Suntech Power (STP) is going for maximum efficiency in 2009. The company has initiated the construction of a new photovoltaic cell production facility in Yangzhou, China. The increased production capacity will reach 2GW of solar cells by the end of 2010.
Also, the new plant will be constructed very close to Suntech's supplier of silicon, Shunda Holdings. Suntech and Shunda will be able to lower costs in transportation and inventory controls. Since both companies will be able to feed off the efficiency of being so close physically, Suntech will have an ongoing advantage in pricing power.
The larger production facility will provide a much larger scale of production. The strategic raw material partner will be right around the corner.
STP traded around the $33 - $35 level pretty consistently through July and and the first part of August. The stock then begins a strong climb at the end of August, trading above $47. Much of September has been choppy for STP, which closed on 9/19 at $43.57 per share.
Suntech is going to have a strong competitive edge in the solar cell market in the future. And going forward the pricing and cost of solar cell production is going to matter more than it does today. Buyers will be more conscious to price by 2010. This is where STP will have a stronger advantage than most other solar cell producers.
The price of $43 might be just a little too high, especially given the market turbulence and financial problems. Suntech has traded between $35 and $40 range quite a bit during the last year, although it has popped to over $85 in that time. Consider Suntech a good buying opportunity if it falls below $40 a share. For the more aggressive trader buying above $40, be prepared to buy more at $35.
STP should be viewed as a long-term investment situation. Although the stock could rise in the near term, the company will have a solid advantage over rivals going in 2009 and beyond.
