CSIQ - Canadian Solar: From China With Modules
2024-02-06 03:39:05 ET
Summary
- Canadian Solar sells solar panels made of polycrystalline silicon; batteries to store electricity; and is also engaged in the construction and maintenance of energy infrastructure.
- Investments in Canadian Solar are associated with significant risks, such as the company's low transparency, the contract-based operation of the Recurrent Energy subsidiary, and the strong affiliation with China.
- We estimate the stock's fair value at $37.3 per share, which means a BUY rating. However, a large number of associated risks justify the high discount.
- Thanks to worldwide renewable energy subsidies, 3.2 TW to 4.2 TW of capacity will come online between 2024 and 2030, which is 4-5.6 times as much as what was installed from 2015-2022.
Investment thesis
Canadian Solar ( CSIQ ) is a bargain purchase compared to other solar industry players. With quite strong fundamentals and massive expansion plans the future looks promising. Though for the long term, the company looks attractive due to its low valuation, we advise investors to dedicate no more than 3% of their total capital to opening a position due to specific risks such as the lack of transparency and poor predictability of the Recurrent Energy segment.
Business overview
Canadian Solar sells solar panels made of polycrystalline silicon; batteries to store electricity; and is also engaged in construction and maintenance of energy infrastructure. The company has two subsidiaries:
- CSI Solar – manufactures and sells solar modules and their parts;
- Recurrent Energy – was formerly known as Global Energy and used to engage in developing solar-energy and battery-storage projects for sale. Now, the company also operates some of the projects it develops, so there’s an additional source of revenue from energy generation and management of jointly-owned assets (the EPC and O&M services).