On Dec 6, 2013, we upgraded our recommendation on
Canadian Solar Inc.
) to Outperform from Neutral, based on the improving
supply-demand imbalances in the solar photovoltaic market, which
will likely lead to price stabilization and a wide global
customer portfolio. North America's biggest solar manufacturer
currently holds a Zacks Rank #3 (Hold).
Why the Upgrade?
The company performed strongly in the third quarter 2013.
Canadian Solar swung into profit in the reported quarter on the
back of higher shipments and revenues. Its third quarter total
revenue surged 50.6% year over year and total shipment of solar
modules in the first nine months of 2013 was up 11.8% from the
comparable prior-year period.
Again, Canadian Solar has already secured 1,015 MW of
geographically diversified utility-scale project pipeline, which
extends visibility on revenue, profitability and cash flow of its
total solution business for the next two to three years. This
business accounted for 41.1% of total revenue in the third
quarter. With other projects in pipeline, we expect the company
to be able to build up from its current position. Currently, it
has a solid backlog of 24 projects in the pipeline in Canada and
has also secured its presence in the prominent solar markets of
U.S., China and Japan.
Canadian Solar caters to a geographically-diverse customer base
spread across key markets in Europe and the U.S., as well as
emerging market opportunities in South Korea, Chile and Canada.
The Asia-Pacific countries of Japan, China and India are expected
to be the principal demand drivers of solar modules in the coming
years. Specifically, the demand for solar modules in Japan will
continue to drive the fortunes of Canadian Solar. Recently, it
has managed to borrow $40 million from the Chinese structured
finance fund Harvest North Star Capital to build 145.1 megawatts
of power plants in Japan.
The company also hopes to benefit from a recovering solar
industry in Europe in 2014, chiefly driven by Germany, the U.K.,
Italy and France. The gradual normalization of the supply-demand
imbalance in the solar PV market will stabilize Canadian Solar's
average selling price.
Canadian Solar is a low-cost vertically-integrated solar module
producer with predominantly China-based manufacturing assets.
Other Stocks to Consider
Given the positive fundamentals in the solar market, stocks worth
considering in the space include
Enphase Energy, Inc.
First Solar, Inc.
JinkoSolar Holding Co., Ltd.
). All these presently carry a Zacks Rank #2 (Buy).
CANADIAN SOLAR (CSIQ): Free Stock Analysis
ENPHASE ENERGY (ENPH): Free Stock Analysis
FIRST SOLAR INC (FSLR): Free Stock Analysis
JINKOSOLAR HLDG (JKS): Free Stock Analysis
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