Suntech to Churn Out More Panels

Suntech Power Holdings Company Ltd. (STP - Analyst Report) engaged a third production shift at its new solar panel manufacturing facility in Goodyear, Arizona. The expansion adds 30 more solar jobs to Arizona's fast-growing solar economy. Suntech Power increased churn-out of panels is in line with the growing demand for its panels in U.S.

As a result of the addition of new shift the module manufacturing facility will now run twenty-four hours per day with 107 employees. The expansion brings the facility's annualized production throughput to about 50MW, representing 15,000 high-quality solar panels per month.

The 117,000 square foot manufacturing facility features highly-automated manufacturing and product testing equipment and currently produces Suntech's 280W solar panels for commercial and utility-scale electricity generation. All modules produced at the facility are backed by a 25-year power output warranty and are compliant for procurement in American Recovery and Reinvestment Act (ARRA) and Buy American Act projects.

Suntech's Goodyear, Arizona, manufacturing facility was opened in October 2010, initially with 30MW of production capacity and 40 employees. The operation has grown steadily since, taking on a second shift in January 2011, and remains on-target to employ 150 employees by the end of 2011. The company plans to further expand annual capacity in the facility to 120MW within the next few years.

Wuxi, China-based Suntech is a leading solar energy company. The company designs, develops, manufactures and markets photovoltaic (PV) cells and modules. The company is slated to release its first quarter of 2011 results on May 25, 2011.

For that quarter Suntech expects PV shipments to be relatively flat compared with the fourth quarter of 2010. Gross margin in the first quarter of 2011 is expected to be approximately 20%.

For fiscal 2011, Suntech expects to ship at least 2.2GW of solar products and generate revenues of $3.4 billion to $3.6 billion. Gross margin for fiscal 2011 is expected to be approximately 20% to 22%.

Suntech Power is one of the largest producers of PV solar modules with a geographically-diversified customer base. It uses its proprietary Pluto technology. The company by the end of 2011 expects to achieve an annualized production capacity of 2.4GW for cell and module; and 1.2GW for wafer. Full year 2011 capital expenditure is expected to be in the range of $250 million–$270 million.

Other positive factors for Suntech include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China and improving operating efficiencies. However apprehensions over rising competition, subsidy cuts in Europe and financial stability of its customers overshadow the positives.

In the near-term (1 to 3 months) we feel the Zacks #3 Rank (Hold) stock would trade in line with peers like First Solar Inc. (FSLR - Analyst Report) and JinkoSolar Holding Company Ltd. (JKS - Snapshot Report). Over the longer run, our Outperform recommendation on the stock indicates that it should perform above the broader market.