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Canadian Solar Inc. Debt jumped on 22.2% and Revenue increased on 8.6%

03/18/2021 • About Canadian Solar Inc. ($CSIQ) • By InTwits

Canadian Solar Inc. reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:
  • The company has potentially unprofitable business model: ROIC is 5.6%
  • It operates with high leverage: Net Debt/EBITDA is 3.3x while industry average is 0.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Canadian Solar Inc.'s Revenue increased on 8.6%. Revenue growth showed acceleration in FY20Q4 - it increased 13.2% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin dropped on 65.1 pp from 20.3% to -44.9% in 2020. During FY2016-FY2020 EBITDA Margin topped in FY2019 at 13.6%.

Gross Margin decreased on 2.6 pp from 22.4% to 19.8% in FY2020. During FY2016-FY2020 Gross Margin topped in FY2019 at 22.4%. SG&A as a % of Revenue showed almost no change in FY2020.

Net Income margin decreased slightly on 1.1 pp from 5.4% to 4.2% in FY2020. During the last 5 years Net Income margin topped in FY2018 at 6.3% and was declining since that time.

Return on investment

The company operates at low ROIC (5.6%) and ROE (9.9%). ROIC decreased on 2.4 pp from 8.0% to 5.6% in FY2020. ROE decreased on 3.2 pp from 13.1% to 9.9% in FY2020. During FY2016-FY2020 ROIC topped in FY2018 at 10.4% and was declining since that time. During FY2016-FY2020 ROE topped in FY2018 at 21.0% and was declining since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 3.3x and Debt / EBITDA is 6.1x. Net Debt / EBITDA decreased on 0.024x from 3.4x to 3.3x in FY2020. Debt surged on 22.2% while cash jumped on 76.3%.

Canadian Solar Inc. has short term refinancing risk: cash is only 61.1% of short term debt.

Valuation and dividends

Canadian Solar Inc.'s trades at EV/EBITDA 9.2x and P/E 17.2x.

Management team

Qu Xiaohua "Shawn" is a Canadian Solar Inc.'s CEO. Qu Xiaohua "Shawn" has spent 19 years with the company. The company's CFO Huifeng Chang has spent 4 years with the company.

Financial and operational results

Canadian Solar Inc. ($CSIQ) key annual financial indicators

mln. $201620172018201920202020/2019
Gross Profit417638775718690-4.0%
Net Income65100237172147-14.5%
Balance Sheet
Short Term Debt2,0282,5301,3981,4971,92828.8%
Long Term Debt6195313946406836.6%
Cash flow
Revenue growth-17.7%18.8%10.4%-14.5%8.6%
EBITDA growth-44.7%95.0%34.0%-11.7%-1.8%

Gross Margin14.6%18.8%20.7%22.4%19.8%-2.6%
EBITDA Margin6.6%10.9%13.2%13.6%12.3%-1.3%
SG&A, % of revenue12.2%11.4%11.0%13.2%12.9%-0.3%
Net Income Margin2.3%2.9%6.3%5.4%4.2%-1.1%
CAPEX, % of revenue39.0%9.2%8.4%9.1%

Net Debt/EBITDA11.3x6.8x2.7x3.4x3.3x-0.0x

Canadian Solar Inc. ($CSIQ) key quoterly financial indicators

mln. $FY20Q1FY20Q2FY20Q3FY20Q4 YoY change
Revenue8266969141,041 70.3%-32.9%20.3%13.2%
EBITDA1589311561 258.4%-6.9%-1.8%-60.7%
Net Income1112197 --67.1%-84.9%-90.2%
Balance Sheet
Cash6195791,1031,179 67.1%32.0%109.6%76.3%
Short Term Debt1,4311,5051,6871,928 -21.0%-0.9%8.9%28.8%
Long Term Debt683596860683 47.0%22.5%57.2%6.6%
Gross Margin27.0%21.2%19.5%13.6% 4.9%3.5%-6.7%-11.4%
EBITDA Margin 19.2% 13.4% 12.6% 5.9% 10.1%3.7%-2.8%-11.1%
Net Income Margin 13.4% 3.0% 1.0% 0.6% 16.9%-3.1%-6.7%-6.7%

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 FY2016 FY2017 FY2018 FY2019 FY2020
Inphi Corporation ($IPHI)-30.8%-15.4%24.2%86.8%
Sequans Communications S.A. ($SQNS)-5.9%-16.6%-23.3%65.0%
MaxLinear, Inc ($MXL)-8.4%-8.4%-17.6%50.9%
Advanced Micro Devices, Inc. ($AMD)-21.6%23.3%4.0%45.0%
Kopin Corporation ($KOPN)-23.0%-12.1%20.7%35.9%
Median (43 companies)1.2%10.9%4.4%-3.0%1.0%
Canadian Solar Inc. ($CSIQ)-18.8%10.4%-14.5%8.6%

Top companies by Gross margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
CEVA, Inc. ($CEVA)91.6%92.1%89.8%88.4%89.3%
Universal Display Corporation ($OLED)83.9%80.8%75.5%78.5%80.1%
Rambus, Inc. ($RMBS)80.1%79.9%76.8%77.1%75.0%
Analog Devices, Inc. ($ADI)65.1%59.9%68.3%67.0%65.9%
MoSys, Inc. ($MOSY)49.0%46.9%61.8%61.0%65.7%
Median (43 companies)48.0%49.1%50.4%50.7%49.4%
Canadian Solar Inc. ($CSIQ)14.6%18.8%20.7%22.4%19.8%

Top companies by EBITDA margin, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Texas Instruments Incorporated ($TXN)43.5%46.7%48.6%47.5%47.6%
Intel Corp ($INTC)35.2%41.7%45.7%45.9%46.7%
Broadcom Inc. ($AVGO)19.9%40.4%44.2%40.9%46.2%
Universal Display Corporation ($OLED)44.8%51.6%35.3%48.0%45.9%
Analog Devices, Inc. ($ADI)36.2%32.1%43.2%42.1%42.0%
Median (41 companies)9.2%10.7%9.3%12.9%17.4%
Canadian Solar Inc. ($CSIQ)6.6%10.9%13.2%13.6%12.3%

Top companies by CAPEX/Revenue, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Micron Technology, Inc. ($MU)46.9%23.3%29.2%41.8%38.4%
Sequans Communications S.A. ($SQNS)11.8%13.3%22.9%29.6%27.1%
Intel Corp ($INTC)16.2%18.8%21.4%22.5%18.6%
First Solar, Inc. ($FSLR)7.9%17.5%33.0%21.8%15.4%
Power Integrations, Inc. ($POWI)3.1%7.5%5.9%5.7%14.5%
Median (41 companies)3.6%4.7%4.2%3.7%3.7%

Top companies by ROIC, %

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
Texas Instruments Incorporated ($TXN)34.9%43.1%47.5%39.7%38.2%
Applied Materials Inc ($AMAT)19.0%31.2%36.4%27.7%32.1%
Advanced Micro Devices, Inc. ($AMD)-21.7%7.3%21.6%21.5%31.8%
QUALCOMM Incorporated ($QCOM)15.8%5.7%2.2%38.0%28.1%
NVIDIA Corporation ($NVDA)13.1%27.3%35.3%36.9%22.7%
Median (45 companies)1.4%3.2%2.2%2.2%5.3%
Canadian Solar Inc. ($CSIQ)2.9%7.3%10.4%8.0%5.6%

Top companies by Net Debt / EBITDA

Top 5 FY2016 FY2017 FY2018 FY2019 FY2020
SunPower Corporation ($SPWR)----8.2x
MACOM Technology Solutions Holdings, Inc. ($MTSI)3.0x7.2x98.6x-6.6x
Rambus, Inc. ($RMBS)-0.1x-0.1x--5.9x
Inphi Corporation ($IPHI)4.5x33.7x32.2x4.5x3.4x
Broadcom Inc. ($AVGO)4.0x0.9x1.4x3.0x3.1x
Median (31 companies)-0.0x0.4x0.3x0.5x0.1x
Canadian Solar Inc. ($CSIQ)11.3x6.8x2.7x3.4x3.3x