trumanburbank

China: Wind Power for 1.3B People

Another wind power play in China is Jinpan International, a high-tech and profitable producer of power transformers that is moving into windmill transformers, a fast-growing part of this fast-growing business that opened a new plant which increased its capacity by 50 this year.

It was recently named to Forbes List of 'Asia's Best 200 Under A Billion for the second year in a row. Current P/E about 9.

Disclosure: I'm long Jinpan (NASDAQ:JST)

China: Wind Power for 1.3B People

Another wind power play in China is Jinpan International, a high-tech and profitable producer of power transformers that is moving into windmill transformers, a fast-growing part of this fast-growing business that opened a new plant which increased its capacity by 50 this year.

It was recently named to Forbes List of 'Asia's Best 200 Under A Billion for the second year in a row. Current P/E about 9.

Disclosure: I'm long Jinpan (NASDAQ:JST)

How to Profit From China's Environmental Woes

Jinpan International is another windpower play. This Chinese manufacturer of cast resin transformers is entering windmill mkt -- currently small portion of their business but the balance of business will also benefit from projected expansion of Chinese electrical grid generally. A recent Seeking Alpha article on the company here:
seekingalpha.com/artic...

Website: jstusa.net

Solar Grade: A Silicon Revolution

Moore's law as applied to PV market is not a particularly useful or exact fit. See the article (Is PV Moore's Law Really On Track?) here:

blogs.spectrum.ieee.or...

Emerging Markets Infrastructure Is Booming

There must be some subway firms that will benefit from the fact that China will build more subway miles in the next 15 years than exist in all of Europe presently, though I haven't researched that space.

One more pure play is Jinpan International (JST:AMEX), a small but profitable and rapidly growing Chinese high-tech producer of electrical trasformers that should benefit from expansion of the electric grid in China (90% of company sales are in China). Currently selling a TTM PE of about 14, and just opened new production plant last month.

There must be many other firms with similar pieces of the transportation, power, water/sewer systems that will benefit from increasing governmental infrastructure investments, but it's difficult to find pure plays.

Disclosure: long JST

General Discussion on TSL

Interesting excerpt of a recent McKinsey & Co article on the economics of solar power and worldwide industry overview from production to regulation, grid parity, etc., (full article, which I recommend, is available with a free subscription to the McKinsey Quarterly newsletter at mckinsey.com).

Most interesting is their projection (hedged though it is) regarding polysilicon price trends; down, down, down (well, probably). (Jack: two of the three authors are from your neighborhood, the McKinsey Houston office...). Excerpt follows:

"Solar-component manufacturers
The fundamentals are clear for photovoltaic-component manufacturers that hope to remain competitive: there’s no escaping significant R&D investments to stimulate continued efficiency improvements, as well as operational excellence to drive down manufacturing costs. Furthermore, in view of the technological uncertainty, established silicon-wafer-based companies should hedge their bets by investing in advanced thin-film technologies.

Some manufacturers have considered establishing partnerships or vertically integrating—approaches that could give them access to supplies, customers, and financing but might also lock them into the wrong technology. To make the right trade-offs, the manufacturers of components for silicon-wafer-based and thin-film technologies should focus on fundamentals, such as manufacturing costs, efficiency improvements, and the movement of prices for raw materials.

Raw materials. Polysilicon is the main raw material for silicon-wafer-based solar-cell manufacturers, which now consume more of it than the semiconductor industry does. Over the last two years, shortages and price spikes have been the result.

High margins have encouraged incumbents to add capacity and have attracted new entrants. Many observers have therefore been predicting that global polysilicon production capacity will at least triple from 2005 to 2010, while our forecasts indicate that demand for the material will only double during the same period. This mismatch suggests that the spot price of polysilicon could drop from over $200 a kilogram to levels previously seen in the semiconductor industry—as little as $30 to $50. Of course, if global demand for silicon-based modules surged, or if announced capacity additions did not materialize or were delayed (due to cancelled projects, quality issues, or the sorts of engineering and construction delays that are currently prevalent in many other capital intensive industries), the price effect might be dampened significantly. Industry participants should therefore screen supply and demand developments continuously.

Production process technology
The way companies manufacture solar cells has the largest impact on the cells' efficiency and their cost. Many incumbents have invested heavily in developing proprietary manufacturing processes. Some start-up cell manufacturers, by contrast, buy entire manufacturing lines from equipment companies such as Applied Materials.

Cell manufacturers are valuable partners for equipment companies hoping to tap into the growth of the solar sector. The equipment companies need formal partnerships that will allow them to retain ownership of the intellectual property associated with their manufacturing processes—a difficult trick that these vendors tried (and failed) to pull off in the semiconductor sector. The same thing could happen again unless equipment providers can figure out how to make their offerings extremely cost competitive and difficult for operators to imitate or enhance.

Producing in low-cost regions
Many leading silicon-wafer-based photovoltaic solar companies are located in high-wage countries. These manufacturers produce cells that are typically more efficient than those produced in lower-wage countries; for example, many German and US cells achieve an efficiency of 20 percent or more, compared with 15 to 16 percent for Chinese ones. Yet countries like China and India will inevitably gain an overall cost advantage by developing the skills needed to produce more efficient cells. Companies in regions with high labor costs should therefore constantly monitor the benefits and risks of locating their next plant in an area that offers lower-cost labor and generous subsidies...."

Chinese Solar Stocks Present Compelling Value

Sorry, that should say "S&P buy recommendation on TSL was posted 7/16/2008...

Chinese Solar Stocks Present Compelling Value

This S&P buy recommendation on TSL was posted 7/6/2008, including EPS estimate of $3.72 for 2008.

S&P MAINTAINS BUY RECOMMENDATION OF TRINA SOLAR ADSS Updating selected Q2 guidance, TSL now expects revenues of $200M-$205M, gross margin of 22.5%-23.5%, and operating margins of 14%-15.2%. These metrics are notably above our model and previous guidance. Consequently, we are raising our '08 earnings per ADS estimate by $0.54 to $3.72, supported by our confidence that management will continue to execute growth plans.

China's Biggest Real Estate Developer Approved for IPO

As with politics, all real estate is local. While there may be short-term bubbles in the hot Beijing and Shanghai mkts, China continues to urbanize at a rate and scale never experienced previously in history. Look to the second-tier cities, where property remains modestly priced and growth continues unabated. Xi'an, for example, just published its city development plan:

"Under Xi'an's new development plan, which was approved by the State Council of China on May 10, 2008 and covers the years 2008 through 2020, the population of the Main City Zone is expected to grow from 3.1 million people in 2007 to 4.5 million in 2010 and 5.28 million in 2020.

The new development plan also specifies that the average living area per person in the Main City Zone will increase from 161 square feet in 2007 to 237 square feet in 2010 and 355 square feet in 2020. To meet the new living area specifications, 567.4 million square feet of new housing will need to be built by 2010, and a total of 1.4 billion square feet of new housing will need to be added in the intervening 13 years from today to meet the new minimum specification by the end of 2020."

This is typical of growth projections for large cities in China. A recent McKinsey report estimated that China will soon have a billion urban residents, an increase from the present 650 million or so -- an increase roughly equivalent to the present population of the US.

Chinese real estate development has a considerable run ahead, with the occassional Beijing bubble along the way.

Disclosre: I own China Housing and Land Development (CHLN: NASDAQ)