Canadian Solar (CSIQ, Financial) started the new fiscal year with solid first-quarter results. The company posted revenue of $860.9 million, thrashing consensus estimates by $125.87 million and representing a growth of 84.6% versus the year-ago quarter. The company set a new record for quarter megawatt shipment, which peaked to 1.23 GW.
This phenomenal growth was on the back of strong global demand led by Japan, Europe and emerging markets in Latin America. 49% of sales came in from Americas on the back of project sales in Canada. Asia represented 33% of revenues primarily on the back of robust demand from Japan. The balance of 18% was from Europe.
On the back of strong top-line growth, earnings per share came in at $1.04, beating analysts’ expectations by $0.44 and making it one of the most profitable solar companies in the world.
Acquisition to drive growth
As a result of acquisition of Recurrent Energy from Sharp Corp. for $265 million, the company’s total project pipeline more than doubled from 4GW to 8.5GW. Besides, this acquisition will increase the company's downstream presence in the North American markets.
Management stated that this acquisition will be accretive to revenue by at least $2.3 billion under build-and-sell business model.
Global PV market is growing
According to the latest NPD Solarbuzz market report, the global solar PV industry is growing at a blistering pace and is headed for cumulative installed capacity of 500 gigawatts (GW) by 2018. Additionally, in January this year, Deutsche Bank also predicted that 46GW of PV would be installed across the world in 2014, and 56GW in 2015.
Canadian Solar is one of the leading and profitable solar companies in the world and this places it in a position to make the most of it. In order to meet the burgeoning demand as a result of projected growth, management said:
“As one of the top three module providers and a dominant Tier 1 company, we will have powerful advantage to gain market shares. As we have done in the past we will make strategic capacity additions in order to meet the increased demand levels we are seeing.”
In fact, the CEO of the company feels that there could be shortage of PV modules from second half of 2015 as a result of spurt in demand.
Outlook is optimistic
Canadian Solar expects the total shipments in the second quarter to be in the range of approximately 950 to 1000 megawatt, which includes 165 MW of shipments to its own utility scale projects. Also, revenue for the second quarter is expected to be in the range of $570 million to $620 million and gross margin in the range of 13% to 15%.
Final take
First quarter was the best quarter in the history of the company. I have been bullish on Canadian Solar since I wrote my last piece in November last year. Canadian Solar has presence in all major markets of the world so it is in a position to make the most of the opportunities that unfurl. Asia and Europe together contributed 51% to revenues in the first quarter.
There has been a pullback after the announcement of YieldCo plans at Investor day on May 18th. So, take advantage of this and buy for long term gains.
