Hapoalim Securities Reiterates Sell Rating Suntech Power Holdings (STP)

Hapoalim Securities is out with a research report this morning, where it reiterates its Sell rating Suntech Power Holdings STP; it has a $6.00 price target on the stock. The HS analysts cited the company's better than expected Q3 revenues and gross margins (though worse than expected EPS), which was driven entirely by losses due to foreign exchange. The analysts noted that, in an effort to address a higher production cost structure than peers arising from the need to outsource all of its wafer needs, STP announced the acquisition of 375 MW of wafer capacity from one of its equity holdings, Glory Silicon. STP is acquiring the 70% of the capacity it doesn't own for $127 million; this implies $0.48 per watt, ahead of the $0.35-0.40 capex per watt the analysts believe standard new wafer capacity can be built. As for valuation, they remarked, “Our price target of $6.00 is based on a P/E multiple of 13x our 2011 EPS estimate. As the pricing outlook for 2011 and resulting margin pressure become more evident, we expect the stock to once again approach its Nov. 2008/Mar. 2009 lows.”