Roth Maintains Trina Solar (TSL) at 'Buy'; Light Q3 Outlook Will Hamper Stock, China Rebound Expected

Roth Capital affirms Trina Solar (NYSE: TSL) at Buy with a target price of $25 following Q2 results and guidance issued earlier this week.

Analyst Philip Shen commented, TSL posted a Q2 revenue/shipment miss and issued weak Q3 GM guidance. Given the revised outlook, we expect consensus estimates to be lower. Additionally, sentiment in the stock will likely remain challenged until the outlook for the Chinese and US markets improves. When the demand in China comes back in full force (as we expect) and when a US/China trade war compromise is reached (as we expect), we believe TSL will be well positioned in each market.

Key takeaways for investors include:

1. China. TSL has seen a pickup in China demand in Q3 and expects acceleration in Q4. Management continues to expect a ~13-14GW market in 2014. The company is actively developing DG projects, and we believe TSL could be well-positioned to grow its China DG business. TSL's current market share in China is ~6-8%;

2. US. US shipments should remain strong and comprise ~28% of TSL's 2014 shipment mix. By reverting to the 2012 tariff, TSL has the lowest tariff rate (combined tariffs of 23.0% vs. peers of 30.7%), which enables the company to have higher GMs on a relative basis. That said, we believe the US and China have a high likelihood of finding a compromise on the trade war by YE'14; and

3. ASPs in Q2 stepped down 2c/W QoQ. TSL posted Q2 ASPs of ~65c/W vs. ~67c/W in Q1, and we forecast ASPs to be down another 1c/W in Q3. Additionally, TSL posted a blended Q2 cost structure of 54c/W (11c/W poly cost).

For an analyst ratings summary and ratings history on Trina Solar click here. For more ratings news on Trina Solar click here.

Trina Solar closed at $12.30 yesterday.

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