Canadian Solar Management Has Analysts Confident After Latest Meeting

Stifel’s Sven Eenmaa reiterated a Buy rating on Canadian Solar Inc. CSIQ, with a price target of $28.

Gross Margin Outlook

Following a meeting with management, Eenmaa mentioned that he was “incrementally positive on the company’s gross margin outlook for 2016 benefiting from increased in-house cell production,” while demand trends into 2Q16 seem to be healthy as well.

Eenmaa expects the company’s recurrent portfolio to reach below $1/W over time, and Canadian Solar appears focused on achieving a balance between capturing the value of its projects and recycling capital in the near term.

The analyst believes that this implies value recognition for the company’s downstream business, with a decrease in volatility in the Yieldco market.

“Management's demand commentary into 2Q16 was positive with Canadian Solar potentially evaluating additional outsourced capacity,” Eenmaa stated.

Although expectations regarding the shift in market project completions in the U.S. from 2016 to 2017 vary across vendors, Canadian Solar expects a shift of 1GW-2GW, with management providing positive commentary on additional organic demand for 2017 and beyond.

Southeast Asia

According to the Stifel report, “In China, where government FiT payment delays and curtailment in western regions remain an issue, access to funding to build PV projects in the country remains available.”

On the other hand, Canadian Solar’s utility-scale project completions in Japan are likely to increase from 2015 to 2017.

“With 700MW of CSIQ capacity added in Southeast Asia and given the low internal conversion costs, we view an increasing in-house share of cell production as supportive of our expectations of 2H16 gross margin expansion for the company,” the report added.