Rated `Overweight' at HSBC
March 26 (Bloomberg) -- Global wind-power stocks were rated ``overweight'' in new coverage at HSBC Holdings Plc, which said the industry has excellent growth prospects as the U.S. and European Union press for alternative sources of energy.
Gamesa Corporacion Tecnologica SA, Spain's largest maker of wind-energy turbines, and Clipper Windpower Plc, a U.K. rival, were named ``top picks'' and given ``overweight'' recommendations at the world's third-largest bank by market value. That means clients are advised to hold a higher proportion of those shares than the stocks constitute in benchmarks.
Even after ``strong'' share-price gains in the last two years, there is ``selective value in the sector and it has excellent growth prospects,'' analysts including Robert Clover in London and Burkhard Weiss in Dusseldorf wrote in a 217-page report released today.
The need for wind turbines will lead to annual earnings-per- share growth of 49 percent over the coming three years. Stocks in the industry are 60 percent cheaper than the general European market, the report said.
HSBC's initiation of coverage of wind-energy stocks implied an ``overweight stance'' on the industry, the analysts said.
World demand for energy will probably double between 2003 and 2030, and more than 10 percent of that is likely to be generated by renewable sources by then, up from less than 2 percent today. The costs of wind-energy technology have fallen so that it is competitive with fossil fuel as long as oil remains more than $49 per barrel.
State of Union
Profit in the wind-energy industry will likely grow by 11 this year, the analyst said, driven by a doubled demand for power, energy security and reductions in emissions until the year 2030, which they estimate will yield $2.5 trillion in investment.
The wind-energy industry is likely to benefit as the European Union, the U.S. and China seek alternatives to oil, gas and coal, the analysts wrote. They cited an E.U. white paper calling for cleaner and more sustainable energy, and U.S. President George W. Bush's emphasis on the need to develop more alternative sources of energy in his State of the Union address.
The analysts estimated the price of Gamesa shares at 29 euros each, saying the company has a ``fantastic track record of profitable growth,'' with a strategic focus of the faster- expanding market in the U.S. and China. Their price estimate for Clipper is 825 pence.
Gamesa, Vestas
Gamesa shares advanced 0.7 percent to 25.42 euros in Madrid and Clipper gained 5.2 percent to 581 pence in London as of 1:16 p.m. in London.
HSBC has a ``neutral'' recommendation on Vestas Wind Systems A/S, the world's largest maker of wind turbines, and Nordex AG.
In the last six months, Vestas Wind Systems shares have doubled, making Vestas the best-performing stock in the Dow Jones Stoxx 600 Index, while the pan-European benchmark increased 12 percent over the same period. The stock now trades close to HSBC's price estimate of 320 kroner.
Vestas jumped 2.6 percent to 313 kroner in Copenhagen, while Nordex declined 1 percent to 24.51 euros on the Frankfurt bourse.
A bidding war for Repower Systems AG between Areva and Suzlon Energy Ltd. has led to speculation of more mergers in the industry, the analysts wrote, saying that while the top five companies make up 80 percent of the market, there is a ``long tail of smaller players'' that may be acquired.
Suzlon is rated ``underweight,'' the analysts said, citing risks to both earnings and revenue. The company's gross profit margin will probably fall on the back of its ``aggressive international expansion,'' leading to higher shipping costs.
Suzlon dropped 2.65 percent to 977.25 rupees in India. |
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