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 Third Quarter Ended 30 September 2021 – (Q3FY21)

• Revenue grew 34% YoY to $1.23 billion, in line with guidance of $1.2-$1.4 billion, and gross margin stood at 18.6%, above the guidance range of 14-16%.
• Solar module shipments stood at 3.9 GW in Q3FY21, in line with 3.8-4.0 GW guidance.
• Net income attributable to Canadian Solar stood at $35 million, or $0.52 per diluted share.
• The company reported9 GWh of battery storage projects under construction, and the total storage development pipeline stood at 21 GWh.

Source: Company Reports, Analysis by Kalkine Group

Key Updates

• On 8 March 2022, the company advised that it signed two 10-year power purchase agreements with Axpo Italia to purchase 70% of 84 MWp.
• On 25 February 2022, the company's Global Energy business group signed private power purchase agreements with Usinas Siderurgicas de Minas Gerais S.A. to produce 50% of Brazil's 381 MWp solar power project.
• On 23 February 2022, the company plans to hold a conference call on 17 March 2022 at 8:00 AM U.S. to discuss Q4FY21 and FY21 results and business outlook.

Outlook

The company is strategically positioned in the battery storage market, solar and battery storage, along with stand-alone storage opportunities. Also, it is aided by the global network and solid brand recognition due to module manufacturing and solar project development. Further, it has diversified utility-scale solar and energy storage project development platforms. Management aims to achieve the following over the next five years:

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, adversely affecting its expansion plan.

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

Stock Recommendation

The company has delivered 6-month and 1-year returns of ~-2.62% and ~-8.10%, respectively. The stock is trading lower than the average of the 52-week high price of $51.00 and the 52-week low price of $23.245.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation, and a target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering operational challenges that have intensified recently, resulting energy crises across the world.

Considering the aforementioned factors, the current trading levels, and the associated business risks, we advise the investors to book profits. We give a “Sell” rating on the stock at the current market price of $37.08 per share as on 10:11 am Washington DC (USA Time) as of 9^th March 2022.

Technical Analysis

Daily Price Chart

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

Canadian Solar Inc. (CSIQ) is a part of Kalkine’s Global Green Energy Product

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