I continue to believe
Trina Solar (TSL) is an undiscovered story in the solar space - however pending dilution due to its controversial decision to expand into the polysilicon production space has caused a long head wind. Today
Cowen upgraded the name causing a nice 5% spike in an ugly tape. I am going to use this jump to sell down more of the position here in the mid $36s range - again I am playing very conservative right now in this market - this does not mean Trina will fall in price; I am simply reducing risk.
Trina Solar remains dirt cheap on a valuation basis, but until we hear how exactly the company plans to fund it's polysilicon adventure we remain at risk on a daily basis from waking up to a 10-15-20% type of dilution announced overnight (and associated stock sell off). Frankly, I am flabbergasted that nearly half a year after announcing this new direction there has not been clarity on the funding - I can only assume they are waiting for a spike up in the stock price before issuing new shares...
Technically, the chart is showing first signs of life in months...and the % of secured polysilicon (as opposed to needing to go the spot market) is a big plus for Trina.
- Cowen is out positive on Trina Solar (NYSE:TSL) this morning raising their Street high 2008 estimates to to reflect the new GCL supply deal, which boosts secured silicon to 95% of targeted production. We believe Street consensus is too low on operating margin, and too high on interest expense (poly plant interest should be capitalized). Silicon coverage for 2009 also looks good, with perhaps 15% still to come from new sources.
- Raising 2008E E/ADS To $4.05 Vs. Prior $3.64, Street $2.90. They raised revenue to $750MM (vs. prior $710MM, St. $709MM), based on shipments of 195MW (in line with 95% coverage of 200-210MW target). Since 15% of poly is covered by the new contract, they boosted GM by 50 b.p., to 23.8% (vs. St. 23.1%).
- Sees 50%+ upside vs. the market in 12 months and reiterates Outperform.
Long Trina Solar in fund; no personal position
