Deutsche’s Outlook Boosts Solar Stocks: China Overnight

Chinese solar makers gained in New York as Yingli Green Energy Holding Co. rallied to a 10-week high after Deutsche Bank AG raised the sector’s growth outlook and Goldman Sachs Group Inc. called the industry “attractive.”

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. climbed 0.9 percent to 103.14 yesterday, halting a three-day slump. Yingli Green, the biggest solar-panel maker, jumped 8.4 percent and Trina Solar Ltd. advanced for a fourth day. YY Inc. surged 8.4 percent and Melco Crown Entertainment Ltd. rose to a record after Citigroup Inc. said gambling revenue will rise in 2014.

Deutsche Bank increased its demand projection for this year and 2015 by about 4 percent and 8 percent, respectively, while Goldman initiated coverage of the sector following three years in which Chinese solar companies posted losses amid overcapacity and smaller subsidies. Yingli Chief Financial Officer Wang Yiyu said yesterday that he expects the company to post its first profit in three years as early as next quarter as demand climbs and cost controls show results.

This year “will be a year of strongly rising demand,” Jenny Chase, head of solar analysis at researcher Bloomberg New Energy Finance, said by e-mail. “Chinese manufacturers are benefiting from both the strong new domestic market and rising global demand.”

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., added less than 0.1 percent to $36.02 in New York after a three-day slump. The Standard & Poor’s 500 Index advanced 0.6 percent as hospital and health-insurance stocks rallied ahead of Friday’s employment report and the start of fourth-quarter earnings season this week.

Profit Margins

Yingli’s American depositary receipts rose to $7.08, the highest price since Oct. 24. The ADRs have rallied 40 percent this year, after gaining 115 percent in 2013. Trina Solar’s ADRs advanced 3.1 percent to $16.51, the highest since Nov. 13.

Yingli, which last reported a quarterly profit in the three months through June 2011, expects margins to “recover to the levels of traditional or large-scale manufacturing industries,” CFO Wang said.

That means a gross margin of about 16 percent and a net income margin of 3 percent to 5 percent, compared with Yingli’s gross margin of 13.7 percent and net margin of minus 6.5 percent in the third quarter of 2013, data compiled by Bloomberg show.

Baoding, China-based Yingli agreed last week to form a venture with China’s Datong Coal Mine Group to develop solar plants in Shanxi province. The partners plan to build 100 megawatts of solar farms this year, according to CFO Wang, who said such tie-ups are a low-cost way to increase sales for manufacturers.

Gambling Growth

Yingli said yesterday it agreed to a venture with China National Nuclear Corp. to develop 500 megawatts of distributed-generation projects, or small-scale power production near the point of use.

Melco Crown, which owns gambling facilities in Macau, the only Chinese city where casinos are legal, surged 4.2 percent to $41.84 in New York, the highest level since its U.S. trading started in 2006.

2014 will be a watershed year for Macau and U.S. gaming stocks, Anil Daswani, a Hong Kong-based analyst at Citigroup, wrote in a note dated Jan. 6. This is the first year since 2005 with no major casino opening in Macau to drain growth, Daswani said, setting its growth estimate for 2014 gross gambling revenue at 20 percent.

YY, SouFun

YY, owner of social entertainment services which allow users to create and organize online groups for activities ranging from games to education, rallied to a record $62.18 in New York. Trading volume was double the three-month average compiled by Bloomberg.

86Research Ltd. said YY’s education service has “big” growth potential in a note yesterday, and said it will increase the company’s stock value, which should be worth $4 per share, or $80 per ADR.

SouFun Holdings Ltd., the biggest real-estate information website in China, surged 9.5 percent to $91.95 in New York, the highest level since its initial public offering in the U.S. in September 2010. The stock has gained 12 percent this year after jumping 230 percent in 2013.

Vipshop Holdings Ltd., an online clothing retailer based in Guangzhou, soared 10 percent to $90.51, a record high since its U.S. IPO in March 2012.

The Hang Seng China Enterprises Index in Hong Kong slumped 0.5 percent to a two-month low of 10,236.12, extending a decline into a fourth day. The Shanghai Composite Index added less than 0.1 percent to 2,047.32, after falling the previous three days.

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