Solid profitability with undemanding valuation
​We forecast Giga Solar (GS) 2Q16 sales to slightly decline due to the silver powder shortage and weak seasonality. However, we believe the short-term headwind for GS will settle down in 3Q16 and expect its sales momentum to recover going forward. China’s NEA recently announced a new installation target of 18.1 GW, which could be revised up to >20 GW, with 2-3 GW from the Disadvantaged Support Implementation Plan. The supply chain expects China demand to recover, as pull-ins for the 2016 PV installation target will likely start in Aug 2016. Although GS can deliver earnings and also sales growth in 2016/17F of 17%/14%, respectively, with the expansion of PV installation, we see mixed market sentiment for the solar sector due to oversupply concerns for manufacturers. Thus, we use a more conservative valuation and P/E multiples of 13.5x (historical avg. PE -0.5x stdev.) to reflect GS’s solid profitability compared to other solar names, even in a downcycle. Our TP of NT$554 implies 14% upside.
Giga Solar Materials Corporation. Giga Solar Materials Corp is a Taiwan-based company principally engaged in the manufacturing and distribution of solar cell materials. The Company mainly provides conductive pastes such as silver conductive pastes, aluminum conductive pastes and silver-aluminum conductive pastes, which are applied in silicon solar cells. The Company's silver conductive pastes are mainly used as positive electrodes of solar cells. Its aluminum conductive pastes are mainly used as back electrodes to improve conversion efficiency. Its silver-aluminum conductive pastes are primarily used as conducting wires of modules on the back of solar cells. The Company mainly distributes its products in domestic markets and to overseas markets.
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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