Company Overview

GCL-poly is an upstream solar manufacturer. It's the largest polysilicon producer of China and the world's largest solar ingot and wafer manufacturer. Its business covers many branches of clean energy.

Summary

GCL-Poly's operation results suffered sharp decline in the 1HF of 2012. Because of demand decrease in developed market and EU anti-dumping policy, the operating environment of GCL-Poly has been deteriorating since 2011 and put great negative effects on operation results.

According to the semi-annual report of 2012, the capacity of GCL-Poly is still in expansion, but since the product price decrease greatly and the increase of cost is obvious, the operation results are still in down trend.

Although GCL-Poly has state several methods to cope with the negative change of the market, but in fact, the adverse change in the PV industry and market can`t be solve by technology update or expand new market.

The financial stability maybe worse in the future, as MIIT put differential credit policy for PV companies which not include GCL-Poly, the issue will affect the liquidity and finance cost of GCL in the future.

The EPS of 2011 is HKD 0.28, BVPS is HKD 1.43. According to recent information, the results decline is worse than our previous estimation and the decline will last in the 2H of 2012. We estimate that the EPS will decline to HKD -0.14 and the BVPS will decline to HKD 1.16. Considering the bad market environment, the target price in next 6 months is HKD 1.05 under 0.9x P/B, the rating is Reduce.

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