Another good quarter for Trina Solar (TSL)

Some of the main points from earnings: 

From the PR:

  • Profit more than doubled in the second quarter, as shipments of solar modules increased and profit margins improved.
  • TSL earned $17.1 million, or 68 cents per share, compared with $7.4 million, or 32 cents per share in the same period a year ago. Revenue nearly tripled to $204.2 million from $75.3 million, and the company raised its expectations for the year.
  • The results also included a one-time charge of $6.1 million, or 24 cents per share, because of the yuan’s greater strength against the U.S. dollar. Trina also took a one-time charge of $2 million, or 8 cents per share, as it ended a polysilicon project in Lianyungang.
  • On average, analysts expected a profit of 81 cents per share on $197.6 million in revenue, according to Thomson Reuters.
  • Trina Solar reported a profit margin of 14.3 percent for the quarter — well above its margin of 10.7 percent a year ago, although it fell below the company’s first-quarter results due to higher materials costs and the charge for the termination of the Lianyungang project.
  • It credited the improvement to greater vertical integration, as the company makes its own solar cells.
  • The company shipped solar modules with a total of 47.6 megawatts of power, more than twice its total from a year ago and well above its first-quarter results. A one-megawatt plant running continuously at full capacity can power 778 households each year, according to the U.S. Department of Energy.

After the blockbuster results of other solars (most notably LDK), this was sort of expected. It still a company with triple digit top-line and bottom-line growth.

The only slight blemish we could detect is that one-time charges of 24 cents and 8 cents, without that earnings per share would have been a dollar, easily surpassing analyst expectations of 81 cents per share:

  • The 8 cent charts is due to the ending of the poly plant, that’s not a problem
  • But the 24 cents charge is surprisingly large. Currency movements between the yuan and dollar are not that big during a quarter. This starts to bug us a little, we have to be honest.

Some other points:

  • The company said it has secured about 95 percent of its estimated silicon requirements for 2008 Earlier this month, both LDK Solar  and Yingli Green Energy Holding Co Ltd said they expected silicon prices to improve in the fourth quarter of this year.
  • Silicon costs will stay flat in Q3 and decline in Q4, just as those other solar companies expect.
  • Usage per watt was 7.2/watt, an improvement from 7.5/watt in the last quarter
  • The company expects margins to improve despite lower average selling prices for its modules. Industry experts anticipate that the average selling price of modules has to fall, so as to make them more cost competitive.
  • Silicon costs per watt was aprox. 1.87/watt. Efficiencies increased to 16.8% and 15.6% for mono and multi crystalline cells.
  • Processing costs improved a tad to 1.15/watt on target to get it to 1.05/watt by year end. Next year we’ll see another 5-10% improvement next year.
  • Trina expects to ship between 62 megawatts and 66 megawatts of solar modules in the third quarter. It also expects revenue of between $250 million and $265 million in the quarter.
  • The company also forecast full-year solar module shipments of 210 megawatts to 220 megawatts, up from a prior view of 200 megawatts to 210 megawatts.
  • It also increased its full year revenue outlook to a range of $850 million to $900 million, compared with a previous range of $770 million to $808 million.
  • The company believes gross margin to be in the range of 23 percent and 25 percent for the year.

Without the currency losses, we would be well on our way to reach $4 in net profit per share for 2008, as we argued they would be able to do this year. It would seem to make the stock incredibly cheap. It still is, even with those millions in foreign currency losses, but they will have to get someone to fix that.

We don’t think you can do a whole lot wrong by buying them, but they might not provide immediate gratification, the way the market behaves.