Demand Fuels China's Solar IPOs

Trina closed at $19.01 Thursday after losing 4%.

The company has been profitable for three of the last four years, even as it grows. Trina's revenue grew nearly sevenfold in the first nine months of 2006 to $76 million from the year-ago figure of $11 million.

Gross profit grew at an even faster rate, 666%, to $21 million, while operating profit grew 587% to $11 million.

Even with that growth, Trina's gross margin rose to 28% for the first nine months of last year from 24% a year earlier, as prices of its products grew faster than what it pays for supplies. Operating profit has grown from 13% from 11%.

The company plans to use the $128 million in proceeds from the offering to cover the costs of raw materials and to build new production lines to meet rising worldwide demand for solar panels.

According to Photon Consulting, which is affiliated with the trade journal Photon Magazine, revenue in the solar-power sector grew 50%, and profit grew 149% in 2005 -- the most recent year with complete data available -- compared with a year earlier. Citing interviews with hundreds of solar companies, Photon estimates that revenue grew 51% in 2006, from $12 billion to $19 billion.

Because of "incremental efficiency gains and manufacturing improvements ... industry average pretax margins are expanding from 22% in 2005 to 30% in 2006 and 33% in 2007," a Photon report said, adding that the growth in both revenue and margins isn't yet factored into many estimates.