Is Trina Solar Trying to Beat SunPower at Its Own Game?

Trina Solar  (NYSE: TSL  ) is not as well known as SunPower  (NASDAQ: SPWR  ) or First Solar, and definitely not as known as SolarCity, despite being one of SolarCity's primary suppliers of low-cost solar panels. While SunPower and First Solar are considered leaders in technology, Trina is viewed as little more than a low-cost leader, making reliable panels that sacrifice efficiency for lower cost. 

However, the company just announced what it's calling High Efficiency Honey Ultra, a module that purportedly has a 24.4% efficiency rating. Considering that its current panels operate at around 16% efficiency, and SunPower's industry-leading panels are closer to 21% -- almost 32% more power output per panel than Trina's -- this could be a remarkable breakthrough for the company, if it could translate that module efficiency to a panel efficiency near 20%. 

Should investors load up on Trina today? Let's dig a little deeper.

Trina's current Honey M model. Source: Trina Solar.

Is Trina for real?
When I first read the press release, I immediately contacted Trina's investor relations to get more information. My only question: When is this coming to market? 

Investor relations confirmed that Trina would start commercial production later in 2014, but the launch date is still to be determined due to a number of factors like certifications in different markets and agreements with resellers. And while efficiency is only one metric to rate solar panels on -- by nominal power, SunPower's X-Series still produces more power at 335 watts -- this is a major leap forward for Trina. The new Honey Ultra produced 326 watts under test conditions, substantially more than the 285 watts from the Honey M series currently for sale.

But here's what really matters:

  1. What will these panels produce when they come to market? 
  2. What will they cost per watt?

SunPower's X-Series rate better (based on wattage) than Trina's Honey Ultra, so price will still matter. Source: SunPower.

SunPower will remain a leader: Trina must prove itself
I've wavered a little on Trina in the past, both being positive but more recently neutral on its chance of being a market-beating stock. My position has largely been based on the company's position as a player in the low end of the business, where panel price is a bigger driver than performance. However, if the company is able to bring its Honey Ultra panels to market at a competitive price, it could largely expand the opportunities that it could participate in, such as large-scale solar utility projects that need to maximize output in the available space. 

Additionally, SunPower is renowned for maintaining high efficiency rates for the panels over time. While some low-cost panels can lose as much as 25% of their output capacity over the 20-25 year life of a panel, SunPower's panels only lose -- so they claim -- about 10%. This adds significant value, especially for utility-scale customers that will be depending on consistent and predictable levels of power generation. Trina needs to show that it can also make panels that are not just efficient today but remain so for decades. 

Better value or just cheaper?
In this case, I'm not talking about solar panel costs. Which company would be a better investment? As fellow Fool Travis Hoium recently wrote, solar is set to keep growing like crazy. And with shares having fallen across the industry recently, it does look like the market has opened up a buying opportunity. Here's a look at the forward (meaning consensus estimates) price-to-earnings ratio for Trina, First Solar, and SunPower:

TSL PE Ratio (Forward) Chart

TSL P/E Ratio (Forward) data. Source: YCharts.

As you can see, First Solar and SunPower carry a premium versus Trina's commodity business. There's probably also a discount due to Trina being a Chinese company, considering that the Chinese government's subsidy program severely damaged the industry for more than a year. But the reality is, much of the price discount is due to the much thinner margins that lead to Trina being less profitable than the two technology leaders. Simply put, Trina is cheaper, but SunPower is the technology leader. And that technology has value that the company can use to create better margins. 

Prove it, Trina
It's possible that Trina is onto something that could open it to a brighter future, but until we have more evidence that this is the reality, there's little to bank on just yet. SunPower, however, is in a fantastic position both with its technology and its partnership with majority shareholder and Energy giant Total SA, which opens doors to even more potential business than SunPower could find on its own. 

If I'm buying today, SunPower's strengths are hard to ignore. Trina? I'd say it needs to show that it can play with the big boys first.

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Read/Post Comments (7) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 10, 2014, at 11:59 AM, clanza875 wrote:

    You should ask a lot more than just when do they go to market.

    I would like to know how its possible that a company that uses multi-crystalline technology can produce a panel more efficient than a company using mono-crystalline technology? Its not just impossible but how could it be done with Trina's microscopic R&D budget and razor thin margins (if any)?

    Sounds like they're blowing hot air.

  • Report this Comment On April 10, 2014, at 12:04 PM, clanza875 wrote:

    Intrigued myself, I just read the press release. It looks like they are using mono technology to produce this panel. Since TSL has no R&D budget, it sounds like they likely just copied a SPWR module (big surprise from China). The manufacturing costs to produce this panel are likely very high and they will be unlikely to produce any profit margin.

  • Report this Comment On April 10, 2014, at 11:09 PM, lukasberk3 wrote:

    Well, its taken them 2 years to develop it in conjunction with ANU, which has quite a track record in PV R&D, and it is a Mono-crystalline panel... http://reneweconomy.com.au/2014/anu-trina-solar-rd-61401. So yes, I agree they need to prove it, but it seems more than hot air. (I'm long a small position in tsl)

  • Report this Comment On April 11, 2014, at 10:55 AM, jargonific wrote:

    The solar company battles are going on mostly in the media.

    Here is another example: http://www.marketwatch.com/story/yinglis-warning-casts-first...

    It's traders who are benefiting from the merciless shorting of solar company stocks. They are enriching selves and hedge fund managers who must be pulling in a RECORD amount right about now..ripping it out of our bank accounts.

  • Report this Comment On April 11, 2014, at 1:49 PM, ronwiserinvestor wrote:

    This article is packed with misinformation. First of all the statement "a module that purportedly has a 24.4% efficiency rating" is false. Trina's 24.4% efficiency rating refers to their cell efficiency not their module's efficiency. BIG DIFFERENCE. The module efficiency will be much lower. Second, efficiency is practically meaningless when it comes to actual module performance.

    A 327 watt high efficiency module puts out the same 327 watts as a 327 watt low efficiency solar module. The only real difference is the size of the module or the footprint on the roof. A high efficiency 327 watt high efficiency solar module will simply have a smaller footprint.

    A more realistic metric of a solar modules performance is it's PTC to STC ratio. For instance, Hyper X Solar's N-Type, thin film passivated, tunneling junction architecture provides a better PTC to STC ratio "Real World" performance according to the California Energy Commission's performance rating listings than over 100 of SunPower's solar panel models.

    Hyper X solar also offers a very low -0.27%/degree C temperature coefficient rating for better performance in hot/warm climates and Hyper X solar systems are priced thousands less and even tens of thousands less on larger systems than a SunPower solar system.

  • Report this Comment On April 12, 2014, at 2:20 AM, TMFVelvetHammer wrote:

    Ronwiserinvestor,

    I didn't mistakenly put "module" for "cell", however the same paragraph does continue to discuss how it will translate to a lower panel efficiency rating.

    I'll also challenge your statement glossing over the panel size. This can be the difference between fitting enough panels on your roof to cover your power needs, or not.

    Case in point: I have a friend on hone east coast that can only fit enough high-efficiency panels to generate 59% of his power needs. A low efficiency panel system nets less than 50% of his needs. That's thousands of dollars in power difference paid to the utility over the life of the system.

    I'm guessing you work for Solar Home, since I see you plugging those Hyper X panels on every solar article on the website ... :)

  • Report this Comment On April 12, 2014, at 2:20 AM, TMFVelvetHammer wrote:

    Ugh, spell correct on the iPad.

    I meant to type "did" and not "didn't" above.

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