GCL-Poly shares hit after CIC sells partial stake at discount

PUBLISHED : Friday, 10 January, 2014, 3:20pm
UPDATED : Saturday, 11 January, 2014, 12:55am

Shares of GCL-Poly Energy, the world’s largest maker of solar panel parts and raw material polysilicon, dropped 6 per cent on Friday after sovereign fund China Investment Corp (CIC) sold another big chunk of its stake on Thursday night at a discount, just when analysts expect the firm to turn losses in the past two years into a profit this year.

CIC has sold 1.2 billion GCL shares at HK$2.60 each, or 7.8 per cent lower than its closing price of HK$2.82 on Thursday. They changed hands at HK$2.65 at 11.32am on Friday. The shares sold represent 7.8 per cent of GCL’s issued shares.

“We view this as an enhanced buying opportunity, as solar [profit] margins look set to recover in [this year’s] first half,” Citi analysts Timothy Lam and Pierre Lau wrote in a research note on Friday.

They forecast GCL would post a net profit of HK$2.27 billion this year. Some 27 analysts polled by Thomson Reuters projected a profit of HK$1.33 billion, compared with an estimated loss of HK$255 million for last year and actual loss of HK$3.52 billion in 2012.

The Citi analysts said rising global demand for solar panels and limited production capacity will lead to higher prices of solar wafer and polysilicon, GCL’s mainstay products.

“Based on our discussions with wafer makers, the [spot market] polysilicon price is above US$20 a kilogram, and wafer supplies remain tight,” they wrote. Polysilicon prices traded below US$16 at one point last year.

“Upward [movement] in polysilicon prices should – temporary supply chain hiccups aside – continue,” American brokerage senior analyst Michael Parker wrote in a note on Friday. “Solar has now reached a cost where it is competitive on an unsubsidised basis with fossil fuels in many markets.”

CIC cut its stake in GCL to 12.3 per cent in June last year from 20.1 per cent. Its stake will be further pared to 4.57 per cent after the latest sale, or just below the 5 per cent threshold at which disclosure is required for major changes in shareholding under Hong Kong stock exchange listing rules.