Hanergy Valuation can be a bubble

Chinese company Hanergy has been making waves in the last 3-4 years by buying western solar thin film solar companies in distress. They bought Miasole, Alta Devices, Solibro etc. when these companies were on the brink of bankruptcy. The relentless cost reductions by the mainstream silicon solar panel technology has made it extremely tough for thin film startups looking to capitalize on thin film technology like amorphous silicon and CIGs. Only First Solar and Solar Frontier are the thin film solar companies which are still producing in scale. Others have either been eaten up by the Asian energy companies, or have just downed shutters after raising hundreds of millions of dollars. Even giants such as GE have shut shop as they just could not keep up with crystalline silicon technology advancements.

Read more about Hanergy Solar Panels.

Hanergy has seen its stock price go up by 300% in the last year and now support a market capitalization of $17 billion. This is enormous, when compared to the largest Chinese solar module shippers like Trina Solar and Yingli Energy, which have less than $1 billion in market cap. Hanergy also hardly figures in the top 15 module shippers and most of its shipments have been intra group. Nobody really knows how good its a-Si and CIGs panels are. The company reported margins of plus 50%, which does not make sense in an industry where the best and the largest have less than 10% margins. This can be a case of lofty valuations.

I think that Hanergy stock is in an enormous bubble right now and does not have a snowball’s chance in hell of living up to its massive growth expectations. The solar industry is highly dynamic and risky. There have been more bankruptcies than successes. I think that the company will soon sport a valuation which is 1/10^th of its current valuation. The solar industry is too competitive for a company to have such a high valuation.