Friday, November 20, 2009

Trina Solar Trumps Them All (TSL)

Trina is trading down 2.87% at $44.26. The stock is extended, having risen some 500+% from the March low.

That said. I don't think the headline overstates the advantages TSL has over the competition.
A couple years ago management had a reputation for lousy shareholder relations. No one talks about that now. Their design and execution of the company's business model has been superb.
From an almost fanatical attention to costs to the controversial June '08 decision to change the "functional currency" from the Renminbi to the buck, management has been ahead of the competition.
As I said yesterday:
"Trina is becoming recognized as the class of the field."
They bolstered the balance sheet with a follow-on stock offering that spanked the stock in the short run while setting the company up to deal with the credit crunch with a flexibility that their peers would kill for. You get the picture, I'm impressed.
From Motley Fool:
We've seen a lot of sunny solar reports this season. SunPower (Nasdaq: SPWRA) (Nasdaq: SPWRB) set a positive tone, which has been carried on by the likes of JA Solar (Nasdaq: JASO), Canadian Solar (Nasdaq: CSIQ), and Yingli Green Energy (NYSE: YGE). Strong results, all, but Trina Solar (NYSE: TSL) truly stands out from the crowd this quarter.

Trina is just killing it as a cost leader in the manufacture of solar modules. In the third quarter, the Chinese shop achieved gross margins of 28.5%, well ahead of guidance....MORE
Here's the transcript of yesterday's earnings call.
We have quite a few posts on Trina, here are the results of a quick 'Search Blog". We've been following this one since April 2008, here's a post from September 11 of that year, four days before Lehman failed:
"...Trina has a very odd management style. On the one hand they have made blunder after blunder in shareholder relations. On the other, they have shown some very forward strategic thinking. One example is the move into the Italian market. They started that process a year ago when the rest of the industry was dreamin' Castilian. Trina is in Spain, but their work in developing an Italian business resulted in our July 29 post "Trina, Suntech in supply deals with Italy's Enel (STP; TSL; ENEI.MI)".
Enel is Italy's largest and Europe's second largest listed utility.

And why did we know they would be coming to the U.S.?
You need Underwriters Laboratory certification to sell here. From our June 13 post "Trina Solar Q1 Conference Call Transcript on the Currency Change (TSL) ":
Two points upfront, the currency change was not a one time, first quarter, event.
The change from the Renminbi is looking smart for a couple reasons:

1) TSL's geographic diversification (26% market share in Italy, 25% of projected second half sales see: Solar: Arrivederci Germania, Viva Italia!) includes a push into the U.S. where they are currently one of three Chinese manufacturers with U.L. certification, U.S. business will be 6% of shipments in the second half, up from zero....
This stuff isn't rocket surgery."
One BIG caveat, all the alt-energy companies are currently dependent on politicians for their survival. This means you really have to pay attention to the politics/policy mood or you might wake up one morning to find all the stocks down 60%.

The simple fact is: the electricity they produce is more expensive than the cost of current base-load. As Trina drives down costs they a) become more profitable and b) get closer to the Holy Grail of grid parity. They aren't there yet however.
Here's where they are:
Trina Solar: First Solar Won’t Be Low-Cost Leader for Long (FSLR; TSL)