SOL – Hot Solar Stock IPO

While scanning for some “new” stocks, I came across SOL. That’s ReneSola Ltd, which trades on the NYSE. This is a recent IPO, which priced itself on January 29 at $13 per ADS share. The float for it is just 10 million shares.

Some background on SOL:

ReneSola, Ltd., through its subsidiaries, engages in the manufacture and sale of solar wafers and related products in the People’s Republic of China. It offers feedstock, ingots, and wafers for the solar industry. The company sells solar wafers to Chinese and international PV cell manufacturers. The Jiashan, Zhejiang company supplies thin sheets of crystalline silicon to customers including JA Solar (JASO), Motech, Solarfun (SOLF), and Suntech Power (STP). SOL primarily offers 125 mm by 125 mm monocrystalline wafers and in Q2 2007 began offering 156 mm by 156 mm monocrystalline wafers. As part of its expansion plan, SOL began producing multicrystalline wafers in Q3 2007. Solar power products that use monocrystalline cells generally yield higher conversion efficiencies. On the other hand, multicrystalline wafers are less expensive to produce and have less stringent raw material requirements. By producing multicrystalline wafers, SOL expects to realize cost synergies by utilizing some of the silicon materials reclaimable from its monocrystalline wafer production. SOL operates one of the largest solar wafer manufacturing plants in China. The co has annual ingot manufacturing capacity of 378 MW. The co plans to increase that to 645 MW by the end of 2008. The co differneitates itself by using proprietary technology to manufacture solar wafers primarily from reclaimables such as broken wafers and broken cells that are difficult to process but less expensive. SOL believes this is a major cost advantage over many of its competitors who rely on virgin polysilicon sourced from the spot market. SOL says its solar wafers are comparable in quality and performance to those made from virgin polysilicon. SOL has grown quickly since it began making solar wafers in 2005. The co is profitable and posted revs of US$152.9 mln for the 9 mos ended Sep 30, up 194% yr/yr.

SOL is the CHEAPEST solar play out there based on PE ratio. Current earnings run rate of about $1 per share (based on Q4 2007 projections of $.23 – $.27) and should earn $2 per share in 2008. If SOL had same forward PE as JASO it would be valued near $60!

Cash and inventories at about $4 per share (ADS).
SOL fair value = $4 + 30 PE X $1 current earnings run rate = $34

I think that when SOL gets noticed by the bigger players, it has a good chance to run into the $18-20 area. This company went public when the markets were not in a good mood with the solar stocks. But in recent days with the great earnings of FSLR and SPWR, these stocks are again starting to flourish

In Wednesday’s market, SOL gained over 15% on its second heaviest volume day since going public. Although the chart is “very young”, this is what we see.

Take a look at charts of JASO, AKNS, SOLF, STP, YGE and ASTI. Notice how they “suddenly exploded” upwards? I have a feeling that SOL will be doing this sometime very soon. With a float of only 10 million shares, this stock can move very fast.

Please do your own due diligence before buying any shares of SOL. I initiated my own position on Wed. Will be adding on, as it keeps climbing.