Comtec Solar Systems is an upstream solar company mainly producingmono-crystalline wafer. The Company is based in Shanghai, PRC and startedto produce mono-crystalline wafers in 2004. The Company is a niche playerconcentrating on high conversion efficient products and it had 600 MW ofwafer production capacity in 1Q 2012.
We expect Comtec’s revenue to grow at a CAGR of 22.1% during FY11-14.
We expect the Company is able to turn a profit in FY12, mainly because therewas non-cash write-down of inventory and impairment losses in FY11.
However, we expect that its profit margins will still be constrained by lowproduct prices in FY12.
We believe Comtec’s competitive advantage is its high conversion productconcentration, and it will lift its shipment by taking advantage of market’sgrowing demand for high efficient product. The Company’s stock price will beaffected by lower profit margins in FY12 and catalysts include resumption ofgovernment subsidies policy in the European Union(the key market) andincreased government support in China、U.S. and Japan. Our target price ofHKD 0.80 represents 10.3x FY12E EPS. Our rating for the Company is‘Neutral’. Major risks include continued cuts in government subsidies anddrops in conventional energy prices.