Solar PV makers are facing a tough second half of 2011. Forecast supply is expected to exceed demand, and virtually every solar supplier is seeing its stock price head south. A few companies have announced share buybacks in an effort to jump-start share prices. That probably won’t help much.

LDK Solar Co. Ltd. (NYSE: LDK) said this morning that it would repurchase up to $110 million worth of its ADSs either on the open market or through privately-negotiated sales. JinkoSolar Holding Co. Ltd. (NYSE: JKS) announced a similar plan in May to buy back $30 million in its ADSs. Solar equipment maker GT Solar Inc. (NASDAQ: SOLR) coughed up $203 million in late 2010 to buy back and retire some 26.5 million of its shares. Other solar makers that might follow suit include Suntech Power Holdings Co. Ltd. (NYSE: STP), JA Solar Holdings Co. Ltd. (NASDAQ: JASO), and Trina Solar Ltd. (NYSE: TSL). JA Solar approved a $75 million stock buyback in late 2009.

Analysts currently have LDK Solar pegged with a median price target of $10.50/share. Following today’s announcement, the shares have gained about 7.5%, to $7.32, in a 52-week range of $5.00-$15.10. The company’s trailing P/E is just 2.36, and its forward P/E is only slightly better at 3.12. Its price-to-book ratio is 0.73 for its most recent quarter. This is a very good value for investors who believe that the solar sector is undervalued.

JinkoSolar has a median price target of $34.75. Shares are trading up about 0.4% today, at $25.07, in a 52-week range of $9.66-$41.75. The company’s trailing P/E is 3.19 and its forward P/E is 3.78. It’s price/book ratio is 1.28. Perhaps a value, perhaps not.

JA Solar carries a median price target of $7.75, and is trading down about -0.7% today, at %5.53, in a 52-week range of $4.48-$10.24. The company’s trailing P/E is 3.09 and its forward P/E is 4.67. The price/book ratio is 0.82.

Trina Solar has a median price target of $32.00, and is trading today at $20.52, up about 0.4% in a 52-week range of $17.00-$31.89. The company’s trailing P/E is 4.94 and its forward P/E is 5.73. The price/book ratio of 1.17.

Of these four Chinese solar PV makers, LDK appears to be the most undervalued, though not by much. JA Solar, too, has a price/book ratio less than 1, indicating that these two could offer some significant upside. By this measure, LDK may have done the right thing by buying back some shares.

Depending on how successful LDK is in boosting its share price, it’s possible that Trina and JA Solar could spend some of their cash to try to prop up their share prices. Trina had $791 million in cash at the end of 2010, while JA Solar had about $365 million. JinkoSolar, with about $172 million, may not be able to afford a buyback.

In the end, though, buybacks are not likely to boost the solar PV makers significantly. Oversupply and lower demand mean lower margins and reduced profits. Buying back stock won’t help that.

Paul Ausick

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