Trina Solar Strengthening its position by buying Rival Companies

The Solar Industry is witnessing some big time consolidations since the last one year. Recently Trina Solar (TSL) acquired a controlling stake of 51% in the Chinese company Hubei Hongyuan Photovoltaic Technology Co. Ltd. (subsidiary of Shenzhen S.C), a manufacturer of solar cells, panels and solar application products. Trina Solar has performed excellently in the past few months. Trina Solar is one of the lowest cost manufacturer of solar panels and solutions and has now also entered the solar development business. This acquisition should surely benefit the company given Hubei Hongyuan’s extensive experience in the solar manufacturing processes and strong parent backing. I will look to remain long on TSL given the company’s strong performance, low valuation, strong Government support and the farsightedness in buying rival companies and consolidating its position in the industry.

CHANGZHOU, China, Feb. 14, 2014 /PRNewswire/ — Trina Solar Limited (“Trina Solar” or the “Company”), a global leader in photovoltaic (“PV”) modules, solutions, and services, today announced that it has entered into an agreement with Shenzhen S.C. New Energy Technology Corporation (“Shenzhen S.C.”), a leading solar equipment manufacturer, to acquire a majority stake in Shenzhen S.C.’s wholly-owned subsidiary, Hubei Hongyuan PV Science and Technology Co., Ltd., (“Hubei Hongyuan”), a specialized PV cell producer located in Xiantao, Hubei Province.

Trina Solar Press Release

Win-Win Situation for All

i) Chinese Solar Market – The solar industry demand is expected to be around ~40-50 GW in 2014. China is going to be the largest market for solar panels by far in the coming years, with a target to install 12 GW in 2014. The Chinese market enjoys certain advantages over the other solar markets in the world. It has low cost production due to availability of cheap resources, easy financing by China Development Bank and preference towards its domestic solar companies.

ii) Trina Solar – Trina Solar plans a more prudent 500 MW installation each year and with the acquisition of Hubei Hongyuan, its target would be even easier to be achieved. HYPV has an extensive experience in the manufacturing quality solar cells, modules and developing PV systems. The company comes with a rich parent backing of Shenzhen S.C and also has recently completed the construction of 25,000 square meters of a plant and has an output of 50 MW of solar cell annually. The company follows international quality management system and certifications in its production processes. With this JV, TSL gets to expand capacity at a low capital cost.

“We are delighted to announce this exciting new acquisition and collaboration with Shenzhen S.C.,” said Mr. Jifan Gao, chairman and CEO of Trina Solar. “Shenzhen S.C. and Hubei Hongyuan have extensive and proven experience in manufacturing superior quality solar equipment and products, respectively. This acquisition will provide Trina Solar with the benefit of greater access to solar cell manufacturing capacity and at a low cost of capital.”

Trina Solar

iii) Hubei Hongyuan – The company will get the brand name of Trina Solar and expansion of its production facilities and other infrastructural benefits. The company plans to change its name to Hubei Trina Solar Co. Ltd. Consolidation is the only way to survive for all small companies today. The Solar Industry has seen some big acquisitions and mergers in the last couple of years. With the Chinese government cutting support to almost 80% of its solar companies, it will be very favourable for small companies to come under the big umbrella companies. Not to mention TSL enjoys unprecedented Chinese Government support.

Stock Performance

Trina Solar is one of the best performing solar stock with low valuation multiple (P/S 0.7x). It enjoys the privilege of the Chinese Government and now with the Chinese planning to add more GWs to the Solar industry each year has more reasons to shine. With the acquisition of majority stake in Hubei Hongyuan, it will expand capacity and also gain access to HYPV’s rich experience in manufacturing. The stock is currently trading at ~14.22$.