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Canadian Solar (CSIQ) IPO

November 9th, 2006 · No Comments

Sticking with the “solar” theme of the past 2 weeks, a new IPO is about to hit the market. Yesterday (11/8/06), shares of Canadian Solar Inc. (Nasdaq: CSIQ) were priced at $15 a share, at the top of the range of $13-15. The company is selling a 28% stake, offering6.3 million shares while existing shareholders are offering another 1.4 million. The IPO will raise $115 million for the company. The name of the company is a bit deceiving. Although the company is incorporated in Canada, it’s manufacturing plants are in China and is based in Jiangsu, China. Canadian Solar makes solar modules and intends to use the proceeds to buy solar cells and silicon raw materials ($30 million), as well as expand manufacturing ($35 milliion) and general corporate purposes. Solar modules are an array of interconnected solar cells encased in a weatherproof package (that’s per the company).

For the quarter ended 9/30/06, Canadian Solar posted net revenues of $17.8 million, gross profit of $4.8 million and net income of $238,722 (or $0.011 per share based on 20.9 million shares outstanding at that time…. of note, there will be 27.2 million shares outstanding after the IPO).

Net revenues for the three months ended September 30, 2006 increased 3.2% from the prior quarter ended June 30, 2006 and 292.9% from the quarter ended September 30, 2005. The company achieved these results following a strong quarter ended June 30, 2006, in which net revenues increased 96.2% from the prior quarter ended March 31, 2006.

Looking through the data, it appears the company has been profitable every year since 2003, earning $3.8 million in 2005 or $0.25/share (share count of 15 million). In the first half of 2006, the company posted a loss of $4.5 million ($0.30/share) mostly on a “loss on change in fair value of derivatives related to convertible notes”.

Canadian Solar is showing strong revenue growth (with 3rd quarter revenues almost exceeding revenue for the entire FY2005). However, it’s profitability remains fairly limited, and its shares (like most of the rest of the solar sector) are richly priced. Given this, I would stick with Suntech Power (Nasdaq: STP) as the stock to buy in the sector.

Tags: Stocks