Another Peppy Chinese Solar Report

• Email
• Share
• Print

Following JA Solar's (Nasdaq: JASO) sweet quarter and Yingli Green Energy's (NYSE: YGE) ripping report, Canadian Solar (Nasdaq: CSIQ) joins the ranks of Chinese solar shops stomping domestic players like Energy Conversion Devices (Nasdaq: ENER). It's enough to make Evergreen Solar (Nasdaq: ESLR) want to whisk its operations off to Wuhan (which is exactly what the company is doing).

The sequential results were eye-popping: Canadian Solar's shipments leaped 113%, and revenue rose by 87%. Year on year, shipments also shot up a sizzling 71%. Note, however, that sales still dropped 16% from year-ago levels.

That's pretty sobering. You can understand why analysts are so keen to get a handle on how much further prices have to fall. CSI pointed out that spot-market solar-cell prices have ticked up in October and November, but acknowledged that the company is figuring modest declines into its projections for 2010. Those include gross margins in the high teens, compared with 16.3% in the third quarter.

Another prominent part of that 2010 forecast is at least a doubling of shipments, to 600 megawatts or 700 megawatts. CSI's in-house cell capacity is taking a big jump from 270 megawatts to 700 megawatts by next June, but the company will still have to tap outside cell makers (primarily Taiwanese, but also Chinese) to hit that shipment guidance.

It sounds like Canadian Solar is stepping on the gas next year, regardless of whether prices stabilize. If they do, that's great, but if not, CSI figures its cost structure is about in line with leading competitors like Trina Solar (NYSE: TSL), so the company is prepared to compete aggressively on price. At the end of the conference call, the CEO said CSI's "first target is to gain market share." This kind of thinking, surely prevalent among peers, is a great example of why I don't own any solar stocks.