Credit Suisse Launches With Outperform Rating

Credit Suisse Solar ana;yst Satyua Kumar this morning launched coverage of Trina Solar (TSL) with an Outperform rating and $40 price target. The stock closed Monday at $26.09.

“While we see some risk to Q4 shipment volumes for the industry - TSL included - we believe TSL’s low cost structure, leverage to China demand and valuation are compelling,” he writes. Kumar contends there is “substantial alpha” in solar companies with low cost structures.

Kumar expects the company to post 2010 revenue of $841 million with EPS of $2.74, above the Street at $834 million and $2.32. His price target stems from 14.5x his 2010 EPS estimate. And he says that if growth in solar demand resumes in 2010, due to higher demand in the U.S. and China, price elasticity in other major markets, and improving credit conditions “there could be substantial upside” to his already above-consensus estimates.

First Solar Won’t Be Low-Cost Leader for Long, Says Trina Solar

For Trina Solar (NYSE: TSL), it won't be long before its solar panel manufacturing costs will fall enough to become comparable to the industry low-cost leader, First Solar (NSDQ: FSLR).

"Next year, our cost reduction roadmap will allow us to compete with First Solar in the balance of system level, so that module wise we will compete with them some time next year," said Terry Wang, Trina's chief financial officer, in a conference call to discuss the company's earnings late Monday.

Wang's comment came as the company returned to profit in the second quarter. Trina posted a net income of $18.9 million, or 71 cents per American depositary share, on $150 million in revenue. The Chinese company posted a loss of $10.6 million, or 42 cents per share, on a revenue of $132.1 million for the first quarter; and a net income of $17.1 million, or 68 cents per share, on a revenue of $204.2 million for the second quarter of 2008.

Trina posted much better quarterly financial figures than other Chinese solar companies over the past week. JA Solar and ReneSola delivered mixed results while LDK Solar performed poorly.

Trina makes solar panels using its own silicon cells. Silicon solar panels dominate the market today. Tempe, Ariz.-based First Solar makes cadmium-telluride panels and has grown quickly to become one of the top 10 (and only non-silicon) panel makers in the world.

First Solar has long prided itself on being able to keep its manufacturing costs low. The company lowered its production costs to $0.87 per watt in the second quarter from $0.93 per watt in the first quarter of this year. It expects to reach $0.65 to $0.70 per watt by 2012.

Its silicon competitors, in general, aren't able to compete on the pricing alone. Silicon panels are able to convert more of the sunlight that strikes them into electricity than cadmium-telluride panels. As a result, silicon panels are more suitable for rooftop installations, where space is a constraint.

First Solar has enjoyed a cost advantage partly because the price of silicon has historically been high. But silicon pricing has dropped significantly, as much as 50 percent for long-term contracts, over the past year.

The financial market crisis has made it difficult for developers to line up financing for solar power projects. Spain, which added a few gigawatts of solar in 2008 alone, now has a 500-megawatt cap for 2009. All these forces have led to an oversupply of silicon panels.

To fend off the silicon competitors, particularly those from China, First Solar plans to give out rebates to customers who do business in Germany, its largest market. The customers would get the rebates after an installation is complete.

Source

Trina profit tops estimates, co backs '09 view

 * Q2 profit $0.71/ADS vs Wall Street view $0.37

 * Q2 revenue down 26.5 percent to $150 million

 * Backs full-year shipment view, to expand capacity

 * Shares up 1.9 pct in extended trade
(Adds details on capacity expansion, polysilicon price,
byline, updates share activity)

 By Laura Isensee

 LOS ANGELES, Aug 17 (Reuters) - Chinese solar company Trina
Solar Ltd (TSL.N) posted a quarterly profit on Monday that beat
Wall Street expectations thanks to lower prices on its key raw
material, polysilicon.

 Shares rose 1.9 percent in extended trade after the company
also maintained its full-year shipments outlook and said it
would expand production capacity by the end of this year.

 "The fact they reaffirmed guidance tells us the solar
market continues to rebound in line with the company's
expectations," said Raymond James analyst Pavel Molchanov.

 Trina's rosy results marked a change from last week, when
Chinese solar companies JA Solar Holdings Co Ltd (JASO.O) and
LDK Solar Co Ltd (LDK.N) posted lackluster results and
Germany's Q-Cells AG (QCEG.DE) said it would cut a fifth of its
workforce as it is hit by a price slump in the industry.

 Solar power companies have suffered this year as the credit
crisis and a pullback in incentives in Spain have led to a
global glut of solar panels, driving down prices and eroding
companies' profits.

 One bright spot, however, has been the decline in the price
of polysilicon. On a call with analysts, Trina said that it
expected to reduce silicon costs by some 30 percent and to
compete with U.S.-based First Solar Inc (FSLR.O) on module
costs next year.

 PROFIT TOPS STREET, REVENUE IN LINE

 Changzhou, China-based Trina posted a second-quarter net
profit of $18.9 million, or 71 cents per American Depositary
share, compared with a net profit of $17.1 million, or 68 cents
per share, a year ago.

 The company said that the combined effect of an accounts
receivable write-off and foreign currency exchange gain was
about 30 cents per ADS.

 It was not immediately clear if those items were included
in the 37 cents a share analysts were expecting, according to
Reuters Estimates. However, even taking into account those
items, earnings were ahead of expectations.

 Revenue fell 26.5 percent to $150 million, about in line
with analysts' estimates and the company's own forecast.

 Trina said gross margins were 27.4 percent, compared with
23 percent in the second quarter of 2008.

 The company expects to ship between 90 megawatts to 110 MW
of photovoltaic panels in the third quarter, up from 64 MW of
shipments in the second quarter.

 For the full year 2009, the company repeated expectations
to ship between 350 MW and 400 MW of solar panels and to reduce
its manufacturing costs by 15 percent to 20 percent.

 On a call with analysts, company executives said they saw
"market confidence" and detailed capacity expansion plans.
While the company had 400 MW of capacity at the end of June, it
will ramp up to 450 MW by the end of September and will reach
600 MW by the end of the year.

 The company expects that its average selling price will
drop between 10 to 15 percent in the third quarter and a
further drop of 10 to 12 percent in the fourth quarter.

 Trina's shares rose to $26.92 in extended trade after
closing at $26.42 on the New York Stock Exchange.

 (Reporting by Laura Isensee and Nichola Groom, editing by
Robert MacMillan, Matthew Lewis and Bernard Orr)