Trina Solar's Momentum Will Continue in the Long Run

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Mar 30, 2015

Trina Solar (TSL, Financial) ended fiscal 2014 with an impressive improvement in its key metrics. Trina performed well on the back of strong performances across its downstream business, which led to record shipments. Trina is now optimistic about its performance in the future, as robust growth in the PV industry is creating opportunity for the company.

What's driving growth

The PV industry is growing and lower oil prices are also playing an important role in its growth. Since oil prices are not showing any signs of recovering soon, the PV industry is expected to grow by a good margin and Trina doesn’t want to let this opportunity go. Hence, it is now focusing on various aspects to improve its profitability. It is seeing growing shipments through U.S market as compared to 2013 and has now expanded its solar installation in China, Japan and the U.S. The company is expecting good response from these efforts and further declining module prices will lead it to good results, opening gates for it in other growing countries, too.

Trina is quite worried about the declining ASP. But in order to deal with this, Trina is laser focusing on cost reduction initiatives. It is investing significantly in R&D facilities which will help it to optimize its manufacturing process and enhancing its supply chain management. This initiative is expected to further reduce the manufacturing costs. It will be strengthening its cost-cutting initiative in 2015 as well.

Opportunities across the globe

Moving ahead, Trina is seeing good growth opportunities in China. It is pleased to see solid progress across its project pipeline in China. Considering this, it is putting efforts to grow its downstream business with a steady pace in China. On the other hand, Trina is also interested in developing DG projects in China which it thinks will be a solid growth driver to it in the long term. Under this, Trina has already completed some projects and is engaged in developing utility scale projects along with its module sales channels to further tap into the DG market, bolstering its downstream pipeline in 2015.

Moreover, Trina is also looking for new innovations in its product portfolio. The company already enjoys a solid image in terms of superior quality, innovations and efficient execution. To deepen this, Trina is now ramping its R&D commitments to deliver high quality products which will ensure its leading market position in future. In addition, Trina is expecting the global demand to rise by 60% and being in such a solid position, Trina is expecting to grow its sales better than the industry, further creating a leading position in the module manufacturing as well.

Conclusion

The stock with a trailing P/E of 24.22 is reasonable and the forward P/E of 8.78 shows steady earnings growth in the near term. The growing PV industry is expected to further add wings to Trina’s growth and in fact the stock can also be a solid long-term holding as its earnings are growing with a CAGR of 35.00% as compared to industry average of just 21.12%. Thus, Trina Solar is definitely a good pick as of now.