Canadian Solar (CSIQ, Financial) is seeing growing demand for its high-quality, high performance solar module products. It expects its shipment to for the first-quarter 2015 to remain between 1,000 MW to 1,030 MW. This includes 55 megawatts of shipments to its own utility-scale solar project. It expects its revenue for the quarter to be in the range of $725 million to $775 million. This represents about 60% growth over the first-quarter 2014, considering the middle point of the range.
Canadian Solar has enhanced focus on downstream market, increasing project pipeline, leading costs structure, and its own YieldCo concept. These factors make it quite appealing in the future.
Additionally, the company is replenishing this strong pipeline with highly attractive portfolio. This represents one of the largest portfolios of utility-scale projects in the fast-growing US market. The below charts better highlight its growing project pipeline across the world. This is one of the largest project pipelines in the world. Moreover, the company has its projects in low risks regions that should strengthen its operational performance with enhanced earnings going forward.
More positives to note
In addition, the company is planning to bring renewable energy ‘YieldCo’ into its business. YieldCo has been saviour for many solar companies across the world as it unlocks the value for shareholders over the long-run. It expects this YieldCo vehicle and its subsequent listings to assist Canadian Solar to fetch essential value under its large pipeline of long-term contracted assets. YieldCo will also help CSIQ to recycle its capital.
At present, the company is strategically engaged analysing the optimal structure for a YieldCo. It is creating an ideal asset profile to support its asset base. Canadian Solar has massive project pipeline that should facilitate stable cash flow projects for its YieldCo going forward. It is looking for assets from third-parties to better deliver value to its shareholder in the future.
The company has also provided guidance for the full year. It expects its annual shipment to be in the range of 4 to 4.3 GW for fiscal 2015. It anticipates its revenue to range between $2.8 and $3.0 billion, with gross margin of nearly 19.6% for the year.
Conclusion
Canadian Solar has strong project pipeline. Also, it is taking various strategic moves such as forming YieldCo, expanding its capacity and reducing the manufacturing costs. These efforts should drive its growth in the future. The analysts expect its earnings to grow at CAGR of 5.00%, which is higher than average industry CAGR of 2.26% for the next five years. This indicates potential growth for the stock in the future.
Moreover, the stock is cheap. It is trading at the forward P/E of 7.47, below its trailing P/E of 8.42. This signifies that the stock is undervalued and has a lot of upside potential. It has PEG ratio of 2.14 that continues to support its growth over the coming years. Also, the company has been pretty healthy on the operational front. Its profit and operating profit margins has been 8.09% and 12.37% for the last twelve months. Its balance sheet carries total cash of $549.54 million and has total debt of $1.01 billion.
