Fri, 04 Oct 2013

Equi ty Research GCL-Poly Energy (3800 HK) Solar / China

Margin to further rebound in 2H13

Polysilicon leads solar sector bottoming out. Since August 2013, we noticed polysilicon

spot price begun to bottom out, increasing from US$16.3/kg to US$ 18.1/kg, or 11.1%. We

expect average polysilicon price to rise to US$18.0/kg in 2H13, versus US$16.9/kg in 1H13,

or 6.5% HoH. We believe the polysilicon sector will lead the solar sector recovery as a result

of higher entry barrier and restarting cost. We have seen the number of operational

polysilicon plants in China to reduce from 30+ in 2011 to 5 now. We expect the list to further

shrink and GCL’s market share should continue to increase. TBEA (600089: CH,NR) is the

only polysilicon producer that is still ramping up and its capacity of 12,000 tons should start

production by the end of 2013. However, its scale and cost structure are still far behind

GCL.

Anti-dumping ruling on polysilicon impact is limited. FCOM’s anti-dumping ruling

again polysilicon import, despite positive for GCL, has rather limited impact so far as GCL’s

leading competitor OCI (010060:KS, NR) needs to pay merely 2.4% anti-dumping duty.

However, with increasing government support on downstream segment, we expect

installation in China to reach 10GW in 2013, up 100% from 5GW in 2012. This should

sustain the sector’s recovery and we expect the government to announce more favorable

policies until the leading producers in the value chain return to profitability.

Margin to rebound as utilization improves and processing cost decreases. We

expect GCL’s gross margin to improve from 6.6% to 11.2% in 2H13 mainly driven by

polysilicon price increases. With higher utilization and new processing technologies, such

as moving from 500kg wafer furnace to 880 kg and 1,200 kg furnaces, diamond wire sawing,

FBR, etc, we estimate GCL’s gross margin to further improve to 16.1% in 2014 and 19.5%

in 2015. However, due to the company’s high gearing ratio, we estimate GCL’s to make an

EPS loss of HK$0.04 in 2H13, versus a loss of HK$0.06 in 1H13. We expect the company

to break-even in 2014 and generated an EPS of HK$0.09 in 2015.

High gearing hinders profitability. We view the largest hurdle for GCL to return to

profitability is its high gearing ratio, which was 179.7% in net gearing as of 1H13. However,

as the company emerges from a sector downturn, we believe the high gearing ratio will

unlikely to be changed.

Valuation: Our target price of HK$3.20 is based on 3.0x 2014 P/B, implying 32% upside.

The company has been traded at forward P/B ratio of 0.8x-3.7x.

Min Li

Analyst

+852 2135 0205

min.li@oriental-patron.com.hk

Initial Coverage

BUY

Close price: HK$2.43

Target Price: HK$3.20 (+32%)

Key Data

HKEx code 3800

12 Months High (HK$) 2.52

12 Month Low (HK$) 1.13

3M Avg Dail Vol. (mn) 137.35

Issue Share (mn) 15,480.26

Market Cap (HK$mn) 37,617.03

Fiscal Year 12/2012

Major shareholder (s) Zhu Gongshan (32.42%)

Source: Company data, Bloomberg, OP Research

Closing price are as of 4/10/2013

Price Chart

1mth 3mth 6mth

Absolute % 20.9 51.9 73.6

Rel. MSCI CHINA % 17.1 37.0 66.5

Exhibit 1: Forecast and Valuation Year to Dec (HK$ mn) FY11A FY12A FY13E FY14E FY15E

Revenue 25,506 22,348 22,896 26,211 29,036

Growth (%) 38.1% -12.4% 2.5% 14.5% 10.8%

Net profit 4,275 -3,516 -1,559 21 1,397

Growth (%) 6.2% NA NA NA NA

Diluted EPS 0.28 -0.23 -0.10 0.00 0.09

Consensus EPS -0.06 0.09 0.21

EPS growth (%) 6.2% NA NA NA NA

ROE (%) 20.79 (21.69) (10.64) 0.14 8.69

P/E (x) 8.6 -10.5 -23.6 1745.9 26.4

P/B (x) 1.7 2.1 2.3 2.2 2.0

Yield (%) 2.3% 0.0% 0.0% 0.0% 0.0%

DPS 0.05 0.00 0.00 0.00 0.00 Source: Bloomberg, OP Research

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Oct/12 Jan/13 Apr/13 Jul/13 Oct/13

HK$3800 HK MSCI CHINA

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 2 of 12

Exhibit 2: GCL Result Review

(HK$ mn) 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2015E 1H10A 2H10A 1H11A 2H11A 1H12A 2H12A

Poly-silicon Produced(MT) 1,850 7,454 17,853 29,414 37,055 46,980 55,000 65,000 7,032 10,821 12,026 17,388 25,233 11,822

Poly-silicon for in-house use(MT) (320) (1,779) (7,346) (26,602) (24,462) (28,882) (32,300) (35,150) (1,638) (5,708) (10,518) (16,084) (16,221) (8,241)

Poly-silicon sold outside(MT) 1,530 5,675 10,507 2,812 12,593 18,098 22,700 29,850 5,394 5,113 1,508 1,304 9,012 3,581

ASP(HKD/kg) 1,891 507 409 373 161 136 146 143 388 431 483 246 180 112

Poly-silicon Revenue(HK$ mn) 2,893 2,880 4,293 1,049 2,025 2,457 3,305 4,280 2,091 2,202 729 321 1,624 401

Wafer shipment (MW) 39 46 1,451 4,451 5,594 7,800 8,500 9,500 229 1,222 2,076 2,375 3,186 2,408

Wafer ASP(HK$/W) 2.33 6.42 6.33 4.20 1.94 1.55 1.63 1.55 6.16 6.36 5.50 3.07 2.10 1.76

Wafer Revenue(HK$ mn) 91 298 9,182 18,703 10,852 12,105 13,834 14,688 1,410 7,772 11,416 7,286 6,677 4,242

Other Solar Business(HK$ mn) 426 0 568 726 945 1,214 1,558 1,885 147 421 546 180 653 292

Solar Power Plant Project(HK$ mn)

2,581 390

2,581

Electricity 0 1,114 2,673 3,004 3,501 3,723 4,228 4,665 1,290 1,383 1,488 1,516 1,671 1,831

Steam 0 476 1,397 1,690 1,888 1,951 2,231 2,463 664 733 805 885 939 949

Coal 0 176 358 334 490 1,056 1,056 1,056 191 167 190 144 219 271

Revenue 3,948 4,944 18,472 25,506 22,348 22,896 26,211 29,036 5,794 12,678 15,174 10,332 11,782 10,566

YoY

25% 274% 38% -12% 2% 14% 11% 358% 245% 162% -19% -22% 2%

Gross profit 2,834 1,491 6,811 8,466 1,749 2,044 4,209 5,670 1,520 5,291 5,857 2,610 1,689 60

YoY

-47% 357% 24% -79% 17% 106% 35% 189% 449% 285% -51% -71% -98%

Operating profit 2,620 915 5,581 6,389 (1,732) (361) 1,588 2,911 1,163 4,418 5,072 1,317 607 (2,339)

YoY

-65% 510% 14% -127% -79% -539% 83% 167% 821% 336% -70% -88% -278%

Other non-operating gain(loss) (33) (972) (33) (550) (1,529) (1,078) (1,387) (1,092) (63) 42 (127) (423) (747) (782)

Net income 2,156 (200) 4,024 4,275 (3,516) (1,559) 21 1,397 788 3,249 3,610 665 (330) (3,185)

YoY

-109% -2114% 6% -182% -56% -101% 6520% 97% 1184% 358% -80% -109% -579%

EPS 0.40 (0.02) 0.26 0.28 (0.23) (0.10) 0.00 0.09 0.05 0.21 0.23 0.04 (0.02) (0.21)

Gross margin 71.8% 30.2% 36.9% 33.2% 7.8% 8.9% 16.1% 19.5% 26.2% 41.7% 38.6% 25.3% 14.3% 0.6%

Operating margin 66.4% 18.5% 30.2% 25.0% -7.8% -1.6% 6.1% 10.0% 20.1% 34.8% 33.4% 12.7% 5.2% -22.1%

Net margin 54.6% -4.0% 21.8% 16.8% -15.7% -6.8% 0.1% 4.8% 13.6% 25.6% 23.8% 6.4% -2.8% -30.1%

Total debt 7,779 8,572 14,232 32,382 36,447 38,168 35,168 32,168

Interest expense (72) (349) (606) (1,166) (2,309) (2,158) (2,017) (1,683)

Source: Company, OP Research

Exhibit 3: GCL Forward P/B Trent

Source: Bloomberg, OP Research

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 3 of 12

Exhibit 4: We expect global demand to increase 17% YoY to 36GW in 2013

Forecast

Country 2007A 2008A 2009A 2010A 2011A 2012A 2013E 2014E 2015E

Australia 0 10 23 320 837 1,000 1,500 2,000 2,500

Belgium 18 50 292 424 996 599 300 300 300

Bulgaria 0 2 7 11 105 767 200 250 300

Canada 10 28 58 105 297 268 300 500 1,000

China 20 45 160 520 2,000 5,000 10,000 10,000 11,000

Czech Republic 3 51 411 1,490 6 113 100 150 200

France 11 46 185 2,069 150 1,079 1,200 1,500 2,000

Germany 1,271 1,809 3,806 7,408 7,500 7,600 6,000 4,500 4,000

Greece 2 11 36 150 426 912 450 550 650

India 20 40 30 40 190 980 1,500 2,000 2,500

Israel 0 0 0 60 120 60 50 50 50

Italy 70 338 711 5,821 5,500 3,438 2,500 3,000 3,000

Japan 210 230 484 900 1,296 2,000 2,500 2,500 3,000

Portugal 14 50 32 16 47 49 220 250 280

South Korea 60 274 168 131 157 252 300 400 500

Spain 560 2,605 69 369 472 276 250 500 500

UK 4 6 10 45 813 925 1,000 1,500 2,000

USA 207 342 477 878 1,867 3,346 3,500 5,000 6,500

Rest of Europe 16 92 46 669 1,546 1,401 1,500 2,000 2,500

Rest of world 98 61 198 488 1,216 1,030 3,000 4,500 5,500

Total 2,594 6,090 7,203 21,914 25,541 31,095 36,370 41,450 48,280

YoY 135% 18% 204% 17% 22% 17% 14% 16%

Accumulated 9,585 15,675 22,878 44,792 70,333 101,428 137,798 179,248 227,528

Source: EPIA, OP Research

Exhibit 5: Global solar installation grows at 46% CAGAR for the past 15 years

(MW) 1998A 1999A 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A

Spain 0 1 0 2 9 10 6 26 88 560 2,605 69 369 472 276

Germany 10 12 40 78 80 150 600 850 850 1,271 1,809 3,806 7,408 7,500 7,600

USA 0 17 22 29 44 63 90 114 145 207 342 477 878 1,867 3,346

Japan 69 72 112 135 185 223 272 290 287 210 230 484 900 1,296 2,000

China 20 45 160 520 2,000 5,000

Southern Europe

86 399 779 5,987 5,973 4,399

Rest of Europe 8 11 10 16 16 50 30 30 37 52 247 951 4,708 3,616 4,884

Rest of the world 68 84 94 75 104 98 53 12 196 188 413 477 1,144 2,817 3,590

Total 155 197 278 335 438 594 1,051 1,322 1,603 2,594 6,090 7,203 21,914 25,541 31,095

YoY 27% 41% 21% 31% 36% 77% 26% 21% 62% 135% 18% 204% 17% 22%

Source: EPIA, OP Research

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 4 of 12

Exhibit 6: Polysilicon price starts to rebound in mid-Aug 2013

Source: PV Insight, OP Research

Exhibit 7: Solar Wafer spot price trend

Source: PV Insight, OP Research

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

1-Jul-09 1-Jul-10 1-Jul-11 1-Jul-12 1-Jul-13

(PolySilicon weekly spot price trend in $/kg)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1-Jul-09 1-Jul-10 1-Jul-11 1-Jul-12 1-Jul-13

6InPoly Wafer 6InMono Wafer

(Solarwafer weekly spot price trend in $/kg)

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 5 of 12

Exhibit 8: Solar Cell spot price trend

Source: PV Insight, OP Research

Exhibit 9: Solar Module spot price trent

Source: PV Insight, OP Research

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1-Jul-09 1-Jul-10 1-Jul-11 1-Jul-12 1-Jul-13

(Solar cell weekly spot price trend in $/kg)

0.00

0.50

1.00

1.50

2.00

2.50

1-Jul-09 1-Jul-10 1-Jul-11 1-Jul-12 1-Jul-13

(Solar silicon weekly spot price trend in $/kg)

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 6 of 12

Exhibit 10: Solar is reaching 6% of German electricity consumption

Source: EPIA, OP Research

Exhibit 11: Historical PV Production and Market

Source: EPIA, OP Research

0

10

20

30

40

50

0

2

4

6

8

10

Belgium Bulgaria Czech Republic

France Germany Greece Italy Spain

PV average contrubution to electricity consumption in 2012 (LHS)

PV maximum instantaneous contribution to electricity consumption in 2012 (RHS)

0%

20%

40%

60%

80%

100%

Pro

dcutio

n -

2000

Mark

et -

2000

Pro

dcutio

n -

2001

Mark

et -

2001

Pro

dcutio

n -

2002

Mark

et -

2002

Pro

dcutio

n -

2003

Mark

et -

2003

Pro

dcutio

n -

2004

Mark

et -

2004

Pro

dcutio

n -

2005

Mark

et -

2005

Pro

dcutio

n -

2006

Mark

et -

2006

Pro

dcutio

n -

2007

Mark

et -

2007

Pro

dcutio

n -

2008

Mark

et -

2008

Pro

dcutio

n -

2009

Mark

et -

2009

Pro

dcutio

n -

2010

Mark

et -

2010

Pro

dcutio

n -

2011

Mark

et -

2011

Pro

dcutio

n -

2012

Mark

et -

2012

Europe APAC Americas China ROW

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 7 of 12

Exhibit 12: China accounts for 35% global polysilicon capacity and 78%

wafer capacity

Polysilicon

Wafers

Source: EPIA, OP Research

China - Capacity35%

Europe - Capacity17%

APAC - Capacity20%

Americas -Capacity

28%

China -Production

27%

Europe -Production

20%

APAC -Production

19%

Americas -Production

34%

China - Capacity78%

Europe - Capacity8%

APAC - Capacity13%

Americas -Capacity

1%

China -Production

80%

Europe -Production

7%

APAC -Production

12%

Americas -Production

1%

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 8 of 12

Exhibit 13: China accounts for 71% global solar cell capacity and 73% c-si

module capacity

C-Si cells

C-Si modules (incl. high-efficiency modules)

Source: EPIA, OP Research

China - Capacity71%

Europe - Capacity5%

APAC - Capacity22%

Americas -Capacity

2%

China -Production

66%Europe -

Production

5%

APAC -Production

27%

Americas -Production

2%

China - Capacity73%

Europe - Capacity13%

APAC - Capacity11%

Americas -Capacity

3%

China -Production

69%

Europe -Production

14%

APAC -Production

13%

Americas -Production

4%

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 9 of 12

Financial Summary

Year to Dec FY11A FY12A FY13E FY14E FY15E

Year to Dec FY11A FY12A FY13E FY14E FY15E

Income Statement (HK$ mn)

Ratios

Turnover 25,506 22,348 22,896 26,211 29,036

Gross margin (%) 33.2 7.8 8.9 16.1 19.5

YoY% 38 (12) 2 14 11

Operating margin (%) 25.0 (7.8) (1.6) 6.1 10.0

COGS (17,039) (20,599) (20,852) (22,002) (23,367)

Net margin (%) 16.8 (15.7) (6.8) 0.1 4.8

Gross profit 8,466 1,749 2,044 4,209 5,670

SG&A/Sales (%) 6.9 8.9 7.4 7.0 6.5

Gross margin 33.2% 7.8% 8.9% 16.1% 19.5%

Payout ratio (%) 19.9 0.0 0.0 0.0 0.0

Other income/(expense) (321) (1,486) (716) (786) (871)

Effective tax (%) 21.7 (3.8) 2.1 14.9 15.0

SG&A (1,756) (1,995) (1,689) (1,835) (1,887)

Total debt/equity (%) 172.5 242.5 280.1 259.2 218.0

Total opex (2,077) (3,481) (2,405) (2,621) (2,758)

Net debt/equity (%) 129.2 195.9 212.3 206.5 176.1

Operating profit (EBIT) 6,389 (1,732) (361) 1,588 2,911

Current ratio (x) 1.03 0.73 0.64 0.68 0.77

Operating margin 25.0% -7.8% -1.6% 6.1% 10.0%

Quick ratio (x) 0.86 0.62 0.55 0.58 0.65

Provisions 0 0 0 0 0

Inventory T/O (days) 78 61 61 61 61

Other non-operating income 517 594 927 500 500

AR T/O (days) 165 232 232 232 232

Net Finance costs (1,070) (2,120) (2,023) (1,889) (1,595)

AP T/O (days) 211 190 190 190 190

Profit after financing costs 5,836 (3,258) (1,457) 199 1,816

Cash conversion cycle (days) 31 103 103 103 103

Associated companies & JVs 3 (4) 17 2 3

Asset turnover (x) 0.38 0.33 0.34 0.40 0.44

Pre-tax profit 5,839 (3,261) (1,439) 201 1,819

Financial leverage (x) 3.05 3.82 4.17 3.99 3.61

Tax (1,269) (124) 30 (30) (272)

EBIT margin (%) 25.0 (7.8) (1.6) 6.1 10.0

Minority interests (295) (130) (150) (150) (150)

Interest Coverage (x) 7.74 0.48 1.48 2.66 4.03

Extraordinary gain/(loss) 0 0 0 0 0

Return on equity (%) 20.8 (21.7) (10.6) 0.1 8.7

Net profit 4,275 (3,516) (1,559) 21 1,397

ROIC (%) 7.6 (6.3) (2.8) 0.0 2.7

YoY% 5 NA NA NA 805

Net margin 16.8% -15.7% -6.8% 0.1% 4.8%

Year to Dec FY11A FY12A FY13E FY14E FY15E

EBITDA 8,285 1,026 2,984 5,018 6,434

Balance Sheet (HK$ mn)

EBITDA margin 32.5% 4.6% 13.0% 19.1% 22.2%

Fixed assets 41,181 42,233 40,095 38,040 36,033

EPS (HKD) 0.28 (0.23) (0.10) 0.00 0.09

Intangible assets & goodwill 1,062 899 835 771 707

YoY% 6 NA NA NA NA

Long-term investments 388 451 469 471 474

DPS (HKD) 0.05 0.00 0.00 0.00 0.00

Other non-current assets 2,842 2,067 2,528 2,528 2,528

Non-current assets 45,473 45,650 43,927 41,810 39,742

Year to Dec FY11A FY12A FY13E FY14E FY15E

Cash Flow (HK$ mn)

Inventories 3,627 3,425 3,467 3,659 3,885

EBITDA 8,285 1,026 2,984 5,018 6,434

AR 7,040 8,681 8,894 10,182 11,280

Chg in working cap (4,744) (860) (259) (1,701) (1,313)

Other current assets 4,466 5,567 5,671 6,493 7,192

Others 1,033 2,351 927 500 500

Cash 6,883 4,496 6,302 3,889 3,191

Operating cash 4,574 2,517 3,653 3,817 5,621

Current assets 22,015 22,169 24,335 24,223 25,548

Interests paid (1,075) (2,222) (2,158) (2,017) (1,683)

Tax (1,857) (191) 30 (30) (272)

AP 7,628 9,128 9,240 9,749 10,354

Net cash from operations 1,641 104 1,525 1,770 3,665

Shorterm debt 11,582 19,705 27,115 24,115 21,115

Other current liabilities 2,242 1,607 1,626 1,716 1,822

Capex (14,866) (3,908) (1,145) (1,311) (1,452)

Current liabilities 21,452 30,439 37,981 35,580 33,292

Investments (59) (153) (461) 0 0

Acquisitions/Sales of assets 0 (451) 31 0 0

Bank loans & leases 20,800 16,741 11,053 11,053 11,053

Others (3,272) (798) 135 127 89

Others 3,102 2,867 2,867 2,867 2,867

Investing cash (18,198) (5,311) (1,440) (1,183) (1,363)

Non-current liabilities 23,902 19,609 13,920 13,920 13,920

FCF (16,557) (5,207) 85 587 2,301

Total net assets 22,134 17,771 16,361 16,532 18,079

Issue of shares and buy-back (44) 0 0 0 0

Minority interests 83 405 0 0 0

Shareholder's equity 20,567 16,210 14,651 14,672 16,068

Dividends paid (883) (1,427) 0 0 0

Share capital 9,310 8,463 8,463 8,463 8,463

Net change in debt 17,445 3,953 1,721 (3,000) (3,000)

Reserves 11,258 7,747 6,188 6,209 7,606

Others 7 (92) 0 0 0

Minority Interest 1,567 1,560 1,710 1,860 2,010

Financing cash 16,609 2,839 1,721 (3,000) (3,000)

BVPS (HK$) 1.43 1.15 1.06 1.07 1.17

Net change in cash 52 (2,368) 1,807 (2,413) (699)

Exchange rate or other Adj 325 (20) 0 0 0

Total debts 35,484 39,314 41,035 38,035 35,035

Opening cash 6,505 6,883 4,496 6,302 3,889

Net cash/(debts) 28,602 34,818 34,733 34,146 31,844

Closing cash 6,883 4,496 6,302 3,889 3,191

CFPS (HK$) 0.024 (0.154) 0.117 (0.156) (0.045)

Source: Company, OP Research

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 10 of 12

Exhibit 14: Peer Group Comparison

Company Ticker Price

Mkt cap

(US$m)

3-mth

avg t/o

(US$m)

PER

Hist (x)

PER

FY1 (x)

PER

FY2 (x)

EPS

FY1

YoY%

EPS FY2

YoY%

3-Yr EPS

Cagr (%)

Div yld

Hist (%)

Div yld

FY1 (%)

P/B

Hist (x)

P/B

FY1 (x)

EV/

Ebitda

Hist

EV/

Ebitda

Cur Yr

Net

gearing

Hist (%)

Gross

margin

Hist (%)

Net

margin

Hist (%)

ROE

Hist

(%)

ROE

FY1

(%)

Sh px

1-mth %

Sh px

3-mth %

Gcl-Poly Energy 3800 HK 2.43 4,851 35.7 N/A N/A 1,745.9 N/A N/A N/A N/A 0.0 2.07 2.25 22.8 22.4 194.1 7.8 (15.7) (21.7) (10.6) 20.9 49.1

HSI 23,138.54 10.7 11.1 10.3 (3.3) 7.9 4.7 3.3 3.5 1.46 1.38 13.6 12.4 3.6 13.0

HSCEI 10,517.28 8.3 7.8 7.2 5.7 9.0 8.4 3.9 4.1 1.26 1.16 15.2 14.8 2.8 16.5

CSI300 2,409.04 11.7 10.5 8.9 11.6 15.0 2.4 2.5 1.65 1.49 14.1 14.2 4.1 8.8

Adjusted sector avg* 42.6 36.3 26.5 35.5 193.2 (135.7) 0.5 0.1 1.27 1.49 (6.8) 14.9 102.9 (9.8) (33.7) (26.0) (7.7) 23.3 47.5

Thin Film Producer

Hanergy Solar Gr 566 HK 1.23 4,403 16.8 12.6 N/A N/A N/A N/A N/A N/A N/A 1.86 N/A 18.5 N/A 0.7 71.4 47.7 15.6 N/A 59.7 108.5

Polysilicon Producer

Comtec Solar 712 HK 1.93 331 5.7 N/A 42.3 16.7 N/A 152.8 (199.7) N/A 0.4 1.23 1.18 16.0 13.7 9.6 8.1 (16.1) (3.6) 3.0 6.0 12.2

Daqo New Ene-Adr DQ US 26.85 186 2.5 N/A N/A N/A N/A N/A N/A N/A N/A 0.92 1.66 (52.4) (3.3) 94.6 (43.1) (128.9) (43.6) (199.1) 168.6 159.4

Oci Co Ltd 010060 KS 180,000.00 4,010 30.4 81.8 N/A N/A N/A N/A 67.9 0.2 0.6 1.28 N/A 13.1 N/A 27.1 5.8 2.2 1.6 N/A 11.8 35.3

Wacker Chemie Ag WCH GR 75.81 5,384 6.5 33.4 178.8 39.2 (81.3) 356.1 10.8 0.8 0.2 1.82 1.68 5.6 7.3 29.1 17.5 2.4 1.4 0.8 (1.0) 30.6

Renewable Energy REC NO 2.85 1,105 19.7 N/A N/A N/A N/A N/A (120.8) N/A 0.0 0.83 0.93 1.3 15.2 25.7 N/A (84.4) (22.9) (9.2) (6.5) 24.5

Sunedison Inc SUNE US 8.50 2,265 50.1 N/A N/A 16.8 N/A N/A (200.4) N/A 0.0 6.04 5.15 22.2 16.9 265.1 13.3 (6.0) (39.6) (2.8) 15.6 4.6

Solar Wafer Producer

Ldk Solar Co-Adr LDK US 1.69 329 4.1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A (9.9) N/A N/A (40.9) (130.4) N/A N/A 7.0 30.0

Solargiga Energy 757 HK 0.39 162 0.5 N/A N/A 8.6 N/A N/A N/A N/A N/A 0.86 N/A (8.3) N/A 179.5 (29.2) (128.1) (55.4) N/A 5.4 0.0

Renesola Ltd-Adr SOL US 5.07 515 17.5 N/A N/A 46.1 N/A N/A (73.9) N/A N/A 1.40 1.56 (21.1) 19.0 221.9 2.7 (23.5) (45.2) (25.3) (10.1) 129.4

Sino-American 5483 TT 41.00 731 5.9 N/A 35.3 26.8 N/A 31.7 N/A N/A 8.5 1.14 N/A (25.7) N/A 25.7 (44.3) (54.1) (12.6) N/A 13.6 5.9

Green Energy Tec 3519 TT 23.25 273 3.0 N/A N/A N/A N/A N/A N/A N/A N/A 0.75 0.97 (12.5) N/A 104.6 (29.6) (36.3) (31.9) N/A 5.4 1.8

Danen Technology 3686 TT 14.45 130 1.7 N/A N/A N/A N/A N/A N/A N/A N/A 0.74 N/A (13.8) N/A 29.6 (81.6) (84.2) (17.3) N/A 12.5 21.4

Solar Cell Producer

Ja Solar Hol-Adr JASO US 10.81 468 21.7 N/A N/A N/A N/A N/A N/A N/A 0.0 0.63 N/A (14.0) 28.9 49.9 (0.8) (24.7) (26.0) N/A 24.7 54.2

Motech Industrie 6244 TT 56.30 839 8.1 N/A N/A 80.9 N/A N/A (67.1) N/A 0.0 1.78 2.11 (12.0) N/A 7.4 (26.9) (49.3) (30.7) N/A 33.7 43.1

Gintech Energy 3514 TT 31.65 421 6.2 N/A N/A 32.6 N/A N/A (156.0) N/A 0.0 0.88 0.95 (14,926.1) N/A 59.0 (4.7) (13.8) (14.7) N/A 21.3 8.2

Neo Solar Power 3576 TT 31.60 821 11.5 N/A N/A 66.8 N/A N/A N/A N/A N/A 1.33 1.40 (12.2) 12.9 14.1 (26.5) (34.0) (32.8) (7.6) 37.3 40.2

E-Ton Solar 3452 TT 15.50 412 3.0 N/A N/A N/A N/A N/A N/A N/A N/A 1.05 N/A (23.3) N/A 22.0 (51.5) (87.8) (22.5) N/A 25.5 24.0

Integrated Module Producer

Suntech Powe-Adr STP US 1.60 288 4.7 N/A N/A N/A N/A N/A N/A N/A N/A 0.36 N/A 26.7 N/A 188.4 12.3 (32.4) (48.0) N/A 60.0 58.4

Yingli Green-Adr YGE US 7.28 1,213 28.1 N/A N/A N/A N/A N/A (143.6) N/A 0.0 4.71 3.98 (20.6) 36.8 318.5 (3.2) (26.9) (105.8) (47.0) 37.6 119.3

Trina Solar-Adr TSL US 16.10 1,271 47.5 N/A N/A N/A N/A N/A (138.4) N/A 0.0 1.61 1.46 (12.4) 155.5 64.3 4.4 (20.6) (26.7) (14.3) 49.8 160.9

Canadian Solar I CSIQ US 19.37 894 42.1 N/A 26.7 6.2 N/A 332.1 (196.6) N/A 0.0 2.71 2.25 (30.0) 10.9 335.3 7.0 (15.1) (42.3) 12.5 43.8 69.5

China Sunerg-Adr CSUN US 5.27 78 2.1 N/A N/A N/A N/A N/A (117.1) N/A N/A N/A N/A (6.9) N/A 7,784.2 (0.4) (45.6) (183.7) N/A 69.5 166.2

Jinkosolar-Adr JKS US 23.82 407 18.4 N/A 34.8 14.9 N/A 133.6 (161.9) N/A N/A 2.50 2.02 (7.3) 7.1 244.4 4.8 (32.2) (50.7) 2.8 26.1 148.6

Hanwha Solar-Adr HSOL US 4.99 420 6.9 N/A N/A N/A N/A N/A N/A N/A N/A 1.09 N/A (8.3) N/A 142.7 (8.8) (42.5) (45.7) N/A 27.6 110.5

* Outliners and "N/A" entries are in red and excl. from the calculation of averages

Source: Bloomberg, OP Research

Fri, 04 Oct 2013

GCL-Poly Energy (3800 HK)

Page 11 of 12

Our recent reports

Date Company / Sector Stock Code Title Rating Analyst

26/09/2013 China Animal Healthcare 940 Benefit from sector consolidation BUY Min Li

24/09/2013 China Modern Dairy 1117 Positive JV arrangement for cash flow BUY Tracy Sun

18/09/2013 Biostime 1112 Begin a New Journey BUY Tracy Sun

12/09/2013 Great Wall Motor 2333 Monthly performance in-line HOLD Vivien Chan

11/09/2013 Comtec Solar 712 Mono wafer leading supplier BUY Min Li

09/09/2013 China Singyes Solar 750 Transition won't be easy HOLD Min Li

09/09/2013 Geely Auto 175 Domestic sales bounce back BUY Vivien Chan

09/09/2013 TCL Multimedia 1070 Aug shipment on track HOLD Yuji Fung

09/09/2013 TCL COMM 2618 Smartphone shipment reached record high in Aug BUY Yuji Fung

05/09/2013 Jiangnan Group 1366 Recovery expected in 2H13 BUY Min Li

04/09/2013 China Modern Dairy 1117 Raw milk price, continue to upswing BUY Tracy Sun

04/09/2013 Xiangyu Dredging 871 Expect a strong turn around in 2014-15 BUY Min Li

03/09/2013 Shengli Pipe 1080 Downward trend is unlikely to be reversed in the near

term

SELL Min Li

03/09/2013 Yongda Auto 3669 Downgrade on earnings disappointments HOLD Vivien Chan

02/09/2013 HC International 8292 Accelerating monetization via O2O and SME financing BUY Yuji Fung

02/09/2013 China All Access 633 1H13 results miss HOLD Yuji Fung

02/09/2013 ASR Holdings 1803 1H13 results in-line with 9.2% yield BUY Yuji Fung

30/08/2013 Bloomage Biotech 963 Reaching our Bull Case Target Price on strong HA

sales

BUY Min Li

30/08/2013 Mengniu Dairy 2319 Recovery is confirmed BUY Tracy Sun

30/08/2013 Honghua 196 Strong order backlog to support 2H13 growth BUY Min Li

29/08/2013 Zhengtong Auto 1728 Solid growth due to strong after-sales BUY Vivien Chan

29/08/2013 Boer Power 1685 EE segment showed strong growth momentum BUY Min Li

29/08/2013 SPT Energy 1251 Strong growth is expected to continue BUY Min Li

29/08/2013 China Modern Dairy 1117 Still Beautiful BUY Tracy Sun

27/08/2013 CIMC ENRIC 3899 Growth fairly priced in HOLD Min Li

27/08/2013 Want Want China 151 Resilient Growth HOLD Tracy Sun

27/08/2013 JUTAL 3303 Growth is still on track BUY Min Li

TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

By accepting this report, you represent and warrant that you are entitled to receive such report in accordance with the restrictions set forth below and agree to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of law or termination of such services provided to you.

Disclaimer

Research distributed in Hong Kong is intended only for institutional investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not an institutional investor must not rely on this communication.

The information and material presented herein are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Oriental Patron Securities Limited (“OPSL”) and/or its associated companies and/or its affiliates (collectively “Oriental Patron”) to any registration or licensing requirement within such jurisdiction.

The information and material presented herein are provided for information purposes only and are not to be used or considered as an offer or a solicitation to sell or an offer or solicitation to buy or subscribe for securities, investment products or other financial instruments, nor to constitute any advice or recommendation with respect to such securities, investment products or other financial instruments.

This research report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not to be relied upon in substitution for the exercise of independent judgment. Oriental Patron may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them. You should independently evaluate particular investments and you should consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities mentioned in this report.

Information and opinions presented in this report have been obtained or derived from sources believed by Oriental Patron to be reliable, but Oriental Patron makes no representation as to their accuracy or completeness and Oriental Patron accepts no liability for loss arising from the use of the material presented in this report where permitted by law and/or regulation. Further, opinions expressed in this report are subject to change without notice. Oriental Patron does not accept any liability whatsoever whether direct or indirect that may arise from the use of information contained in this report.

The research analyst(s) primarily responsible for the preparation of this report confirm(s) that (a) all of the views expressed in this report accurately reflects his or their personal views about any and all of the subject securities or issuers; and (b) that no part of his or their compensation was, is or will be, directly or indirectly, related to the specific recommendations or views he or they expressed in this report.

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance.

Oriental Patron, its directors, officers and employees may have investments in securities or derivatives of any companies mentioned in this report, and may make investment decisions that are inconsistent with the views expressed in this report.

General Disclosure

Oriental Patron, its directors, officers and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. Oriental Patron may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of Oriental Patron may be a director of the issuers of the securities mentioned in this report. Oriental Patron may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment or investment banking service to the issuers of the securities mentioned in this report.

Regulatory Disclosures as required by the Hong Kong Securities and Futures Commission

Oriental Patron (inclusive of OPSL) which are carrying on a business in Hong Kong in investment banking, proprietary trading or market making or agency broking are not a market maker in the securities of the subject companies mentioned in this report. Unless otherwise specified, Oriental Patron does not have any investment banking relationship with the companies mentioned in this report within the last 12 months. As at the date of this report, Oriental Patron do not have any interests in the subject company(ies) aggregating to an amount equal to or more than 1% of the subject company(ies) market capitalization.

Analyst Certification:

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Rating and Related Definitions

Buy (B) We expect this stock outperform the relevant benchmark greater than 15% over the next 12 months. Hold (H) We expect this stock to perform in line with the relevant benchmark over the next 12 months. Sell (S) We expect this stock to underperform the relevant benchmark greater than 15% over the next 12 month. Relevant Benchmark Represents the stock closing price as at the date quoted in this report.

Copyright © 2013 Oriental Patron Financial Group. All Rights Reserved

This report is being supplied to you strictly on the basis that it will remain confidential. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of Oriental Patron. Oriental Patron accepts no liability whatsoever for the actions of third parties in this respect.

CONTACT

27/F, Two Exchange Square, www.oriental-patron.com.hk Tel: (852) 2135 0205

8 Connaught Place, Central, Hong Kong min.li@oriental-patron.com.hk Fax: (852) 2135 0295