Trina Solar Ltd. (NYSE: TSL) is scheduled to release its fiscal fourth-quarter 2009 financial results before the opening bell on Wednesday, February 24, 2010. Analysts, on average, expect the company to report earnings of 60 cents a share on revenue of $282.35 million. In the year ago period, the company posted a loss of 2 cents per share on revenue of $216.34 million.Trina Solar Limited, through its subsidiaries, designs, develops, manufactures, and sells solar modules. It offers monocrystalline PV modules ranging from 165 watts to 230 watts in power output; and multicrystalline PV modules ranging from 210 watts to 230 watts in power output for use in residential, commercial, industrial, and other solar power generation systems.
In the preceding fiscal-third quarter, the Changzhou, China-based company reported that its net income rose to $40.11 million or $1.29 per American Depository Shares, or ADS, from $32.05 million or $1.17 per ADS in the previous year. Net revenue for the quarter dropped 14.1% to $249.75 million from $290.72 million, reflecting lower module average selling prices.Analysts, on average, expected the company to report earnings of $0.75 per ADS on revenue of $216.30 million. Gross margin climbed to 28.5% from 22.4% and gross profit advanced year-over-year to $71.07 million from $65.19 million, mainly attributable to lower average silicon purchase prices. For the three-month period, solar module shipments were around 123 MW, up 84.7% from the previous year.
The company said in November that it is seeing even stronger demand in the fourth quarter, reflecting increasing brand recognition for our products and a further improvement in financing conditions.
For the fourth quarter, the company foresees shipments to range between 145 MW and 165 MW of PV modules and expects gross margin of 25% - 27%. For the full year, Trina Solar expects total PV module shipments to range from 380 MW to 400 MW, compared to its earlier guidance of 350 MW - 400 MW. Trina expects to have between 850 and 950MW of cell manufacturing capacity online by the end of 2010.
Last month, Trina Solar announced that the Chinese government has picked the company to establish a key state solar laboratory. The approval is a big boost for the company as it means new business and strong support from China's central government.
Recently, Trina Solar announced that it has developed a square monocrystalline-silicon cell with enhanced power output utilizing a proprietary improved photovoltaic cell manufacturing process. The company said that the advanced cell structure should significantly boost cell conversion efficiency, achieving up to 18.8% in test laboratory production.
Among other developments during the quarter, the company announced the change of ratio of its ordinary shares to American Depositary Shares or "ADSs" from one hundred ordinary shares to one ADS to fifty ordinary shares to one ADS, effective on January 19, 2010.
Thanks to better cost advantages, Chinese solar module maker have grabbed more market share from their international competitors. Local solar companies have also benefited from China's well-developed supply chain, cheap electricity, supportive policies and even low environmental standards. Trina's global market share is estimated to have reached 6 to 7 percent in 2009, up from 3.5 percent in 2008, according to Sean Tzou, the chief operating officer of Trina Solar Limited.
The demand for solar power products has picked up after a difficult 2009, when the turmoil in the credit market forced financial players to abandon U.S. solar energy projects. The 2008 collapse of top solar financier Lehman Brothers and the freeze-up in the global credit markets drove nearly all banks to halt funding for major new solar projects, forcing the makers of systems that turn sunlight into electricity to cut prices for their products and sending their stocks crashing. The problems of solar companies had been further compounded by an oversupply of polysilicon, a material used in solar panels.
The solar industry is poised to benefit from growing attention to global warming, skyrocketing oil prices, cheap financing and technological advances. At the Copenhagen Summit held in December 2009, the five major polluters of the world agreed to take action to reduce CO2 aggressively, with $100B per year pledged to help developing nations adopt green energy technology to cut greenhouse gas. Meanwhile, the US, China, Brazil and India continue to invest heavily in wind and solar energy with China's $454B in the next 5 year period as the most aggressive one. As part of the stimulus bill signed last year, the federal government approved around $60 billion in loan guarantee authority and $30 billion in energy grants for renewable energy and transmission companies. Congress has also granted a 30% renewable-investment tax credit to help expand the development of alternative sources of energy.
In the near term, the solar industry is facing an important challenge in the form of reduced government subsidies. Globally, solar industry depends upon government subsidies and incentives and support to remain competitive. However, recent developments suggest that subsidies will inevitably be reduced or phased out. According to media reports, the German government is planning to cut solar subsidies for new roof and open-field sites from April by 16 percent to 17 percent. Additional cuts to the subsidies will be made from 2011 if solar projects amount to more than 3,000 megawatts, and even more if they total more than 3,500 megawatts. Already, France in January slashed the tariffs for electricity produced from rooftop solar panels by 24 percent. Spain too has taken similar steps. Most solar panel maker generate the bulk of their revenue from Europe.
The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 13.67 and PEG Ratio (5 yr expected) of 0.88. In terms of stock performance, Trina shares have gained 513 percent over the past year.
Full Disclosure: None.
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