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Bachman Maintains BUY and $41 Price Target on Trina Solar (NYSE:TSL)

Feb 23, 2011
Author: SCP Editor

February 23, 2011 – Analyst Comments – Auriga’s Bachman reiterated his BUY rating on Trina Solar (NYSE:TSL) and price target at $41, noting that its financial results and report largely exceeded Q4 results and FY11 guidance.  

Financial Results

Reported FY10 revenues of $1.85 billion, compared to $845 million for the FY09, with gross margins of 31.4% and 28%, respectively. FY10 net income was $311 million, or $4.18 per diluted ADS, compared to net income of $96 million for the FY09. Solar module shipments in Q410 were about 351MW and for the FY10 reached about 1.06GW.

In terms of guidance, management expects higher shipment volume for PV modules in Q111 over Q410, with gross margins relating to in-house production to be about 30% and overall gross margins in the high 20% range. For FY11 it expects total PV module shipments between 1.75GW to 1.8GW.By the end of FY11, it expects non-silicon costs of about $0.70/watt.  

It expects to increase annualized in-house ingot and wafer production capacity, as well as PV cell and module capacity to reach about 1.2GW and 1.9GW respectively in the 2H11. It expects cell efficiencies for multicrystalline cells by the end of FY11 to up to 18.5% on a test production basis, and noted that it is targeting 20% cell efficiency in the middle of 2012, and 21.5% in 2013.

Key Takeaways:

·         Increased input costs have impacted the income statement, and thinks Trina should be more immune than its smaller competitors lacking long-term sourcing agreements;

·         Progress towards reducing non-poly silicon moving slower than expected but should improve to $0.70/watt by Q411;

·         Raising FY11 revenue estimate substantially to reflect capacity increase, while EPS advances more slowly due to higher cost structure;

·         Price target of $41 is 10x revised FY12 EPS of $4.13, up from $4.09


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