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Cowen & Company’s Rob Stone cut estimates this morning on China Sunergy (Nasdaq:CSUN: Summary, Messages, Articles), based on lower estimates and ASPs. He is forecasting a loss for Q4. On the positive side, he said margins in 209 should benefit from price declines in spot material costs, improved wafer quality and higher efficiency cells. Stone is maintaining a NEUTRAL rating on CSUN.

China Sunergy reported Q3 revenues this week of $199 million, an increase of 142.9% Y/Y and a 6.6% increase over the previous quarter. Gross margins were unimpressive, at 9.3% for Q3, and net income was $2 million, compared to a net loss of $4.3 million for the same period last year, and net income of $4 million in the previous quarter. Management acknowledged that the market conditions have been deteriorating which has results in some canceled orders, and ASP erosion. It said further that we should expect ASP erosion again the Q4, which will significantly impact results for the quarter and the full year.

In terms of outlook, management guidance is for negative gross margin in Q4, with production volume in the range of 15-20MW, and FY08 production guidance of 107-112MW. For FY09, management expects production to be in a range of 180-210MW including 20% from OEM business. It expects gross margin in 2009 in a range of 15% to 19%.

The stock is now trading at 0.66x book value, and 1.1x its cash position, which is cheap, but in light of the ASP challenges that the business is facing in the near term and the relative size of the business, we think it will have more difficulty in the current environment with its larger peers.

Here is what other analysts are saying:

· Jeffries & Co. rate at BUY with price target of $15 (8/25/2008), but the Nasdaq is also off about 38% since August 25. Jeffries Analyst Paul Clegg was on CSUN’s earnings conference call so we would expect that he update his coverage in the next couple days.

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