Company Overview: Canadian Solar Inc. (NASDAQ: CSIQ) is a solar power company that provides solar power products system solutions with diverse operations across North America, South America, the Middle East, Asia, Europe, Australia, and Africa.

­­­­­­CSIQ Details

Material Business Updates

Figure 1: Valuable Business Update

Source: Company Filings, Table Created by Kalkine Group

Historical Financial Trend:

CSIQ illustrated sustainable historical growth while keeping the value proposition intact. The sales have regained pace from the dip of FY19 with almost stabilised EBITDA margins. Operating revenues grew at a 5.1% CAGR (FY16 – FY20).

Figure 2: Historical Financial Overview

Source: Company Reports, Analysis by Kalkine Group

Third Quarter FY21 Performance:

Figure 3: Quarterly Performance Summary:

Source: Company Reports, Analysis by Kalkine Group

Full-Year FY20 Performance:

Figure 4: Annual Performance Highlights:

Source: Company Reports, Analysis by Kalkine Group

Top 10 Shareholders:

The top 10 shareholders together form ~51.02% of the total shareholding. Qu (Shawn Xiaohua) and BlackRock Investment Management (UK) Ltd. hold the company’s maximum stake at ~­­­23.00% and ~5.17%, respectively.

Figure 5: Top 10 Shareholders

Source: Analysis by Kalkine Group

Key Metrics:

Stable operational efficiency despite turbulent revenue across CSIQ’s diverse portfolio has translated into long-term sustainable growth levels. In addition, the solar and battery storage project pipeline exhibits a sustainable growth prospect across coming years. CSIQ’s profitability and return status remain stable despite recent market disruptions.

Figure 6: Key Financial Metrics

Source: Analysis by Kalkine Group

Outlook:

Resilient Long-term Growth: The cumulative solar PV installations are expected to cross 1 TW by the next year and to clock 3.2 TW by FY30. Cumulative battery storage capacity installations are expected to pass the 100 GWh mark by the next year and clock 1TWh by FY30.

N-type Heterojunction (HJT) Solar Modules: The commercial delivery of N-type HJT solar modules is expected to culminate in Q4FY21, establishing the TopCon pilot cell line. The HJT is scheduled to deliver the highest power output and conversion efficiency.

CSI Solar China IPO Update: The IPO’s feedback process with regulatory authorities and Shanghai Stock Exchange is expected to complete in Q3FY21 and Q4FY21. At the same time, the investor roadshow and official listing will proceed in 2022.

Figure 7: Guidance

Source: Company Filings, Table Created by Kalkine Group

Key Risks:

De-risk Process Pending on CSIQ’s Pipeline: The pipeline involves early to mid-stage solar and battery storage opportunities, currently under development, but they are yet to be de-risked.

Risk of Oversupply: Solar power industry may, from time to time, experience global oversupply, which may adversely affect solar power project developers, installers, and distributors.

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

Stock Recommendation:

CSIQ has delivered 3-month and 6-month returns of ~-28.889% and ~-33.197%, respectively. The stock is trading below the average of the 52-week low price of US$23.25 and the 52-week high price of US$63.50, indicating an accumulating opportunity. The stock has been valued using the EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). The company might trade at a slight premium compared to its peers’ average EV/EBITDA (NTM trading multiple), considering the introduction of HJT technology and favourable prospects of the solar module market. For valuation, a few peers like Skyworks Solutions Inc (NASDAQ: SWKS), Amtech Systems Inc (NASDAQ: ASYS), Lam Research Corp (NASDAQ: LRCX), and others have been considered. Given favourable attributes of HJT technology, CSI Solar China IPO, increased PV installations & battery storage capacity, the current trend in the solar energy and battery storage market, and potential upside as indicated by the valuation, we give a “Buy” recommendation on the stock at the current market price of US$27.40 as of 1 February 2022, at 10:12 AM (GMT+5), New York, USA.

CSIQ Daily Technical Chart (Source: REFINITIV)

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.

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