4 China Solar Stocks to Watch

NEW YORK ( TheStreet) -- LDK Solar ( LDK), Trina Solar ( TSL), Solarfun Power Holding ( SOLF) and Yingli Green Energy ( YGE) gained 17.7%, 15.9%, 15% and 11.6% respectively during the past week. These stocks will likely generate attractive returns for investors in the short-term.

The fact that the Chinese government is promoting clean energy provides investors buying opportunity in the solar sector. China, on its way to reduce reliance on growth driven by energy-driven industries, plans to spend $738 billion over the next decade for developing cleaner sources of energy, according to the head of National Energy Administration's planning and development department.

LDK Solar

LDK Solar, manufacturer of multi-crystalline solar wafers, recently said that the company commenced producing solar cells at its 60-megawatt (MW) facility. The company recently expanded vertical manufacturing facility by installing its first production line of solar cells. The plant would be expanded to 120 MW of production capacity by the third quarter.

The company had revealed that it seeks to increase its output to 18,000 metric tons by the end of 2011, thereby offering a huge potential for the investors. The company has plans to expand capacity for other solar products. On Aug. 30, Lazard Capital Markets reassigned a buy rating to the stock with a target price of $10. Currently the stock is trading around $7.65, highest level since May 2010.

Trina Solar

Trina Solar, maker of solar modules, announced its second quarter financial results on August 24. The company reported earnings per share of 52 cents topping analysts' consensus estimates of 49 cents. Revenue during the quarter surged 147.7% to $370.8 million, ahead of analyst estimates of $338.7 million. For the third quarter, the company expects to ship between 250 MW to 260 MW of photovoltaic (PV) modules.

For full year 2010, the company raised total PV module shipments forecast to be between 900 MW and 930 MW from the earlier estimated 750 MW to 800 MW, reflecting an increase of 126% to 133% from 2009.

On Sept. 3, Jefferies reassigned a buy rating to the stock with a target price of $38. Currently trading at $27.91, the stock has touched its highest level since Jan. 14, 2010.

Solarfun Power Holding

Solarfun Power Holding recently started its PV Distribution channel in the Japanese market through signing a distribution agreement with Fujimi Fine Technology. In addition, Hanwha Chemical, South Korea based solar products producer, announced plans to invest more than 3 trillion won ($2.6 billion) in Solarfun by 2018.

Investors cheered these developments as the stock touched its 52-week high Thursday at $11.68. On Friday, Jefferies reassigned buy rating to the stock with target price of $14.

Yingli Green

Yingli Green, China's second-largest solar panels marker by market capitalization, signed a five-year polysilicon supply agreement with OCI Chemical Corp, a leading chemicals producer in Korea on Aug. 31. As per the agreement terms, OCI has agreed to supply polysilicon valued at almost $442 million from 2011 to 2015.

Yingli, one of the world's largest vertically integrated PV manufacturers, commenced construction of a 100 MW multi-crystalline silicon solar cell manufacturing plant in Hainan province. The plant which is valued at $113 million is due to be completed by May 2011. These developments come on top of a strong performance in the recent quarter.

For the second quarter, the company beat analyst expectations and recorded a 14% rise in its net income. On Friday, Jefferies reassigned a buy rating to the stock with target price of $17 representing an upside of 45.3%.

Among the U.S. solar stocks, recent developments at First Solar ( FSLR) have attracted investors. The company is planning to build the world's largest solar power plant in Mongolia. First Solar will likely begin construction in 2011 after receiving an approval from the China authorities. The plant has a capacity of 2-gigawatt enough to power almost 3 million Chinese households. The stock accumulated 4.7% during the past week.

In addition, the company took an initiative to install 22-megawatts of solar-energy facilities for New Mexico based PNM Resources ( PNM). First solar plans to build five projects with capacities in the range of 2 MW - 6 MW, by the end of 2011.

During the past week, other solar stocks Energy Conversion Devices ( ENER) and Evergreen Solar ( ESLR) gained 5.8% and 3% respectively.
Karvy Global Services (www.karvyglobal.com), a subsidiary of the Karvy group (www.karvy.com), provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.