Suntech Gets MCS Accreditation – Analyst Blog

Suntech Power Holdings Company Ltd. (STP) received official certification under the UK Microgeneration Certification Scheme (MCS) for its solar panels. The accreditation certifies that Suntech’s modules for sale in the UK meet or exceed relevant standards. MCS certification is a pre-requisite for selling solar panels in the UK market. The certification will enable Suntech to market its solar panels to resellers and customers in the UK.

 

MCS accreditation is issued by the leading UK test authority, the British Board of Agreement (BBA). The MCS approval process includes a factory inspection, to ensure that all production processes conform or exceed safety and reliability standards, as well as thorough product performance evaluation.

 

Suntech Power’s focus on the UK market comes at a time when its largest market Germany (Accounted for approximately 41.4% of net sales in 2009) is facing subsidy blues. A reduction in the PV feed-in tariff rates in Germany is currently under discussion and is expected to come into effect in the second or third quarter of 2010.

 

Suntech Power needs to develop new markets fast to serve its rising production capacity. As of December 31, 2009, its annualized aggregate PV cell manufacturing capacity was 1,100 MW. However, by the end of the second quarter of 2010 the company plans to increase its capacity to 1.4GW.

 

Based in Wuxi, China, Suntech Power Holdings Company Ltd. is a solar energy company that designs, develops, manufactures and markets a variety of photovoltaic (PV) cells and modules, including a broad range of value-added building-integrated photovoltaics, or BIPV products.

 

Suntech’s products are used in a variety of residential, commercial, industrial and public utility applications. The company also provides PV system integration services in China and U.S., and is expanding into the development of utility scale solar power systems. Suntech Power’s China-based manufacturing base gives it a huge cost advantage over its U.S. and European peers.

 

Suntech’s internally developed Pluto technology-enabled multicrystalline silicon modules can achieve higher conversion efficiency. The increase in conversion efficiency helps it capture market share in the crowded PV market. A higher market share translating into higher product shipments helps expand gross margin through economies of scale.

 

Suntech Power is one of the largest producers of PV solar modules, serving a geographically-diversified customer base. Positive factors include ongoing expansion programs, higher conversion efficiency through its Pluto technology-enabled modules, subsidy program in China, and improving operating efficiencies.

 

However apprehensions regarding the tepid module demand in Europe, rising competition, and financial stability of its customers overshadow the positives. Our Neutral recommendation on the stock indicates that it would perform in line with its peers like JA Solar Holdings Co. Ltd. (JASO), Trina Solar Limited (TSL), and Canadian Solar Inc. (CSIQ).