Canadian Solar Inc. (CSIQ) on Q1 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Canadian Solar's First Quarter 2021 Earnings Conference Call. My name is Annie, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Isabel Zhang, IR Manager at Canadian Solar. Please go ahead. Isabel Zhang: Thank you, operator. And welcome, everyone, to Canadian Solar's first quarter 2021 conference call. Please note, that we have provided slides to accompany today's conference call which are available on Canadian Solar's Investor Relations website within the Events and Presentations section. Shawn Qu: Thank you, Isabel. Hi, everyone. Welcome, and thanks for joining us today. We started 2021 with a strong quarter. We delivered 3.1 gigawatts of module shipments, US$1.1 billion in revenue and 17.9% in gross margin. We also achieved net income of US$23 million, and a diluted EPS of $0.36. Our results came in towards the high-end of our guidance, while delivering a good balance of growth and profitability. I want to thank our team for their focus and execution to make this happen. While Q1 remained a challenging quarter, our team continued to execute our strategy and strengthen our long-term competitive advantage. Ismael Guerrero: Thanks, Shawn. I'm proud to report that in Q1, Global Energy delivered $471 million in revenue and 24% in gross margin. We achieved nearly 500 megawatts of project sales in Japan, India and the U.S. We also continue to grow our project pipeline, both in solar and battery storage projects, which will enforce our future success. Today, I would like to spend a bit more time to go through the Global Energy business to help the market understand better our business drivers. Please turn to Slide 5. Canadian Solar is one of the few global pure-play solar and storage project development platforms in the world. We compete with state-owned or state-backed utilities as well as small local developers. And we have built over time our own unique competitive moat. Over the past decade, we have developed, built and connected to the grid over 5.7 gigawatts of solar projects across 20-plus countries. And by the end of this year, we expect to add another 1.5 gigawatts to our track record as these are projects currently under construction. Moving to Slide 6, please. We have also grown our total solar pipeline to 21 gigawatts, including our China pipeline, which is now part of CSI Solar. Of the 21 gigawatts of total pipeline, nearly 6 gigawatts are projects in operation, in construction or in backlog. Of those 6 gigawatts, 95% are contracted projects, which provide significant visibility to our project development business. So far, we have a 100% track record delivering projects in backlog. Canadian Solar Global Energy is often seen as a volatile business. This is true if you only consider quarterly revenue profit. However, if you look at our global pipeline, we had a pretty stable business because we have a large and growing backlog of highly valuable clean energy assets. The value of these cash flow generating assets do not change on a quarterly basis. For example, announced last month that we started construction on 143 megawatts of solar projects in Japan. During the earlier development phase, these projects encounter numerous challenges and experienced some delays. However, our team persevered, and now we are building one of our crown jewel solar assets, the 100-megawatt Azuma Kofuji project has a 20-year feed-in tariff of JPY36 or US$0.33 per kilowatt hour. This is around 10x to 15x higher than the global average solar PPA price. Yan Zhuang: Thank you, Ismael. In Q1, in the CSI Solar division, we delivered 3.1 gigawatts of solar module shipments, $695 million in revenue and 9.7% in gross margin. While this performance is lower than we would have liked, we managed to deliver towards the higher end of what we had expected. As we all know by now, 2021 has been the supply side story. So let me start on some positive news. Please turn to Slide 12. Solar glass prices are not only back to normal, but right now, they're below the pre-inflationary phase. Unfortunately, this was more than offset by polysilicon prices, which have tripled over the past 12 months. This is very unusual as we can see that the total polysilicon supply in the market is more than enough to satisfy end market demand. The problem is that well over 200 gigawatts of wafer and cell capacity are competing for less than 200 gigawatts of polysilicon supply. Meanwhile, we're seeing greater speculative polysilicon treating activities by intermediaries, which is also contributing to the higher polysilicon price. In terms of foreign exchange, we continue to see unfavorable currency fluctuations, although less negative than in previous quarters. And shipping costs, while we saw a short lift improvement followed by another increase in transportation costs after the Suez Canal event. It is important to put these supply chain pressures into broader perspective. Despite the long lead times for solar glass capacity expansion, prices declined just as dramatically as they had initially increased, swinging the industry from shortage to overcapacity over the course of just a few months. This demonstrates that supply side pressures, particularly in the manufacturing industry, tend to be short-lived and are not sustainable, particularly in the case of polysilicon, as current manufactured gross margins are hitting approximately 60%. Of course, that doesn't change the fact that short-term remains painful for module manufacturers, which is why we have taken several measures to lessen the impact of supply side pressures. Please turn to Slide 13. During Q1, we continued to raise prices. In fact, Q1 ASPs are nearly 10% above Q4 of last year, which is the largest quarterly module price increase in the recent history of our business. This is also in addition to our modest price increase in Q4. Obviously, it is still less than the poly price jump, but still a significant increase. And as a long as poly price stay high, module prices will not come down either. We will continue to take price up, and we're willing to give up some volume in order to protect margins. With that said, our capacity utilization rate remains at one of the highest levels in the industry based on our channel checks. Longer term, we continue to see very strong global end market demand for solar energy. Global demand will soon exceed 200 gigawatts a year and is on its way towards the 300 gigawatts mark. Existing markets are growing and new markets are coming online. However, in the near term, we are seeing greater price elasticity of demand and certain utility skill projects may be delayed to next year if module prices do not come down. This is natural and should be expected of a well-functioning market that adjust to higher prices. In the meantime, we continue to monitor supply chain developments while positioning the company for longer-term growth. With that, let me pass it down to Huifeng, who will go through the Q1 financials in more detail. Huifeng, please go ahead. Huifeng Chang: Thank you, Yan. Please turn to Slide 14. We delivered Q1 revenue of $1.1 billion toward the high end of our guidance. We achieved 5% growth over the last quarter and 32% year-over-year. Gross margin came in at 17.9%. Q1 benefited from higher-margin product sales in Japan and a near double-digit percentage increase in solar module ASPs quarter-over-quarter. This was offset, however, by lower shipment volume, recognized as revenues as well as higher raw material costs. Selling and distribution expenses increased by 31% quarter-over-quarter, mainly driven by higher international transportation costs. G&A expenses were down 4% quarter-over-quarter due to lower impairment charges and tighter cost controls. Total operating expenses were up 9% quarter-over-quarter. The foreign exchange net impact was a negative US$7 million, mainly caused by the strong U.S. dollar versus the year-end. Income tax expense was $14 million in Q1 compared to a benefit of $2 million in Q4 2020. The higher tax expenses were driven by an increase in pretax income from high tax jurisdictions such as Japan and the increase of certain non-taxable terms. Net income to shareholders was $23 million or $0.36 per diluted share. Now turning to the cash flow and the balance sheet on Slide 14 -- Slide 15. While we focus on maintaining strong working capital and conserving cash, we made an exception this quarter to build up and hold more inventories than usual. In our Q1 balance sheet, inventories elevated by $238 million as we managed our working capital to raise inventory in selective markets for short-term. As a result, we consumed $83 million in operating activities. Q1 CapEx was $110 million. We currently expect full year CapEx to be around $650 million, slightly lower than what we previously guided. We are committed to manage our CapEx and will remain flexible to grow our business in response to opportunities. Our total cash position remained strong at $1.5 billion, giving us the flexible cash position to fund CapEx this year and other long-term investments. Total debt increased 5% to $2.3 billion, mainly due to the increase in non-recourse debt used to finance our solar projects. Net debt-to-EBITDA in Q1, excluding restricted cash, ticked up slightly, but it remains at a healthy level of 3.5x. Now, let me pass it back to Shawn, who will conclude with our guidance and the business outlook. Shawn? Shawn Qu : Thanks, Huifeng. Please turn to Slide 16. Factoring in everything we just covered, for the second quarter of 2021, we expect the total module shipment to be in the range of 3.5 gigawatts to 3.7 gigawatts, including approximately 80 megawatts of module shipments to our own projects. Total revenue for the second quarter are expected to be in the range of US$1.4 billion to US$1.5 billion. Gross margin is expected to be between 9.5% to 10.5%. For the full year 2021, we reiterate total shipments to be in a range of 18 gigawatts to 20 gigawatts and project sales to be in the range of 1.8 gigawatts to 2.3 gigawatts. We also expect battery storage shipment for 2021 to be in the range of 810 to 860 megawatt hours. The total revenue guidance for 2021 remains unchanged and is expected to be in the range of US$5.6 billion to US$6 billion. Our guidance reflects the continuous shortage and price increase of certain raw materials during Q2 of this year, partly offset by higher shipments to be recognized in as revenue. It also reflects a greater contribution from battery storage revenues in CSI Solar, which will be recognized more materially from Q2 onward. On the Global Energy side, our guidance reflects a lower gross margin contribution due to the expected different sales mix. Finally, please turn to the Slide 17. We have submitted the listing application documents to the provincial securities regulatory authorities for the China listing of our CSI Solar subsidiary. The documents are under review as per usual procedures. So we remain on track. However, as usual, the IPO is always subject to capital market conditions, as you know. With that, I would now like to open the call to your questions. Operator? Operator: . First question comes from the line of Brian Lee of Goldman Sachs. Brian Lee: I guess just as we think about the bigger picture here, I just wanted to understand your thought process. You're raising prices. It sounds like -- you had that slide up there, where you expect module ASPs to move up through the next several quarters. At the same time, you're cautioning a little bit that if module prices and other inflationary pressures are too great, you could start to see some demand slippage and you’re reiterating your guidance for the year. So just putting all that together, I'm trying to reconcile, are you seeing any projects pushing out any customer saying, we are going to do projects in a different timeline later than the original timeline? Or is that something you anticipate in the second half? And can you maybe quantify a bit like how much more would the cost of a system, let's say, need to move up from here? Is it 10%, 15% before you start to actually see some of those project delays or cancellations start to materialize? I just want to understand what the puts and takes are here. Shawn Qu : I will ask Yan to answer this question. Yan Zhuang: Well, Brian, well, you raised a question that everybody is expecting an answer. But I can tell you, I think on the bigger picture, we have to say that there are a lot of projects right now on waiting list. So they actually are waiting. They're supposed to be built this year. They are supposed to be built in the first half of this year, but they're waiting. And among the waiting list, some of them may just postpone into next year, but a lot of them, they need to be built anyway. So from -- this is quite different in terms of the module price increase impact to the project returns or the decision of whether or not they want to start construction. This impact changed from market to market and also from project to project. So I can give you one example. In China, in the average province, module price increase of 20% in the past months actually reduced the project return by 1% -- 100 basis points. So this is the impact. However, in different province, the numbers are different. So in other markets, things can be different, right? In the U.S. market, you have a lot of some costs for development phase. And so the penalty is heavy. So they still have to continue with -- a lot of the project needs to carry out, needs to -- as planned, right? In Japan, because the PPA price is high, so the module price increase becomes moderate. And also, if you look into Latin America, things are different, it can be more difficult. In Europe, you have a lot of projects that don't have PPA or the PPA is negotiated after construction. So they can wait. However, it does not mean all the projects in Europe, they don't build this year. So since they have different projects, projects with PPAs, projects with some cost. So things are different. So -- but as I said, at a high level, first half, the volume -- the installation base is small. So the more demand is actually parting up for second half. So we're still expecting that the demand for the second half will increase even though with the increasing module price, and also for Canadian Solar. I want to remind everybody that in terms of branding, in terms of global presence, in terms of channel, in terms of selling force -- sales force, we’re not anything less than our competitors. However, we reiterated annual volume target. Our target is not higher than our competitor. So even -- we're actually -- that is based on our capacity. But also, I don't think we're anything less in terms of selling volume. So compared with their target, I don't think we're overaggressive. And I also want to remind that, as I mentioned in my statements earlier that with -- somehow, I believe, moving to second half the shipping cost has a chance to be more stabilized and even coming down a little bit with the COVID-19 situation improves. So that's my expectation. And secondly, with the silicon price. I want to mention that, first of all, the motivation of speculation for stocking silicon has significantly reduced. I don't think there's many people in the market that are very keen on investing their money at today's silicon price for inventory. So that part has been the primary force on behind the shortage of silicon. So people are saying that 30% of silicon capacity in the first half, in Q1, was disappeared from the consumption. So this is the information I received. And also moving to second half, we will see more -- significantly more bigger wafer and thinner wafer coming into the market. So that will help to increase the utilization rate of silicon material. So somehow -- we're expecting somehow the silicon prices will be stabilized or even making a turn, a sudden turn. That is also possible. So maybe there's another possibility that the Chinese government may take action, right? They already took action for steel industry, and they just took action in the coal industry, just today. So we don't know what happened with silicon, but that might be a chance. So I think we still have the capacity that will support our 18 gigawatts to 20 gigawatts of target. And so, we think we still have a good chance to hit the target -- to hit the guidance. That's why we maintain the guidance. I hope I answered your question. Brian Lee: Yes. No, that's great. I appreciate the fuller context there. Maybe one more question from me, and I'll pass it on. The -- as we think about the model, and the forecast here for Q2, 9.5% to 10.5% gross margin, can you help us with the split? I'm assuming module gross margin is lower than that? And then the energy gross margin will be higher than that, average to the 9.5% to 10.5%. But can you give us some rough sense of the delta? And then secondly, the revenue guidance for Q2, $1.4 billion to $1.5 billion, rough split between what you're expecting on module related revenue MSS versus SI? Shawn Qu : I will let Huifeng to answer this question. Huifeng? Huifeng Chang: No, I think Yan is better to handle this question. Shawn Qu : No, no, no. This is about CSIQ, come on, CSIQ energy. Okay. In terms of gross margin, the -- most of the gross margin contribution this time is from CSI Solar. The energy, Global Energy gross margin actually for this quarter is lower than this number. However, the -- most of the revenue contribution in Q2 is from the CSI Solar side. That’s why what you see here is more or less the CSI Solar side of gross margin. Now in terms of revenue contribution, I guess I’d answer it. Most of the revenue contribution for Q2 come from CSI Solar. And the -- a small portion means 15%, 20% comes from the Global Energy business. Operator: Next question is from the line of J.B. Lowe of Citi. J.B. Lowe: Shawn, those comments you just made in terms of the gross margin from the CSI Solar side, it sounds like that -- if that's the case, I mean, that's essentially what gross margins were in 1Q, was around that 9%, 9.5% level, right? So does that mean that you think you can hold margins flat in CSI Solar in 2Q despite all the cost inflationary pressures we've seen? Shawn Qu: Well, the -- we are -- the ASP, the module price in Q2 also increased. However, there are some -- well, actually, from the CSI Solar side, we expect the performance in Q2 is better than Q1. I will let Yan to elaborate. Yan Zhuang: Yes. One of -- I mean the first thing is we've been increasing prices and customers over time starts to accept that. And you'll be surprised to see that in some markets and some projects, actually, how much they can take in terms of module price hike. In a lot of the cases, it’s just very inconvenient and it takes time for them to convince their bosses and/or their lenders. So it just takes time. So over time, the price increase improves situation. And secondly is, in Q1, we actually do -- had a lot of impact from the low price orders we signed last year. And in Q2 that amount reduced. So that also helped. And in second half, we expect -- so the impact from carryover aging low-priced contract we signed from last year will further be reduced, almost to nothing. So this is an important factor on improving profit over other factors. Shawn Qu: This is Shawn. Now you might remember that back in last year, the November earnings call, I said that we think with all these unfavorable supply side trends, we target to achieve low-teen gross margin in CSI Solar. And then we target to make it back to mid-teens in Q2. And that's what I said in November. Now we indeed managed to have the Q1 CSI Solar gross margin more or less at that number, although with a lot of hard fight. Now for Q2, it looks like it's going to be low-teen rather than mid-teen. And as you all know by now that this is due to mainly unexpected price increase in the supply chain from the polysilicon to heavy metals and to the chemical material. But it looks like our Q2 CSI Solar performance will still be better than Q1. So we still improve. It didn't really reach -- didn't reach the target we mentioned back in November, but we did manage to make improvement. And we believe we will continue to improve in Q3. J.B. Lowe: Yes. No, I mean given all the cost but, I think that's a win, if you could even have improvement in 2Q. I guess my follow-up is staying on that side. Volumes in the back half of the year are going to be -- just doing the math, almost double what they were in the first half. How much can that help you push margins up to the mid-teens in -- on the module business in the second half, do you think? Shawn Qu: Well, I've explained our confidence on the volume side for second half. And on the other hand, as I said, shipping cost improvement and also pricing improvement will continue helping us to improve our margins. So silicon price we believe is not sustainable like this. And also in second half, we will also have more volume of 210, the bigger wafer modules that are coming online and our -- and including our HJT lines. So we also have a plan to actually increase our module sales in second half. So those will help us improve our margin. J.B. Lowe : Great. And if I could squeeze one more in here... Shawn Qu: Yes. Also the volume is up, the volume is up, even if we maintain the same gross margin, there’s volume increase, it will help to -- help us with a lot of the fixed costs. J.B. Lowe: Yes, absolutely. That was kind of what I'm getting to. Last one for me was just -- I noticed that some of the capacity targets that you guys had on ingots, wafers and cells by year-end has been reduced. But your CapEx was only reduced a little bit. I'm just wondering, is that capacity that you're pushing into basically 2022 that's going to come online? Just what are the puts and takes on that front? Shawn Qu: Well, we pushed down -- we reduced the capacity target for the end of the year. The CapEx spending in Q1 already spent. In Q2, those are some scheduled payments. However, this will -- we will -- by reducing some of the CapEx, like the capacity expansion targeting Q2, the annual CapEx will end up to be lower. On the other hand, we decided to put some of the money into strategic stock of some of the raw materials. We believe that's a good decision. This is one way for us to help to lessen the impact of the material increase in Q2. And we are seeing good results, good effects from this, I think smart reallocation of money. Operator: Next question is from the line of Philip Shen of ROTH Capital Partners. Philip Shen: First one is on polysilicon. I know you guys have talked a lot about it already. But in your forecasting, when do you expect poly pricing to come down? And I think, Yan, you mentioned that there could be some kind of action by the Chinese government on the polysilicon industry. Could you elaborate more? And can you talk about if those comments are just speculation? Or do you have some insight that could be coming? And could you share some details about it in terms of timing and so forth? Yan Zhuang: It is my personal opinion based on -- it's a channel information because -- or you can call that a speculation, but that's a possibility. So in terms of silicon price, when it is going to come down? I really can't tell you that. But I can tell you, I already gave you the fact that it's not sustainable. And the motivation for speculation on silicon stock now has disappeared because price is too high, okay. So at least we expect the silicon price will be stabilized. And with the chance if something happens or somehow, it may go down even. That's all I can say. Philip Shen: And then as it relates to module pricing, I know people have talked about this earlier. So in Q1, I think pricing, you talked about you increased pricing double-digit percentages versus the prior quarter. How much could you raise pricing on modules on a global average in Q3 versus Q2? And maybe -- I don't think you addressed Q2 specifically, but how much could module price increase Q2 versus Q1 as well? Yan Zhuang: Well, I cannot simply give you an average because it really changes from market to market. When the price goes up, you have some regions, some markets, we will have to face more difficulties. While some other markets, they actually feel less. And even within the same market, you have different type of projects, will have -- they will have to take a different level of hit. So I think modules -- there's still a potential for module price to go up, while the demand remains strong. So there are many reasons. Reason number one is there's a big waitlist. The project is supposed to be built in Q1 and Q2, they're waiting, but a lot of them -- a majority of them cannot move into next year. So some will, but I would say a lot of them have to be built this year, in particular, in some markets, as I said, in U.S., in China, in Japan and also I already gave you one example, right? 20% of module increase in China in the average province, it caused -- it reduced the project return by 100 basis points. So it's still like -- even today, still like a 7% of return. So there's still room for module price to go up. I can't give you exact number, but I think my expectations, module, in the second half, I think our customers -- more customers are willing to accept a module price increase because they're running out of time. And the volume, I would say, demand level in second half will be strong. Philip Shen: Great. Okay. As it relates to the Chinese IPO process, looks like requirements for new listings are being tightened with listings becoming more difficult. I know, Shawn, you talked -- you gave us a slide and talked through it. But when you -- as you look at it now, do you think it's more likely that the IPO happens in 2022? Or do you have confidence that it could have -- if there's a high probability that could happen in '21? Shawn Qu: Huifeng, do you want to answer this question. Huifeng Chang: Phil, can you repeat the question again? Philip Shen: Yes. Do you think the IPO process for China -- the China listing is going to be more likely in '21 or '22, given some of the difficulties or the increased requirements for new listings being -- the timing for those listings by the Chinese government or the CSRC? Huifeng Chang: I haven't heard new requirements of listing. What happened was the process became slower. Now several months ago, I think as you were referring to some report about CSRC asking the third-party service provider, such as the financial auditors, the legal auditors, they have -- they will get more responsibility in the IPO process. And then some of the companies, usually very small companies, decided to either delay or drop out the application. So in terms of listing process requirements, haven't -- no regulation change. So we are in the process of waiting for the requests and the questions for review for the -- most likely coming in June. And then there will be a back and forth Q&A. And I think later this year, we will close that page. Now after the page closed, we know that there is waiting time for the final IPO to launch and that process will take maybe 3 to 5 months. According to the latest pace of some other companies that have received approval from the stock exchange, but they are still waiting for the go-ahead from CSRC. Philip Shen: So just very quickly, Huifeng. Thank you. Do you think is more likely in '21 or 2022, the IPO? Huifeng Chang: I think it's more likely towards the end of 2021, but there's a possibility it may slip into beginning of 2022. Shawn Qu: Philip, I -- we don't want to speculate the IPO process. We remain on track. And the next step will be the further application and review on question and answers. And then the IPO itself will be subject to capital market conditions, as you know. So we’ll put out the slides. And any further speculation will be too much of a question. Operator: Next question is from the line of Colin Rusch of Oppenheimer. Colin Rusch: Could you talk a little bit about the utility-scale business and how the offtake agreements are really going to end up going with? We're seeing a significant amount of interest from corporates wanting to lower their emissions profiles. I'm wondering what the dynamics are rather than targeting utilities for the offtake agreements that there might be some pricing opportunities for you guys with some of these projects to sell direct to corporations? Shawn Qu: Yes, hi, Colin I think you question is on public PPAs versus private PPAs and some even merchant -- I mean, project-based on merchant trading. I would let Ismael to answer this question. Ismael? Ismael Guerrero: Thank you, Shawn. Thank you, Colin for making the question. I'm very happy to receive a question on our energy business. Look, I think you are touching a very good point. It truly depends from country to country and the regulation of each country. In the U.S., my personal opinion is that as time moves on, utilities are going to be retaining more projects and making less PPAs. And you can see that on our and business model that is growing there, too. So we are seeing more utilities coming, asking us for developing projects for them, then signing PPAs. And on the other hand, we see many corporations willing to sign private PPAs. Now the challenge on those, I should tell you that is that many of them still do not have the knowledge. And it's a long process to negotiate the PPAs to make sure that they are solid and bankable. So there will be a transition period, but we see them coming heavily. In Europe, for instance, it’s just starting. So we are negotiating our first ones there and starting in some of the markets like Australia, for instance, it's way more common. So I think that there is a transition coming as we’re sitting, and we see it as a very good opportunity. Colin Rusch: That's super helpful. And then in terms of where you've been able to raise price quickly and by business segment, obviously, the channel business has been healthy margin business for you guys. Has that responded faster? And can you push prices in that channel a little bit more aggressively? And then are we seeing some of the larger projects kind of bring up the rear in terms of the cadence of the price increases, but just trying to get a sense of how those price increases are falling throughout the different business segments? Yan Zhuang: Well, thank you, Colin. Yes, you're right. Actually, we were able to move up pricing quicker, faster in the DG market, which is a distribution channel because their lead time for PO is actually much shorter. It's like 2 to 3 weeks instead of anywhere between 4 to 6 months, even longer. So that's , right? It's longer. And also, their business model actually has higher space -- has more room for price up. So -- and moving to second half -- moving to Q2 and second half, we’re already expecting improvement in this -- further improvement in this channel because we see that COVID situation in the U.S., Europe, Japan, Australia, in those markets, are actually getting better. And that will help the DG market significantly. So we're expecting that will help us improve our margin over time in this year. Did I answer your question or I missed something? Operator: I believe he is no longer in queue. Thank you. Alright. That's the end of our Q&A session. I'd now like to hand the conference back to the presenters for closing remarks. Please continue. Shawn Qu: Okay. Thank you for joining us today and for your continued support. If you have any questions or would like to set up a call, please contact our Investor Relations team. Take care, and have a nice day. Thank you again. Operator: Thank you. Ladies and gentlemen, that concludes today's conference call, and thank you for participating. You may now all disconnect.
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Canadian Solar Shares Down 4% Following Q1 Earnings

Canadian Solar Inc. (NASDAQ:CSIQ) shares dropped more than 4% today following the company’s reported Q1 results, with EPS of $0.14 coming in better than the consensus estimate of ($0.13). Revenue was $1.25 billion, compared to the consensus estimate of $1.31 billion.

The company announced plans to increase vertical integration as it continues to see demand growing. Management estimates that global solar demand will double from 2019 levels in 2022, reaching 200GW.

With its target of 15% market share, analysts at Oppenheimer believe the company is prudent to actively manage its cost structure and control additional elements of its supply chain. The analysts mentioned they are encouraged by energy storage project pipeline growth as they expect storage to prove a meaningful earnings contributor going forward, particularly in Latin America, where they expect grid stability services to be at a premium.

The company also provided guidance for Q2 well ahead of Street expectations. Quarterly revenue is expected to range from $2.2 billion to $2.3 billion.