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Auriga on Canadian Solar (CSIQ); Traction on Shipments, Costs, EPC Visibility Offset by Sharp ASP Erosion

May 11, 2012 10:18 AM EDT Send to a Friend
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Price: $26.46 --0%

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Auriga maintains a 'Hold' on Canadian Solar (NASDAQ: CSIQ) price target of $4.00.

Analyst, Hari Chandra, said, "Canadian Solar differentiated itself in 2011 by delivering on shipments. But shipment gains are meaningless if ASP ($0.89/Wp in 1Q12) continues to cascade while costs (~$0.82/Wp in 1Q12) don't keep pace. We believe this poses a major risk as shipments rise. Buildup of EPC business, first with TransCanada and now with SkyPower gives Canadian Solar visibility and margin cushion, but likely not enough to offset the sharp ASP erosion. Its already burdened b/s, with debt/capital at ~68%, will likely need more debt for project execution. While access to debt may readily come from Chinese banks, we believe the focus on shipments at the expense of profitability entails continued losses well into 2013. 1Q12 - Revenue miss; shipments/GM in-line; NO forex hit = Miracle on EPS! 1Q12 results: Canadian Solar 1Q12 revenue at $326M fell short of our est. of $380M and Street consensus of $362M. Shipments at 343MWp were in-line, but ASP at $0.89/Wp was -12% vs. our -5% estimate."

For an analyst ratings summary and ratings history on Canadian Solar click here. For more ratings news on Canadian Solar click here.

Shares of Canadian Solar closed at $3.40 yesterday.




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