Trina Solar Looks Good, Though Market Yawns

Just another day of good solar news ignored by the market - today is Trina Solar's (TSL) turn. Some upside to previous guidance given in today's press release - market could care less. On $3.53 estimated 2008 earnings the company now trades at under 4x earnings. I'd be aghast except that I have multiple companies growing 50-100% year over year in the 2-5x earnings range now. (Emphasis mine, and my comments in italics.)

• Trina Solar Limited ("Trina Solar" or the "Company"), a leading integrated manufacturer of photovoltaic products from the production of ingots, wafers and cells to the assembly of PV modules, founded in 1997, today announced its selected estimated unaudited financial results for the third quarter of 2008.
• For the third quarter of 2008, the Company expects its net revenues to be in the range of approximately $285 million to $294 million, exceeding its previously forecasted range of $250 million to $265 million. The new range, which includes non-module income, represents an approximately 40% to 44% increase from its net revenues in the second quarter of 2008.
• During the quarter, the Company shipped approximately 66 MW of PV modules, compared to its previously forecasted range of 62 MW to 66 MW.
• As guided previously, the Company's gross margin for the third quarter is expected to be in the range of approximately 23.0% to 25.0%, and its operating margin is expected to be in the range of approximately 15.0% to 17.0%.
• "We expect to strengthen our operating cash flows over the third and fourth quarters of 2008, which combined with the proceeds from our senior convertible notes offering, will greatly enhance our cash position for future operations." (Smart to talk about cash since everyone is in fetal position over debt.)
• Based on customer commitments in signed contracts and the Company's current operating and market conditions, the Company believes it is on track to meet or exceed its full year 2008 targeted total net revenues of between $850 million and $900 million.

Disclosure: Long Trina Solar in fund and personal account

Comments

[Daryan:]

This market just sucks, and correlating Solar with Oil is just plain ridiculous. They have NOTHING, let me repeat this, NOTHING to do with one another. Well, unless you are short that is I guess. The move to clean energy has nothing to do with commodities and everything to do with a move towards renewable resources. I don't have a TSL position but am annoyed nonetheless.

2008 Oct 15 11:41 AM

[Alphameister:]

I own TSL also. My concern is whether projects supplied by the company are backed by sufficient capital. I would hope the company is making inquiries of its customers in this regard, and I would like reassurance on this issue from management if possible.

2008 Oct 15 01:43 PM

[Robert D.:]

You make a good point about the cash/debt problem. The alternative energy group took a big tumble with the market for various reasons, but specifically, the majority of these companies are relying on debt and credit lines to finance their operations. Also, while there are few companies with real sales, and profitability, the majority of them are speculative in nature, due to the lack of significant operations, and thus will pull the good ones down as well.

Even if a company is outperforming their sector, they will feel the pinch of a market drop, as money managers look to decrease their exposure due to a possible (and real) global slowdown.

Lastly, oil plays a part in the game, as alternative energy makes sense only if oil is high enough to push investments into alternative sources of energy. While the "green" factor plays as well, unfortunately, the real "green" factor is money... which source is cheaper?

Many people are waiting for 3Q and 4Q results, and we may have to wait to see how these results will change forecasts/expectations... The real reason to remain bullish on the sector is the global demand for this technology, specifically solar and wind. Both upcoming presidents are also currently bullish on alternative energy, so we could see a further push up after elections.

2008 Oct 15 04:40 PM

[PeteK:]

You must check out California's Nov 4th ENERGY INITIATIVE, or
MEASURE 7, if passed, will require gov. owned utilities to generate 20% of their electricity from renewable energy by 2010, to 40% by 2020 and 50% by 2025.
Chance of passing ? maybe 50/50.
If many States do the same like California, America will be cleaner for sure.
But you must ask your State and the Governor to support.

2008 Oct 15 05:02 PM

[Robert D.:]

en.wikipedia.org/wiki/...)

California (and other states in the south west) have access to much more sun power and wind power (and even geothermal), than the rest of the United States. From the looks of the groups opposing the Energy Initiative, the current financial crisis (very difficult to borrow money), and the decline in oil prices (we will never think long-term, always "what's cheaper"), i'd say the odds this initiative gets passed are less than 5%.

However, even if it does get passed, it is not something that will spread nation wide (at least with current technology available).

2008 Oct 16 09:05 AM

[CT Programmer:]

Peppio is more right than he realizes. The REAL push for alternative energy is not coming from the Feds. It's coming from the states that are gradually increasing the percentage of "alternative" energy that utilities must use. These are called RPS's (Renewable Portfolio Standards) and 29 states have them in place, including my home state of CT. California is just getting on board with this. This is a good article regarding RPS's: seekingalpha.com/artic.... Not only that, but many states have tax incentives for home use of "alternative" energy. CT will subsidize a huge chunk of a solar system you put on your roof. BUT, even with the subsidy it still is 15 years before you break even. As traditional energy costs rise, the ROI equation changes and makes alternatives more enticing even at the household level. But as energy prices back off like they have done recently, it does hurt the alternative energy market. It is very closely linked, although more to natural gas and coal than to oil.

2008 Oct 16 10:00 AM

[gebby:]

florida just created its own plan to address energy as well. big role for solar.

Although the plan's focus is on Florida, its release is timely and important to the national dialogue on the fate of climate change solutions during these economically troubled times. The authors state in no uncertain terms that they believe climate action is not a costly policy package best postponed for better times, but the central and vital engine of economic recovery.

The Action Team completes its charge during a time of economic uncertainty. While it may be assumed by some readers that the current economic environment would hamper Florida's progress toward a low‐carbon economy, the Action Team firmly believes that current economic conditions precisely sharpen the "call to action" first issued by Governor Crist in 2007. Now is the time for strategic investment in Florida's low‐carbon energy infrastructure if we are to be successful in diversifying the state's economy, creating new job opportunities, and positioning Florida's "green tech" sector as an economic engine for growth.

The plan is probably the most advanced and comprehensive of any climate program in the nation and provides of model for national emulation. A large number of climate actions are already being implemented, thanks to a series of Executive Orders and laws enacted by the Florida legislature. Governor Crist issued three orders in 2007. The state legislature, during its regular 2008 session, passed three bills, including House Bill 7135 (HB 7135), which contains many provisions that are moving Florida aggressively forward in energy security and climate change mitigation. Some of the recently enacted policies and programs are already in rule-making, and the state can point to a significant number of early achievements in state government greenhouse gas emissions reductions, private sector renewable energy projects, utility‐based solar energy, energy efficiency, and related research and development.

2008 Oct 16 01:37 PM