Canadian Solar BUY

CSIQ : NASDAQ : US$28.08
Target: US$46.00

Canadian Solar is a vertically-integrated solar module
manufacturer and project developer. Headquartered in
Canada with principal operations in China, Canadian
Solar has grown to be one of the world’s largest and most
competitive solar firms
All amounts in US$ unless otherwise noted.

Sustainability — Energy & Power Technologies
Investment recommendation
We reiterate our BUY on CSIQ following a solid print/guide and a
valuation backstop following a large sell-off on the Q3 results. We
believe that the sentiment in the solar group has largely detached from
fundamentals based on fears of cheap energy, and we remain buyers of
the top names in the group, including Canadian Solar.
Investment highlights
Canadian Solar handily beat Q3 expectations and issued guidance
sequentially up from the strong quarter. Headlines may look like the
guide missed consensus expectations, but we believe there was an
outlier who was unreasonably high in the average.
 While gross margin headlines read pretty negatively as well, none of
the items causing the pressure should have come as a surprise. We
do not view Canadian Solar as a margin-expansion story, but rather
as more of a solid top-line grower with strong operating leverage
and cash earnings. This has not changed.
 The company is close to announcing a yieldco, in our opinion, even
though it looks like the market interpreted the company’s lack of
firm details as a punt on the topic.
 Canadian Solar’s overall project pipeline continues to grow despite
monetizing and retaining significant volumes in the quarter. While
the new pipeline carries increased policy risk and in some cases
lower margins compared to the Canadian projects that have been
the company’s mainstay thus far, we still have confidence that the
company is among the best-positioned solar companies approaching
these new markets and can complete this strategy given its solid
track record of execution.


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