Global demand for solar power is on the rise. According to Statista, the solar energy market is projected to grow from a paltry $4.7 billion in 2003 to around $160 billion by 2023. Canadian Solar (CSIQ, Financial) has been aggressively expanding its presence globally to become one of the largest manufacturers and project builders in the world. The company posted estimate-beating first-quarter fiscal 2015 results last month. Let’s take a look at some of its metrics.
Revenue growth is steady
Since 2013, the solar power company’s revenue has grown a whopping 172%. During the recently reported quarter, Canadian Solar posted revenues of $860.9 million, representing year-over-year growth of over 84% and beat the consensus estimate by over 12%. Solar module shipments totaled 1.23 GW versus 500 MW in the prior year quarter.
In second-quarter fiscal 2015, Canadian Solar expects to ship 950 MW to 1,000 MW to rope in revenues in the range of $570 million to $620 million. For fiscal 2015, shipments will be in the range of 4.0 GW and 4.3 GW of solar panels where global market size is expected to be 53 GW to 57 GW in 2015. This represents an impressive 7.5% share of world market.
Gross profit margin
Since 2013, the company has managed a healthy gross profit margin. During the recently reported quarter, gross profit came in at $153 million, representing year-over-year growth of around 123%. Going forward, Canadian Solar expects gross margin to be in the range of 13% to 15% for the second-quarter fiscal 2015. The decline in gross margin is on the back of reduced average selling price, or ASP, of modules.
Healthy debt-to-equity ratio
Over the years, Canadian Solar has reduced the debt-to-equity ratio. The solar company exited the quarter with cash, and cash equivalents were $407 million. Its current ratio of 1.13 also shows that it can manage debt effectively. In fact, long-term debt decreased sequentially from $134.3 million to $125.9 million at the end of the first-quarter.
One of the highest returns in the industry to shareholders
Canadian Solar has delivered one of the highest returns to the shareholders backed by a steady rise in earnings per share. During the recently reported quarter, the company reported earnings of $1.04 per share, trumping consensus estimate by over 38%.
The company feels that its YieldCo vehicle will further drive value to shareholders in the long run. Shawn Qu, chairman and CEO, said during a conference call:
“All of this gives Canadian Solar added momentum as we continue to pursue our YieldCo strategy which will be the next major catalyst to build value for Canadian Solar and its shareholders.”
The company has already secured $53 million in project financing from Investec Bank PLC for its four solar PV plants totaling 40.2 MW in the U.K., and this will be held back for being dropped into YieldCo. The project is already operational since March, and the company is building two more projects totaling to 5.5 MW in the U.K.
Acquisition to drive growth
During the quarter, Canadian Solar completed the acquisition of San Francisco-based Recurrent Energy from Sharp Corp. for $265 million. As a result of this acquisition, the company’s total solar project pipeline grew from 4GW to over 8.5 GW and its late-stage project pipeline expanded by 1 GW to 2.4 GW. Management said that this acquisition will create anticipated revenue opportunity of $2.3 billion under a build-and-sell business model.
Wrapping up
Canadian Solar will be controlling around 7.5% of global solar capacity by the end of fiscal 2015. The company has been growing revenue and earnings at a commendable pace, and keeping a tight hold on its margins and debt. Also, it has returned a lot of value to shareholders over the past few years.
Currently, by shipments Canadian Solar is second largest, and experts feel that it may soon be the top producer in the world. Acquisition of Recurrent Energy and the proposed YieldCo vehicle will be further growth drivers in the long run.
Hence, this is a good stock to buy.
