On Jun 8, 2015, we issued an updated research report on Canadian Solar Inc.CSIQ − a leading vertically integrated solar module producer with operations around the globe.
Canadian Solar caters to a geographically diverse customer base spread across key markets in the U.S., Canada and Europe, besides looking for opportunities in the emerging markets of South Korea, Singapore and Brazil. Much of the company's manufacturing capacity is located in China, though it does have a plant in Ontario as well.
The company's strong pipeline of projects along with its inorganic startegy is expected to further consolidate its position. Asia-Pacific countries like Japan, China and India are expected to be the principal demand drivers of solar modules in the coming years. Canadian Solar has a significant presence in Japan and continues to expand its operations in this growing solar energy market. It expects to complete about 45 MWp of projects including construction and grid connection in Japan in 2015.
During the first quarter, Canadian Solar wrapped up its purchase of Recurrent Energy, a San Francisco-based leading solar energy developer, from Sharp Corp. for $265 million. This has boosted the company's total solar project pipeline to 8.5 gigawatt ("GW") from 4 GW while its late-stage project pipeline expanded by 1 GW to 2.4 GW.
Canadian Solar stated that the acquisition will create an estimated revenue opportunity of at least $2.3 billion under a build-and-sell business model. This will significantly expand the scale of its solar energy development platform making it one of the foremost solar energy developers in the world.
Last month, Canadian Solar reported first-quarter earnings of $1.04 per share, comfortably beating the Zacks Consensus Estimate by 38.7%. Quarterly earnings also grew considerably from 7 cents per share in the year-ago quarter. The upside was driven by an increase in shipment volumes and higher revenues.
On the flipside, the company is slowly losing its ground in Asia despite having a manufacturing base in China. With Asia being touted as the next big solar market, the company's falling revenues in the region is definitely a concern. Asia and others contributed 33.6% to net revenues in the first quarter, declining significantly from 50.4% in the year-ago quarter.
The company is subject to competition from U.S. based solar producers like First Solar Inc. FSLR , Enphase Energy, Inc. ENPH and SunPower Corp. SPWR . This puts the company's top line at risk since it has to compete with a large number of competitors for a slice of the solar market.
Canadian Solar presently holds a Zacks Rank #3 (Hold).