Canadian Solar Inc.

CSIQ Details

Canadian Solar Inc. (NASDAQ: CSIQ) is a leading solar technology and renewable energy company globally. It develops solar photovoltaic modules, utility-scale solar power, and battery storage projects and provides solar energy and battery storage solutions.

Result Update for the Quarter Ended 30 June 2021 (Q2FY21)

• The revenue jumped 105% YoY to $1.43 billion in Q2FY21 that stayed in line with guidance of $1.4-$1.5 billion. The total module shipments increased by 26% YoY to 3.66 GW of which 167 MW was shipped to its own utility-scale solar power projects.
• The gross profit stood at $185 million in Q2FY21, up 26% YoY and gross margin stood at 12.9% much above the guided range of 9.5%-10.5% supported by the benefits of higher module ASP, manufacturing efficiency improvements, and a higher contribution from battery storage shipments and beyond-module sales.
• The net income attributable to the company declined to $11 million in Q2FY21 from $23 million Q1FY21 due to the impact of lower gross profit and higher operating expenses, partially offset by the income tax benefit.

Income Statement (Source: Company Reports) 

Outlook

The company has 19 GWh of global battery storage project pipeline of this 2.3 GWh is contracted and/or is in the construction phase. The company anticipates total module shipments to stay between 3.8-4.0 GW in Q3FY21, including ~275 MW of module shipments to its projects. It estimates revenues to be in the range of $1.2-$1.4 billion with gross margin to be in the range of 14%-16% in Q3FY21.

Further, the company reiterates its guidance on revenue for FY21 in the range of $5.6-$6.0 billion. It has also maintained its project sales forecast of 1.8-2.3 GW and total battery storage shipment guidance of 810-860 MWh for FY21. However, it has marginally lowered its guidance on total module shipment for FY21 to 16-17 GW from 18-20 GW earlier.

Key Risks

The company’s performance would be adversely impacted by the volatile solar power market and industry conditions. Tight credit markets could reduce demand or prices for solar power products and services that would adversely affect its expansion plan.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Technical Analysis

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The has delivered 6-month and 9-month returns of ~-31.28% and ~-39.40%, respectively. The stock is trading lower than the average of the 52-week high price of $67.39 and the 52-week low price of $31.6827.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and a target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering the continued strong growth in demand for solar energy and battery storage, robust project pipeline, and reiteration of FY21 revenue guidance.

Considering the aforementioned factors, a “Buy” recommendation has been assigned on the stock at the current market price of $31.90 per share, down by 7.32%, as of 4^th October 2021. 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices