North Coast Solar Stocks

August 6, 2009

Canadian Solar shares soar on surprise Q2 profit

Filed under: CSIQ — Tags: , , , , , , — Jason @ 1:24 pm

Thu Aug 6, 2009 1:24pm EDT

* Q2 EPS $0.49 vs loss est of $0.09

* Ups FY shipment view

* Sees Q3 shipments about 90 MW to 100 MW

* Shares up as much as 20 pct

By Adveith Nair

BANGALORE, Aug 6 (Reuters) – Canadian Solar Inc (CSIQ) reported a surprise second-quarter profit, on strong sales in all its markets, and raised its full-year shipment outlook, sending its shares up as much as 20 percent.

For the latest second quarter, the company earned 49 cents a share. Analysts, on average, expected a loss of 9 cents a share, before items, according to Reuters Estimates.

The company’s outperformance was due to share gains in Germany, expansion to new markets in Asia, the United States and Eastern Europe and a lower processing cost, Piper Jaffray analyst Jesse Pichel wrote in a note to clients.

Deutsche Bank analyst Steve O’Rourke said penetration into new markets, including Korea, the Czech Republic and Italy, resulted in higher-than-expected shipments.

Canadian Solar shipped 48.2 megawatt (MW) in the second-quarter and guided for shipments to almost double sequentially. For the third quarter, the solar-cell maker now expects shipments of between 90 MW and 100 MW.

For the full year, the company now expects shipments between 260 MW and 270 MW, up from its prior view of 200 MW to 220 MW.

The solar sector, which once impressed with stellar growth rates, has fallen victim to a crisis of tight credits and oversupply. But solar subsidy programmes recently introduced in the U.S. and China could help spark an industry revival.

INVENTORY DESTOCKING HELPS

Canadian Solar significantly reduced its higher-priced inventory in the quarter, and was positioned to benefit from further declines in raw material prices, Chief Financial Officer Arthur Chen said in a statement.

“The company’s cost declines will continue thanks to its ramp-up of internal wafer capabilities, giving it the ability to capitalize on lower polysilicon prices and lower wafer prices as it cycles through higher-cost inventory,” analyst Pichel said.

Second-quarter gross margin came in at about 20 percent, compared with a negative gross margin of 7.9 percent for the first quarter, when the company was hurt by falling average selling prices and an inventory of high-cost wafers.

Canadian Solar expects third quarter gross margins of between 17 percent and 18 percent, it said on a conference call.

The company, which expects “flat to modest” declines in third-quarter average selling prices (ASP), said its cost structure will allow it to maintain gross margins even if prices fall below $2/watt.

“Second-quarter ASPs came in at about $2.37/watt for a standard module. I think prices in the third quarter will be down closer to $2.20/watt, and will touch $2/watt by the fourth quarter,” O’Rourke said.

Shares of the company were up 18 percent at $18.97 Thursday on Nasdaq. More than 7 million shares changed hands in intra-day trade, three times the company’s 10-day moving average.

Excluding Thursday’s gains, the shares are up more than five-fold from a March year-low. However, the stock is still off 50 percent from its August year-high.

(Editing by Jarshad Kakkrakandy and Unnikrishnan Nair)

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