Yuanta University's research raised the rating of Sunshine Energy (0757.HK) from sale to purchase on the grounds that shipment volume expectations driven by demand in the 2010/11 fiscal year were strong, and the average price of wafers in the first quarter of 2009 was higher than expected. The company plans to actively expand production capacity and continue to take cost reduction measures to reduce profit margin volatility.

The bank raised Sunshine Energy's target price from HK$1.40 to HK$2.30. The new target price is equivalent to 16.9 times the price-earnings ratio for FY2011 and 1.9 times the share price to book value in FY2011. The bank adjusted the target valuation and valuation method, that is, from the median level of the interbank's stock price to book value ratio and the enterprise value to profit before interest, tax, depreciation, and amortization, to Sunshine Energy's expected 1-year stock price to book value ratio and price-earnings ratio to better reflect the company's transaction premium.

Sunshine Energy fell 0.59% yesterday to close at HK$1.68.