Nomura said GCL Poly Energy’s 1Q operating results were disappointing, with the company’s wafer and polysilicon shipments largely flat q-q. The research house believes this suggests consolidation is taking longer, which is further reflected in the continued decline in ASPs. While management expects ASPs to stabilize in 2H, Nomura noted pricing is already very low, thus keeping profitability constrained. The house remains conservative on GCL given ASPs continue to decline on oversupply, contribution from the project business likely to be 2H-end loaded, and worsening macro- economic conditions. The house maintained its “neutral” call, with a target price of HK$2.30.

CIMB cuts GCL-Poly Energy target cut to HK$1.25 from HK$1.80 as the house changes the valuation of the solar business from discount cash flow to 1.12X P/BV, on par with leading polysilicon producers. The house says the company’s 1Q12 gross margin squeeze from low product prices confirmed its negative view on the company. CIMB adds that the bleak market outlook and stubbornly low wafer prices make a net loss for this year inevitable. “We change our valuation basis because investors would look for tangible value given the loss-making situation. We expect further earnings downgrades by the market, putting further pressure on the share price,” says CIMB.

Citigroup cuts GCL-Poly Energy’s target to HK$1.70 from HK$2.00 after lowering its 2012-14 estimates by 5%-14% to factor in more conservative pricing and a solar farm ramp-up. The house lowers its estimates on concerns of a margin contraction, and maintains a cautious view given limited clarity on the company’s solar farm business, which the house estimates will account for 35% of 2012 net profit. “We see downstream cell/module cost-leaders as better plays on rising utilization rates, until we see a better poly-si supply/demand metric,” Citigroup says. It keeps the stock at Sell. GCL-Poly Energy slides 7.2% to HK$1.67.

JP morgan tweaked its target price for GCL Poly Energy to HK$1.7 from HK$1.8, and maintained its “underweight” rating. It noted that the company reported poor 1Q operational results from double whammy of lower ASPs and higher costs. GCL guided for 50,000MT poly production in 2012, ASPs to stabilize in 2H, and expects 35GW of global demand, including 6GW in China. But JPM thinks this demand target may be overly optimistic given Italy’s GSE reported just 564MW connected in 1Q versus 10,027MW connected for 2011.