Event: Trina Solar released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved revenue of 81,119 billion yuan, up 39.38% year on year; net profit of 5.077 billion yuan, up 111.34% year on year; and basic earnings per share of 2.34 yuan, up 107.08% year on year. Among them, 23Q3 achieved revenue of 31.736 billion yuan, up 41.25% year on year, up 13.08% month on month; gross profit margin 16.79%, up 3.43 pct year on year, up 0.56pct month on month; net profit of 1,537 billion yuan, up 35.67% year on year, down 13.26% month on month; basic earnings per share of 0.71 yuan, up 33.96% year on year, down 13.41% month on month. The company's revenue in Q3 was impressive, mainly due to a significant increase in shipments of photovoltaic modules, brackets, distributed systems and energy storage products. The increase in gross margin is mainly due to the gradual release of N-type silicon wafer production capacity, the further decline in the comprehensive cost of the company's components, and the continued decline in the comprehensive cost of energy storage products.

Shipments have continued to grow, and the proportion of silicon wafers supplied by oneself has increased. In terms of component business, the company's component shipments in the first three quarters of 2023 were 45-46GW, an increase of 68% over the previous year. Among them, Q3 shipments were 18-19GW, and single-watt net profit was 0.11 yuan. It is estimated that 65-70 GW will be shipped throughout the year. In terms of distributed systems, shipments in the first three quarters of 2023 were about 7 GW, of which Q3 shipments were less than 2.5 GW, and the net profit per watt was about 0.18 yuan. In terms of bracket business, 5.6 GW was shipped in the first three quarters of 2023, of which 2.3 GW was shipped in Q3.

Continuously improve the integration of production capacity, and TopCon is about to be released. The second phase of the 10GW N project at the company's Huai'an base was fully put into operation in October 2023, and the third phase of the 10GW project at the Huai'an base will be put into operation one after another. The company expects the production capacity of silicon wafers, cells, and modules to reach 50GW, 75GW, and 95GW respectively in 2023, of which TopCon battery production capacity can reach 40GW. The company also continues to expand its overseas presence, building 6.5 GW integrated production capacity in Southeast Asia and 5GW module production capacity in the US. In October 2023, the company signed a memorandum of cooperation with AdPorts and Jiangsu Haitou to plan a production capacity of 50,000 tons of silicon, 30GW silicon chips and 5GW battery modules.

Valuation forecasts and investment recommendations: Based on the company's performance, we maintain our 2023-2025 earnings forecast unchanged. We expect the company's net profit from 2023-2025 to be 68.06/86.33/10.267 billion yuan; diluted earnings per share of 3.13/3.97/4.72 yuan; corresponding PE is 9.54 times, 7.52 times, and 6.32 times, respectively. Considering asset impairment losses, declining industrial chain prices, and comparable company valuations, we lowered the company's PE by 14 times (16 times), corresponding to the target price of 43.82 yuan, maintaining the “superior to market” rating.

Risks: Production capacity production has not progressed as expected; competition in the industry has intensified; raw material prices are higher than expected