Canadian Solar Inc. reports 138% Net Income growth in 2018 and 10.4% Revenue growth
03/21/2019 • About Canadian Solar Inc. (
$CSIQ) • By InTwits
Canadian Solar Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Canadian Solar Inc. is a fast growth stock: 2018 revenue growth was 10.4%, 5 year revenue CAGR was 17.7% at 2018 ROIC 10.4%
- Canadian Solar Inc. has high CAPEX intensity: 5 year average CAPEX/Revenue was 15.5%. At the same time it's a lot of higher than industry average of 7.6%.
- CAPEX is quite volatile: $316m in 2018, $311m in 2017, $1,111m in 2016, $643m in 2015, $65m in 2014
- The company has business model with average profitability: ROIC is 10.4%
- It operates with high leverage: Net Debt/EBITDA is 2.7x while industry average is 2.0x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 10.4%. Revenue growth showed slowdown in 18Q4 - it was -18.7% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.63 pp from 3.1% to 3.7% in 2018. During the last 5 years EBITDA Margin bottomed in 2016 at 6.6% and was growing since that time.
Gross Margin increased slightly on 1.9 pp from 18.8% to 20.7% in 2018. During 2014-2018 Gross Margin bottomed in 2016 at 14.6% and was growing since that time. SG&A as a % of Revenue showed almost no change in 2018. During the last 5 years SG&A as a % of Revenue topped in 2016 at 12.2% and was declining since that time.
Net Income margin increased on 3.4 pp from 2.9% to 6.3% in 2018. During 2014-2018 Net Income margin bottomed in 2016 at 2.3% and was growing since that time.
Investments (CAPEX, working capital and M&A)
Canadian Solar Inc.'s CAPEX/Revenue was 8.4% in 2018. CAPEX/Revenue dropped on 10.1 pp from 18.5% in 2015 to 8.4% in 2018. It's average CAPEX/Revenue for the last three years was 18.9%. To fuel its fast growth the company invested a large share of EBITDA (64.0%) to CAPEX. During the last 5 years CAPEX as a % of Revenue topped in 2016 at 39.0% and was declining since that time.
Return on investment
The company operates at good ROE (21.0%) while ROIC is low (10.4%). ROIC increased on 3.1 pp from 7.3% to 10.4% in 2018. ROE surged on 10.6 pp from 10.4% to 21.0% in 2018. During 2014-2018 ROIC bottomed in 2016 at 2.9% and was growing since that time. During 2014-2018 ROE bottomed in 2016 at 7.7% and was growing since that time.
Leverage (Debt)
Debt level is 2.7x Net Debt / EBITDA and 3.6x Debt / EBITDA. Net Debt / EBITDA dropped on 4.1x from 6.8x to 2.7x in 2018. Debt dropped on 41.5% while cash dropped on 20.9%. During 2014-2018 Net Debt/EBITDA topped in 2016 at 11.3x and was declining since that time.
Canadian Solar Inc. has short term refinancing risk: cash is only 31.8% of short term debt.
Valuation and dividends
Canadian Solar Inc.'s trades at EV/EBITDA 4.9x and P/E 4.6x.
Management team
The company's CEO is Qu Xiaohua "Shawn". Qu Xiaohua "Shawn" is a founder and has 17 years tenure with the company. Huifeng Chang is a Canadian Solar Inc.'s CFO. Huifeng Chang has spent 3 years at the company.
Financial and operational results
FY ended 12/31/2018
Canadian Solar Inc. ($CSIQ) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 2,961 | 3,468 | 2,853 | 3,390 | 3,745 | 10.4% |
| Gross Profit | 581 | 577 | 417 | 638 | 775 | 21.6% |
| SG&A | 203 | 312 | 349 | 387 | 411 | 6.1% |
| EBITDA | 449 | 342 | 189 | 369 | 494 | 34.0% |
| Net Income | 240 | 172 | 65 | 100 | 237 | 138.1% |
Balance Sheet
|
|---|
| Cash | 550 | 553 | 511 | 562 | 444 | -20.9% |
| Short Term Debt | 1,114 | 1,630 | 2,028 | 2,530 | 1,398 | -44.8% |
| Long Term Debt | 284 | 753 | 619 | 531 | 394 | -25.8% |
Cash flow
|
|---|
| Capex | 65 | 643 | 1,111 | 311 | 316 | 1.8% |
Ratios
|
|---|
| Revenue growth | 79.0% | 17.1% | -17.7% | 18.8% | 10.4% | |
| EBITDA growth | 112.1% | -23.9% | -44.7% | 95.0% | 34.0% | |
|
|---|
| Gross Margin | 19.6% | 16.6% | 14.6% | 18.8% | 20.7% | 1.9% |
| EBITDA Margin | 15.2% | 9.9% | 6.6% | 10.9% | 13.2% | 2.3% |
| SG&A, % of revenue | 6.8% | 9.0% | 12.2% | 11.4% | 11.0% | -0.4% |
| Net Income Margin | 8.1% | 5.0% | 2.3% | 2.9% | 6.3% | 3.4% |
| CAPEX, % of revenue | 2.2% | 18.5% | 39.0% | 9.2% | 8.4% | -0.7% |
|
|---|
| ROIC | 18.8% | 9.2% | 2.9% | 7.3% | 10.4% | 3.1% |
| ROE | 43.3% | 22.4% | 7.7% | 10.4% | 21.0% | 10.6% |
| Net Debt/EBITDA | 1.9x | 5.4x | 11.3x | 6.8x | 2.7x | -4.1x |
Canadian Solar Inc. ($CSIQ) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,425 | 651 | 768 | 901 | | 110.5% | -6.0% | -15.8% | -18.7% |
| Net Income | 43 | 16 | 67 | 112 | | | -59.3% | 400.6% | 81.7% |
Balance Sheet
|
|---|
| Cash | 567 | 452 | 520 | 444 | | 9.1% | -8.9% | -15.5% | -20.9% |
| Short Term Debt | 1,984 | 2,127 | 1,878 | 1,398 | | 15.8% | 4.0% | -12.2% | -44.8% |
| Long Term Debt | 328 | 221 | 120 | 394 | | -44.2% | -44.5% | -73.0% | -25.8% |
Ratios
|
|---|
| Gross Margin | 10.1% | 24.5% | 26.1% | 30.1% | | -3.4% | 0.3% | 8.6% | 10.4% |
| Net Income Margin | 3.0% | 2.4% | 8.7% | 12.4% | | 5.0% | -3.1% | 7.2% | 6.8% |
Peers in Semiconductors
Below you can find Canadian Solar Inc. benchmarking vs. other companies in Semiconductors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 8.5% | 5.2% | 10.9% | 4.7% |
|---|
| Canadian Solar Inc. ($CSIQ) | | 17.1% | -17.7% | 18.8% | 10.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 46.4% | 47.7% | 48.0% | 49.1% | 51.0% |
|---|
| Canadian Solar Inc. ($CSIQ) | 19.6% | 16.6% | 14.6% | 18.8% | 20.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.5% | 9.2% | 10.7% | 9.8% |
|---|
| Canadian Solar Inc. ($CSIQ) | 15.2% | 9.9% | 6.6% | 10.9% | 13.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.6% | 4.7% | 4.4% |
|---|
| Canadian Solar Inc. ($CSIQ) | 2.2% | 18.5% | 39.0% | 9.2% | 8.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.4% | 3.2% | 3.0% |
|---|
| Canadian Solar Inc. ($CSIQ) | 18.8% | 9.2% | 2.9% | 7.3% | 10.4% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.6x | -0.3x | -0.0x | 0.4x | 0.3x |
|---|
| Canadian Solar Inc. ($CSIQ) | 1.9x | 5.4x | 11.3x | 6.8x | 2.7x |
