Hapoalim Securities Raises Estimates On Trina Solar

After a deeper dive into the TSL's earnings drivers, Hapoalim Securities is raising its 2010 and 2011 estimates. Not only does Hapoalim estimate core earnings power of $3.62 in 2011 even as it expects ASP declines of 27% by 4Q11 to $1.30, but the prospects of a self‐financed capacity expansion to 2 GW suggests EPS potential of $4.45. Though it sees upside to consensus estimates, it expects valuation multiples to come under pressure next year in light of solar's dependence upon government subsidies, persistent pricing and margin pressure arising from rampant supply growth, and the lack of free cash flow generation. While Hapoalim raises the price target from $21 to $27, it recognizes downside to $22 based on a 6x historical trough multiple. In turn, it maintains a Hold rating Driven by firm pricing in 2H10, the rebound in the Euro since June, lower poly/wafer costs, and recognition that TSL's low‐ costs likely will allow it to sell out even if the market declines, we raise our estimates. Even in the context of Hapoalim's forecast for ASP declines accelerating to close out the year down 27% at $1.30/watt, it believes TSL can still generate $3.62 in EPS. TSL is trading higher at $25.15