DNB Markets cuts price target on Norwegian REC

Nov 30, 2011 - DNB Markets has cut the share price target on Renewable Energy Corporation ASA (OSL:REC), or REC, to NOK 6 from NOK 7, after the company announced on Tuesday further production cuts in Norway and warned of weaker fourth-quarter results.

The Norwegian solar group said yesterday it will start a process with the trade unions to suspend 60% of the capacity at the 650 MW multicrystalline wafer plant in Heroya as of December 1. REC also guided that compared to the previous quarter, lower sales prices and reduced sales volumes are expected to hurt its financial results in the fourth quarter of 2011, particularly in REC Silicon.

The fourth-quarter volumes in REC seem to be even lower than originally expected, and in addition, the company is building up inventories in all product categories, DNB Markets said, adding it has trimmed the price and volume estimates for the current quarter.

The broker believes that in the course of the low season in the first quarter, REC will also reduce capacity in polysilicon and panels.

However, DNB Markets does not share concerns that REC might issue new shares and does not fear a breach of loan covenants.

DNB Markets has a "buy" rating on the stock.

By 1000 CET today, shares in REC had lost 4.41% to NOK 3.56 on the Oslo Stock Exchange (OSE).

(NOK 1.0 = USD 0.169/EUR 0.127)

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