Chinese wind turbine maker Sinovel Wind Group Co slumped by nearly 10 percent in its Shanghai trading debut on concerns its stock is overpriced and that rising competition will slow its earnings growth.
The company, which raised 9.46 billion yuan (US$1.4 billion) in the first major share sale on the Chinese mainland this year, has set its initial public offering price at 90 yuan each - the top end of its indicative range of 80-90 yuan - hoping to bank on investors' strong demand for renewable energy stocks.
But its shares opened lower at 87 yuan Thursday, and tumbled 9.59 percent to 81.37 yuan at the close. The Shanghai Composite Index rose 0.23 percent.
"I'm not surprised Sinovel fell below its IPO level, given its high valuations and the overall weak sentiment in the market," said Chen Huiqin, a Huatai Securities analyst. "And wind stocks are not longer that attractive to investors."
Chen added Sinovel's price is set to fall when the lock-up periods of institutional investors expire.
Sinovel set the highest IPO price on the main board of the Shanghai Stock Exchange, way above the previous record of 36.99 yuan set by Shenhua Energy Co in 2007.
The IPO price valued Sinovel at a forward price/earnings multiple of 25 times. Sinovel's main domestic rival, Xinjiang Goldwind Sci & Tech Co, trades at about 17 times estimated 2011 earnings.
Sinovel, which builds turbines for Shanghai's Donghai Bridge Wind Farm, is set to grow at a compound annual rate of over 30 percent by 2015 and aims to become the world's top wind turbine maker by overtaking Denmark's Vestas and General Electric.
