...Considering the improving conditions and outlook, we have revised our price estimate for Trina Solar from around $8.50 to about $14.50. In this note, we provide an overview of some of the key changes to the drivers for our valuation model and the resulting impact on the Trefis price estimate for Trina Solar.
China is going to be a key driver of growth in the near term; the Chinese government recently increased its solar installation target for 2014 by around 2 GW to 12 GW, meaning that the country will account for close to a quarter of new global solar installations next year. Trina Solar is one of the country’s largest panel manufacturers, deriving more than 25% of its revenues from the Chinese market, and we believe that it could be well poised to improve its shipments as the market expands. We have increased our estimates for Trina’s shipments to the Chinese market to around 1.95 GW by 2020 versus our previous estimate of around 1.70 GW. We have also revised our forecasts for the company’s other geographic segments in line with current trends, increasing total shipments to about 5.4 GW, up from our previous estimate of around 4.9 GW....
..Trina Solar has been focusing on developing its utility-scale solar business, building large-scale solar power plants. This business is more lucrative for solar companies, as it allows them to capture additional value by providing solar panels along with other balance of systems equipment and the related engineering, procurement and construction services. While this business is still relatively small when compared to the company’s panels business, we believe that it could grow substantially The company is estimated to have a development pipeline of over 500 megawatts (MW) currently, most of which is located in China.
...Trina Solar has taken some significant strides in reducing its cost base over the last few quarters. The company’s manufacturing costs have been improving on a per-watt basis due to higher capacity utilization rates, which improves the allocation of fixed production overhead, as well as increasing conversion efficiencies for panels, which reduce the quantity of raw materials and consumables required to manufacture each watt of panels. Considering the improving trends in the company’s manufacturing costs as well as the company’s push into the higher-margins solar projects business, we have increased our gross margin forecasts (adjusted for depreciation and other non-cash items) to around 27.5% by the end of the Trefis forecast period.
Our revised price estimate for Trina Solar stands at about $14.50, up from around $8.50 previously. Breaking up the price impacts of our driver changes, the revised gross margins forecasts increased the price estimate by roughly $2 per share while the higher shipment forecasts raised the price estimate by around $2.50 per share. The higher average selling prices impacted the price estimate by roughly +$2 while the change in the company’s net debt position negatively impacted the price estimate by around $0.50 per share, resulting in a net $6.00 increase to our price estimate.
seekingalpha.com/article/...r-margins-and-utility-scale-focus?
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