Trina Solar (TSL) – Introduction

Trina Solar a Chinese Solar module manufacturer incorporated in Cayman Islands had an initial public offering (IPO) of their American Depository Shares (ADS) on December 2006 – each ADS representing 100 ordinary shares. The follow-on offering was on June 2007. Combined they totaled roughly 11M shares. At IPO time, the shares traded at around $20 per share. In July 2007, following the announcement of several solar module contract wins in Europe, the share price peaked at $71 per ADS. The current relatively small float of only about 21M shares makes them especially volatile.

As elaborated in our article that compares vertically integrated solar manufacturers, Trina is one of the few fully integrated polysilicon based solar manufacturers. Their standard monocrystalline solar modules range from 160 watts to 185 watts and multicrystalline solar modules range from 190 W to 220 W in power output. Initial production lines were for monocrystalline solar modules, and in November 2007, production began on multicrystalline modules. Though multicrystalline modules tout lower production costs it is to some extent offset by lesser conversion efficiency. For e.g., Trina’s conversion efficiency for monocrystalline and multicrystalline-based products are expected to approach 17% and 15.3% respectively by the end of 2008.

Trina Solar enjoyed tremendous growth in the past five years. Revenue soared from just over $2.7M in 2003 to over $300M in 2007 accounting for an impressive compounded annual growth rate (CAGR) of about 225%. This growth rate is expected to be maintained. Revenue for 2008 is projected to be 770-808M range representing a year-over-year (YOY) growth in the range of 155-170%. For a billion dollar company, growth in those ranges is remarkable. Net margin however has come down from the 20% range in 2003 to the low-teens in 2007 and is anticipated to remain low for 2008.

Polysilicon the base raw material used in the integrated value chain by Trina Solar has seen a multi-fold price hike from the $50-60 range to the $400 range due to increased demand. This has led most solar companies to procure polysilicon from silicon recycling facilities. By using a proprietary mixing mechanism they are able to fabricate solar modules of the same specifications as those produced by the virgin polysilicon sourced modules. This held down the costs during the initial months, but when recycled polysilicon pricing amplified in its turn, all associated advantage disappeared. The Holy Grail with regards to poly pricing is in the offing as a large number of poly production plants are expected to come online in the 2009-2010 timeframe improving supply. Margin contraction over the years can be fully traced back to an increasing pattern of polysilicon sourcing costs combined with a relatively steady average selling price (ASP).

Trina Analysis:

1. Trina Solar (TSL) - Part 1 - Introduction.
2. Trina Solar (TSL) - Part 2 - Business Issues.
3. Trina Solar (TSL) - Part 3 - Outlook.

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3. Solar Manufacturer Comparison (STP, TSL, YGE, CSIQ) - 11/07.
4. Suntech Power Holdings (STP) - Stock Analysis - 09/07.

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