Hanergy Thin Film Power Group Ltd. (00566.HK), whose share price has surged almost five-fold in six months, has been rated “underweight” by BNP Paribas amid concerns over the valuation of the new-energy play.
The brokerage noted that Hanergy’s forward price to earnings ratio now hovers at 60, despite a relatively low compound annual growth rate of 16 percent, the Hong Kong Economic Journal reported.
Hanergy, which is involved in the manufacture of thin-film solar photovoltaic modules, is entering the downstream segments of solar power supply, rechargeable cellphone batteries, electric vehicles and online shopping platforms that will drastically increase its costs, BNP noted.
The brokerage is also concerned about the company’s product delivery, pointing out that its first batch of copper indium gallium selenide (CIGS) solar power parts has seen shipment delay to this year from the end of 2014.
Yet, considering demands from third-party outsourcing, BNP revised up Hanergy’s profit forecasts for the three years through 2016. The annual profit revisions were in the range of 33 to 117 percent.
Analysts also gave a new target price for the Chinese firm, which closed Tuesday’s trading session in in Hong Kong at HK$6.70.
The target was lifted to HK$1.65 from 81 HK cents, but it marks a hefty 75 percent discount to Hanergy’s current price.
China Securities Journal earlier reported a Western brokerage had warned clients of a margin cut on pledges of Hanergy shares.
Analysts at Crédit Agricole Asset Management, however, said Hanergy’s share price surge is not surprising given its inclusion in the FTSE China 50 Index.
This article appeared in the Hong Kong Economic Journal on March 18.
Translation by Vey Wong
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