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Canadian Solar: Riding High On Capacity Expansion And Strong Execution

Recent Q3 2015 results have further strengthened my bullish stance towards Canadian Solar (NASDAQ:CSIQ). The company delivered a good set of results with revenues and gross margin exceeding guidance. The company enjoys a global leadership position in the solar panel manufacturing and system development business. CSIQ also has strong growth prospects for the next year with large capacity expansions, a strong project pipeline and plans for a yieldco listing in place. The stock valuation looks cheap when compared to the company's potential. Given the company's strong potential and low valuations, I think it's a good time to buy the stock.

Why is CSIQ a good pick

1) Good results exceeding guidance - Though the company gave weak revenue guidance in the last quarter, it surprised positively with revenues coming in at $850 million showing a strong 34% quarterly growth. It was well above the earlier guidance of $570-620 million. Shipments also amounted to 1.2GW, which was well above the higher end of its earlier guidance at 1.02GW. Though the gross margin fell slightly from 15.2% in Q2 2015 to 14.9% in the current quarter, it exceeded the top end of guidance of 12-14%. The earnings per share rose from 31 cents in Q2 2015 to 53 cents in the current quarter.

"We remain committed to maximizing the valuation of our asset portfolio for our shareholders. We continue to work hard on a potential YieldCo, while keeping all options open given recent market volatility" - Michael G. Potter, Senior VP and CFO of Canadian Solar.

2) Strong outlook for the coming quarter - The company also expects revenue for the fourth quarter to be in the range of $930-980 million, which is well above a consensus of $774 million. The shipments too are expected to rise to 1.3-1.35 GW in Q4 2015. Q4's gross margin guidance is expected to increase 13-15%, up from the last quarter guidance of 12-14%. I'm in general expecting the strong solar companies to do extremely well going...


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