin film cell
Place EVA
Place backsheet
Lamination
Edge trimming
Light absorbing
Cooling down
Frame installation
Junction box sealing
Visual inspection
Place label
Packaging
Module
Assembly
(back end)
Hanergy Solar 566 HK Esther C Chen
28 BNP PARIBAS 18 NOVEMBER 2013
EXHIBIT 49: TFPV SWOT analysis
Strength Weakness
Higher energy yield Lower conversion efficiency than crystalline
More absorption of sunlight High capex investment
Better performance in shadowing
Less energy payback time (more environmentally friendly)
Monolithic manufacturing process
Opportunities Threats
Hot and cloudy regions – Middle East, Southeast Asia, South America and places closed to equator
Aggressive cost cutting and vertical integration from Crystalline PV manufacturing
Large scale ground-mounted solar field BIPV applications Oversupply in polysilicon
Exemption from anti-dumping levies to China solar makers
Source: BNP Paribas
TFPV application in BAPV/BIPV
Energy can be produced through photovoltaic panels using Building Applied PV
(BAPV) or Building Integrated PV (BIPV) methods. BAPV panels are added and
integrated in the building after the construction work is completed. We believe BAPV
will be a large volume market in the near term as it is relatively easy to install and
maintain solar panels on rooftops or buildings like factories and warehouses. We
believe BAPV installations have to be architecturally and aesthetically appealing
even though it is just about installing photovoltaic panels on buildings.
EXHIBIT 50: Residential BAPV EXHIBIT 51: Commercial BAPV
Source: BNP Paribas Source: BNP Paribas
When photovoltaic systems are integrated in buildings using construction materials
and built and constructed along with an object, it is called building-integrated
photovoltaic (BIPV). BIPV converts sunlight into useful electricity and also acts as a
building material replacing conventional building materials in parts of the building
such as roofs, facades or shades. BIPV systems are also planned together with the
object. They can form part of the actual structure of a wall, providing a waterproof
shell, or be positioned alongside the wall to provide shade from the sun. Additional
costs incurred for installing integrated photovoltaic panels over non-integrated
photovoltaic panels can be offset, even if partially, by savings incurred on building
materials and labour required to construct the part of the building.
If we analyse the installed capacity of a BIPV project along with its complexity, we
can easily understand that as the complexity of a BIPV project increases, installed
capacity drops significantly (Exhibit 52). The challenges become far greater when we
integrate solar technologies into the structure or materials of a building to generate
power, as sustainability, maintenance, functionality and architectural aesthetics
become critical factors. Seamless integration of structural components requires
knowledge of solar technologies and also building construction, architectural design,
material sciences and aesthetics. It is fairly easy to install photovoltaic panels in
partially integrated rooftops, while facades require a higher standard of building
Hanergy Solar 566 HK Esther C Chen
29 BNP PARIBAS 18 NOVEMBER 2013
integrated knowhow as it is not simply about installing PV modules as curtain walls,
but requires a combination of the original curtain wall and mixing different patterns.
Facades are being installed on existing buildings as well as old buildings to provide a
completely new look as well as to enhance the appeal of the buildings.
EXHIBIT 52: Complexity and installed capacity in various BIPV
Source: BNP Paribas
We believe BIPV will play a significant role as a market with higher margins and
higher barriers to entry in the medium and longer term. BIPV will remain a tricky
solution as critical issues in material/technology choices need to be addressed for
aesthetic reasons. We are well aware of the technical challenges for BIPV, with
installation of PV films on windows increasing the indoor temperature of the building,
violating energy-efficiency principles and dramatically affecting the uniformity of
energy production.
EXHIBIT 53: Examples of BIPV projects
Source: BNP Paribas
We think BIPV will not just remain an overhead application but will use an entire
building structure to generate its own power and feed additional power into the grid
system creating a sustainable energy solution. According to Navigon Research‘s
Building Integrated Photovoltaic report in January 2013, the market size of BIPV and
BAPV is expected to increase from USD606m in 2012 to USD2.4b in 2017. The
global BIPV and BAPV markets will witness more than 400% growth as these
markets are expected to grow from c.400MW in 2012 to 2,250MW in 2017. With
BIPV as an available solution, we expect solar suppliers to team up with building and
construction companies, as well as designers and architects to generate a new
revenue stream altogether. Even building companies are interested in associating
with these players to exploit available opportunities in the green building space. It is
interesting to know that construction companies and architectural firms are aiming to
construct net-zero energy buildings, which will have zero net-energy consumption or
carbon emissions. We reaffirm that BIPV could provide aesthetically pleasing, non-
intrusive, multi-purpose building elements, ensuring supply reliability, reducing
energy and peak demand charges and contributing to environmental protection. It
represents the combination of renewable energies and traditional building practices
on the building exterior.
Hanergy Solar 566 HK Esther C Chen
30 BNP PARIBAS 18 NOVEMBER 2013
Critical success factors for BIPV
Though BIPV is expected to grow significantly in medium term, we believe the BIPV
industry has to overcome several challenges.
1. Cost-to-performance: We believe project economics is the most crucial
success factor not only in the BIPV segment but also the entire solar industry.
The existing BIPV system costs are almost double the normal solar field
application costs. As BIPV is a customised solution, it cannot be mass-produced,
thus impeding BIPV‘s scalability. We believe lack of economies of scale and
learning curve coming through manufacturing process deployment limits cost
reductions, which could eventually impact adoption of the BIPV technology.
2. Performance deterioration from dissipation and shadowing: Unlike rack-
mounted PV, BIPV modules tend to generate greater heat as they are installed
flat on the building and prohibit any airflow between module and host structure.
Higher temperatures result in quality deterioration of the module‘s
semiconducting material that could lower conversion efficiency. Although BIPV
enhances the available space for PV-suitable space of a building (given more
than just the roof is eligible for installation), the sub-optimal angle of irradiation
on these non-horizontal surfaces and obstructions posed by surrounding
buildings results in diminished energy. Performance deterioration can be
minimised to a certain extent by installing air exhaust ventilation systems and the
right choice of PV technology.
3. Aesthetic concern: Designers and architects have to choose the right PV
technology and product design to minimise the aesthetic concern.
4. Local regulatory: The BIPV systems industry is facing difficulties in electrical
design and permission procedure as each country has unique regulatory
requirements. Also, the BIPV industry has to adhere to codes and standards,
and regulatory requirements of two separate industries (PV and construction).
For instance, even measuring standards could create problems in BIPV project
deployment as the construction industry uses square metre units signifying area,
while the PV industry uses watt units measuring electrical output. Hence, it
becomes imperative to harmonise incongruence between different industry
standards involved in BIPV deployment.
We think building construction, aesthetic design, and energy-efficiency are the three
pillars for successful BIPV project deployment. Moreover, companies with tactical
knowledge in the building and photovoltaic segments as well as economies of scale
are likely to have a definite competitive advantage.
Thin Film Solar Solutions
Project developers and system integrators have been trying to come up with different
optimised solutions to increase adoption of BIPV projects. Currently, we come across
common solutions such as flexible thin film PV, rigid thin film PV and crystalline
silicon PV in the market.
EXHIBIT 54: Types of BIPV modules
Source: BNP Paribas
Hanergy Solar 566 HK Esther C Chen
31 BNP PARIBAS 18 NOVEMBER 2013
TFPV is an important development in recent years as it helps to generate affordable
solar electricity. Thin films use a very thin layer of semiconductor, which is just a
millionth of a metre (microns) thick. They are not only relatively easy to manufacture,
but also efficiently use raw materials and energy, resulting in reduced costs and
carbon footprint. The monolithic manufacturing process in thin film PV technology
improves the efficiency of the production process and helps decrease labour costs.
Thin films are relatively energy-efficient as the energy payback time (EPBT), the time
required to generate electricity equivalent to the energy input required to
manufacture a PV module, including the energy input for its raw materials, is
approximately one year, even with lower conversion efficiency (7-15%). Due to their
natural features such as higher energy yield, higher tolerance to hot temperature,
better performance in shadowing and higher transparency, thin-film technologies
have a unique position in the BIPV market. Although crystalline silicon PV has better
conversion efficiency than thin film technology, the latter scores more than crystalline
silicon PV on other parameters such as energy yield, tolerance to hot temperature
and performance in shadowing. Leading thin film PV producers have started using
environmental management principles based on Life Cycle Analysis (LCA), which will
help offer sustainable energy solutions with no, or minimum, hidden environmental
costs. The LCA approach considers and analyses the total life-cycle impact of a
technology from raw material sourcing to recycling of the technology.
We believe Hanergy Solar (566 HK) could benefit from the increasing use of BIPV
and thin films in the construction of buildings, but that it is more likely to be a 2015
and beyond story. We believe the cost-performance ratio will be the most critical
factor for survival and growth of these companies, given the solar utility industry is
cost-driven rather than technology-driven. As discussed above, companies with
tactical knowledge of semiconductor, solar and building industries will have a definite
advantage over competition.
Hanergy Solar 566 HK Esther C Chen
32 BNP PARIBAS 18 NOVEMBER 2013
Financial statements Hanergy Solar
Profit and Loss (HKD m) Year Ending Dec 2011A 2012A 2013E 2014E 2015E
Revenue 2,565 2,756 4,556 5,275 6,182
Cost of sales ex depreciation (934) (761) (852) (961) (1,062)
Gross profit ex depreciation 1,630 1,995 3,705 4,314 5,119
Other operating income 7 5 72 25 29
Operating costs (572) (246) (313) (411) (416)
Operating EBITDA 1,065 1,754 3,464 3,928 4,732
Depreciation (19) (28) (54) (212) (457)
Goodwill amortisation 0 0 0 0 0
Operating EBIT 1,046 1,726 3,410 3,717 4,275
Net financing costs (79) (60) (63) (205) (435)
Associates 0 0 0 0 0
Recurring non operating income 0 0 0 0 0
Non recurring items (4) 0 0 0 0
Profit before tax 963 1,666 3,347 3,512 3,841
Tax (244) (350) (392) (527) (576)
Profit after tax 719 1,316 2,955 2,985 3,264
Minority interests 0 0 0 0 0
Preferred dividends 0 0 0 0 0
Other items 0 0 0 0 0
Reported net profit 719 1,316 2,955 2,985 3,264
Non recurring items & goodwill (net) 4 0 0 0 0
Recurring net profit 724 1,316 2,955 2,985 3,264
Per share (HKD)
Recurring EPS * 0.07 0.10 0.11 0.11 0.12
Reported EPS 0.07 0.10 0.11 0.11 0.12
DPS 0.00 0.00 0.00 0.00 0.00
Growth
Revenue (%) (25.5) 7.5 65.3 15.8 17.2
Operating EBITDA (%) (40.3) 64.8 97.4 13.4 20.5
Operating EBIT (%) (40.4) 65.0 97.5 9.0 15.0
Recurring EPS (%) (74.2) 47.0 8.0 1.0 9.4
Reported EPS (%) (74.2) 47.9 8.0 1.0 9.4
Operating performance
Gross margin inc depreciation (%) 62.8 71.4 80.1 77.8 75.4
Operating EBITDA margin (%) 41.5 63.6 76.0 74.5 76.6
Operating EBIT margin (%) 40.8 62.6 74.8 70.5 69.2
Net margin (%) 28.2 47.7 64.9 56.6 52.8
Effective tax rate (%) 25.3 21.0 11.7 15.0 15.0
Dividend payout on recurring profit (%) 0.0 0.0 0.0 0.0 0.0
Interest cover (x) 13.3 28.7 54.0 18.1 9.8
Inventory days 105.6 180.0 156.3 169.4 202.9
Debtor days 311.0 435.4 330.5 353.5 328.7
Creditor days 77.6 92.0 100.7 111.7 114.3
Operating ROIC (%) 57.7 65.7 85.9 47.6 36.8
ROIC (%) 10.2 15.5 27.1 22.7 21.2
ROE (%) 7.7 11.9 21.4 17.2 15.9
ROA (%) 6.7 10.6 19.2 15.2 14.0
*Pre exceptional, pre-goodwill and fully diluted
Revenue By Division (HKD m) 2011A 2012A 2013E 2014E 2015E
Solar equipment 2,565 2,756 4,556 4,888 5,074
Solar farm 0 0 0 387 1,107
Others 0 0 0 0 0
- - - - -
Sources: Hanergy Solar; BNP Paribas estimates
Hanergy Solar 566 HK Esther C Chen
33 BNP PARIBAS 18 NOVEMBER 2013
Financial statements Hanergy Solar
Cash Flow (HKD m) Year Ending Dec 2011A 2012A 2013E 2014E 2015E
Recurring net profit 724 1,316 2,955 2,985 3,264
Depreciation 19 28 54 212 457
Associates & minorities 0 0 0 0 0
Other non-cash items 0 0 0 0 0
Recurring cash flow 742 1,344 3,008 3,197 3,721
Change in working capital (1,636) (14) (894) (983) (126)
Capex - maintenance 0 0 0 0 0
Capex - new investment (1) (43) (1,817) (4,242) (2,926)
Free cash flow to equity (894) 1,287 297 (2,028) 669
Net acquisitions & disposals 0 0 0 0 0
Dividends paid 0 0 0 0 0
Non recurring cash flows 152 (226) 13 0 0
Net cash flow (742) 1,062 310 (2,028) 669
Equity finance 1,231 10 1,234 19 21
Debt finance (1,263) (682) (6) 3,088 1,046
Movement in cash (774) 390 1,537 1,080 1,736
Per share (HKD)
Recurring cash flow per share 0.07 0.10 0.11 0.11 0.13
FCF to equity per share (0.08) 0.10 0.01 (0.07) 0.02
Balance Sheet (HKD m) Year Ending Dec 2011A 2012A 2013E 2014E 2015E
Working capital assets 3,297 4,307 4,974 6,537 6,256
Working capital liabilities (802) (1,798) (1,571) (2,152) (1,743)
Net working capital 2,495 2,509 3,403 4,386 4,512
Tangible fixed assets 119 134 1,898 5,928 8,397
Operating invested capital 2,614 2,643 5,301 10,314 12,909
Goodwill 0 0 0 0 0
Other intangible assets 0 0 0 0 0
Investments 0 86 86 86 86
Other assets 8,373 8,513 8,500 8,500 8,500
Invested capital 10,987 11,242 13,887 18,900 21,495
Cash & equivalents (331) (721) (2,258) (3,338) (5,074)
Short term debt 0 0 0 0 0
Long term debt * 729 0 0 3,000 4,000
Net debt 398 (721) (2,258) (338) (1,074)
Deferred tax 0 0 0 0 0
Other liabilities 197 251 244 333 378
Total equity 10,392 11,712 15,901 18,906 22,191
Minority interests 0 0 0 0 0
Invested capital 10,987 11,242 13,887 18,900 21,495
* includes convertibles and preferred stock which is being treated as debt
Per share (HKD)
Book value per share 0.77 0.87 0.57 0.68 0.79
Tangible book value per share 0.77 0.87 0.57 0.68 0.79
Financial strength
Net debt/equity (%) 3.8 (6.2) (14.2) (1.8) (4.8)
Net debt/total assets (%) 3.3 (5.2) (12.7) (1.4) (3.8)
Current ratio (x) 4.5 2.8 4.6 4.6 6.5
CF interest cover (x) (10.3) 23.1 34.5 11.8 9.3
Valuation 2011A 2012A 2013E 2014E 2015E
Recurring P/E (x) * 18.8 12.8 11.8 11.7 10.7
Recurring P/E @ target price (x) * 20.1 13.7 12.7 12.6 11.5
Reported P/E (x) 18.9 12.8 11.8 11.7 10.7
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
P/CF (x) 18.3 12.5 11.6 10.9 9.4
P/FCF (x) (15.2) 13.0 117.5 (17.2) 52.2
Price/book (x) 1.6 1.4 2.2 1.8 1.6
Price/tangible book (x) 1.6 1.4 2.2 1.8 1.6
EV/EBITDA (x) ** 13.4 9.5 7.0 8.6 7.2
EV/EBITDA @ target price (x) ** 14.3 10.2 7.6 9.2 7.8
EV/invested capital (x) 1.6 1.4 2.4 1.8 1.6
* Pre exceptional, pre-goodwill and fully diluted ** EBITDA includes associate income and recurring non-operating income
Sources: Hanergy Solar; BNP Paribas estimates
Hanergy Solar 566 HK Esther C Chen
34 BNP PARIBAS 18 NOVEMBER 2013
Disclaimers and Disclosures
APPENDIX
DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S) (BNP Paribas Securities (Taiwan) Ltd)
ANALYST(S) CERTIFICATION
Esther C Chen, BNP Paribas Securities (Taiwan) Ltd, +886 2 8729 7065, [email protected].
The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst herein. Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/or FINRA regulations.
IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONS "BNP Paribas” is the marketing name for the global banking and markets business of BNP Paribas Group. No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel, and it is considered Third-Party Affiliate research under NASD Rule 2711. The following disclosures relate to relationships between companies covered in this research report and the BNP entity identified on the cover of this report, BNP Securities Corp., and other entities within the BNP Paribas Group (collectively, "BNP Paribas").
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report:
Company Ticker Disclosure (as applicable)
N/A N/A N/A
BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months. 5. It beneficially owns 1% or more of any class of common equity securities of the subject company. 6. It makes a market in securities in respect of this company. 7. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in
securities issued by this company. The financial interest is in the common stock of the subject company, unless otherwise noted. 8. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company or has received compensation from the
company.
IMPORTANT DISCLOSURES REQUIRED IN KOREA The disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated and/or recommended in this report:
Company Ticker Price (as of 15-Nov-2013 closing price) Interest
N/A N/A N/A N/A
1. The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co. Ltd (“BNPPSK”) by means of payment guarantees, endorsements, and provision of collaterals and/or taking over the obligations.
2. BNPPSK owns 1/100 or more of the total outstanding shares issued by the Company. 3. The Company is an affiliate of BNPPSK as prescribed by Item 3, Article 2 of the Monopoly Regulation and Fair Trade Act. 4. BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the
transaction does not exceed 5/100 of the total asset of the Company or the total number of outstanding shares. 5. BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year. 6. With regards to the tender offer initiated by the Company based on Item 2, Article 133 of the Financial Investment Services and Capital Market Act,
BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company, provided that this provision shall apply only where tender offer has not expired.
7. the listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of entering into arrangement for public offering or underwriting-related agreement for issuance of stocks
8. The Company is recognized as having considerable interests with BNPPSK. 9. The analyst or his/her spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc. contracts) the
following securities or rights (hereinafter referred to as “Securities, etc.” in this Article) regardless of whose name is used in the trading. 1) Stocks, bond with stock certificate, and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited. 2) Stock options of the Company whose securities dealings are being solicited. 3) Individual stock future, stock option, and warrants that use the stocks specified in Item 1) as underlying.
GENERAL DISCLAIMER This report was produced by BNP Paribas Securities (Taiwan) Ltd, member company(ies) of the BNP Paribas Group. This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipient’s own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this report may not be available for sale in certain jurisdictions.
Hanergy Solar 566 HK Esther C Chen
35 BNP PARIBAS 18 NOVEMBER 2013
As an investment bank with a wide range of activities, BNP Paribas may face conflicts of interest, which are resolved under applicable legal provisions and internal guidelines. You should be aware, however, that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients.
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Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (“BNPP”) and Finansia
Hanergy Solar 566 HK Esther C Chen
36 BNP PARIBAS 18 NOVEMBER 2013
Syrus Securities Public Company Limited (“FSS”). The International Investment Advisory Team at FSS prepares and distributes research under the brand name “BNP PARIBAS/FSS”. FSS is not an affiliate of BNPP. FSS also publishes a different research product under the brand name “FINANSIA SYRUS,” which is prepared by research analysts who are not part of the International Investment Advisory Team and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas.
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Additional Disclosures Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative.
All share prices are as at market close on 15 November 2013 unless otherwise stated.
RECOMMENDATION STRUCTURE
Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. * In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.
Industry Recommendations Improving (é): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Stable (previously known as Neutral) (çè): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating (ê): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity.
RATING DISTRIBUTION (as at 18 November 2013)
Total BNP Paribas coverage universe 640 Investment Banking Relationship (%)
Buy 324 Buy 5.2
Hold 195 Hold 1.5
Reduce 121 Reduce 3.3
Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.
© 2013 BNP Paribas Group