Polysilicon supply and demand to remain roughly in balance in 2014
February 25, 2014Portable Solar Powered Houses
February 27, 2014TSL buys 51% in HYPV
Trina Solar (TSL) buys a controlling stake of 51% in the Chinese Solar company Hubei Hongyuan Photovoltaic Technology Co. Ltd. The company was previously a subsidiary of the Chinese solar company Shenzhen S.C. HYPV has a rich experience in the manufacturing solar industry. It is known for its quality solar cells, panels and other application products. Trina Solar as it is well known, is one of the lowest cost manufacturer of solar modules in China. TSL also enjoys strong Chinese Government support. With the China Government slashing its support to almost 80% of Chinese solar companies, TSL holds a strong footing in China. This JV is surely mutually beneficial to both the entities.
The solar industry has seen a lot of consolidation in recent times. In the past years when there was a boom in the solar industry, many companies plunged into solar business, thus making the supply far exceed the demand which led to an imbalance in the industry. The solar industry today seems to have regained its balance, after seeing many bankruptcies (LDK and STP to name the major ones) and consolidations. With TSL acquiring a majority in HYPV, the situation seems to be a winning one for both the companies.
The solar demand is expected to be around 50 GW in 2014. China alone plans to add another 14 GW of solar installations in 2014 and has a strong preference for its domestic companies. TSL being the “blue eyed boy” for the Chinese Government and a leading solar company in China further brightens its prospects of future revenues. Thus TSL gets to expand capacity (50 MW from HYPV) at a low capital cost. HYPV on the other hand gets the brand name of Trina Solar and expansion of its capacities. It plans to change the name of the company to Hubei Trina Solar Co. Ltd. Further, consolidation is the new way to survive for small solar companies in today’s scenario.
TSL has been performing excellently since the last couple of quarters. The stock is currently trading at $15 with low valuation multiples (P/S 0.7x). I would look to buy the stock, given its strong industry fundamentals and a prospective future in China.