The global leader in photovoltaic modules, energy storage and distributed businesses are growing rapidly. Trina Solar was founded in 1997, successfully listed on the Shanghai Stock Exchange in 2020, and has now grown into a global leader in photovoltaic technology innovation and product manufacturing. The company's business includes three major segments: photovoltaic products, photovoltaic systems, and smart energy. In 2018-2022, operating income increased from 25.054 billion yuan to 85.052 billion yuan, CAGR reached 35.74%, net profit to mother increased from 558 million yuan to 3.68 billion yuan, and CAGR reached 60.25%. In 19-22, PV modules accounted for more than 70% of revenue. The revenue share of system products continued to increase. The CAGR reached 85.7% in 18-22; in '22, the revenue of smart microgrids and multi-energy systems reached 2.03 billion yuan, a growth rate of 1,328%, showing a rapid growth trend.

PV modules: channels and brands build distributed advantages, integrated improvement of raw material costs. (1) Integration enhances profitability: upstream layout can enhance resilience to risks. According to the company's 23 semi-annual report, the company's production capacity for silicon wafers, cells, and modules is expected to reach 50, 75, and 95 GW respectively by the end of 2023. (2) Channels and distribution have advantages: According to ENF, the company has distributors and installers in 68 and 107 countries around the world, leading the industry in number. According to the “Investor Relations Activity Record Form” on September 7, 2022, the distribution ratio reached about 60%, and distributed component shipments continued to lead the way, with a market share of over 25%, ranking first in the industry. (3) Large-sized products are competitive: Large-sized silicon wafers can dilute the production costs of various production processes, and the corresponding component products are more powerful. According to Trina Solar's WeChat account, citing Black & Veatch, 210mm-660W modules can reduce electricity costs by 3.94% compared to 182mm-535W modules. (4) Leading battery technology: The latest premium N-type 700W module can reduce the electricity cost of power plants by 2.08% with advantages such as ultra-low attenuation, optimized double-sided power generation performance, and ultra-low operating temperature coefficient, and is known as the “electricity cost star” of terrestrial power plants.

Emerging business: Cost reduction opens up demand space and creates a second growth curve for the company. (1) Energy storage: The cost of energy storage systems is falling rapidly, and the company is speeding up the deployment of domestic and overseas markets. With the price of lithium batteries and photovoltaic modules falling, the economy of new energy distribution and storage continues to improve. In 2022, the company achieved a huge breakthrough in the Chinese market, shipped more than 1.5 GWh, and successfully delivered a single 800 MWh energy storage project. Home storage batteries have passed European standard certification and are expected to further explore the European and American markets with the advantages of photovoltaic channels. (2) Distributed photovoltaic system: Domestic distributed photovoltaics are growing rapidly, and the company's channel advantages are remarkable. The company shipped more than 6GW in 2022, achieving a 200% increase. It is expected that distributed photovoltaic system shipments will grow rapidly in the future.

Profit forecast and investment advice: We expect the company's net profit to be 55.61, 57.51, and 7.013 billion yuan respectively in 23-25, up 51.1%, 3.4%, and 21.9% year-on-year. Referring to the valuation level of comparable companies, we gave the company a 24-year PE valuation of 13-15 times, with a corresponding reasonable value range of 34.31-39.58 yuan, giving it a “superior to the market” rating.

Risk warning: downstream demand falls short of expectations; the company's new production capacity is progressing slowly; competition is intensifying; technological progress falls short of expectations.