203 replies to this topic

[odyd]

OK Thanks.

Josh how do you see CSIQ stacking up to TSL these days? I am not trying to compare $0.07 to $0.37 I am talking about level of execution for the rest of the year.

[sunnysky]

sorry, $546M is gross revenue.

[joshchang]

Josh how do you see CSIQ stacking up to TSL these days? I am not trying to compare $0.07 to $0.37 I am talking about level of execution for the rest of the year.

CSIQ should have a good Q2 from guidance. I like Qu's group a lot so this is a long term hold for me. Some bumpers on execution that I really like to see improvement are 1. Consistency in Ontario projects margins. Seems GM in Q1 varies from last Q's sale. I am not sure if depreciation of CAD plays any role in it. 2. Timing of project sale recognition. 3. Forex management. They shouldn't have any excuses on this one any more. Right now, it seems TSL has much stronger module segment but CSIQ has much more profitable project lineups there. Problem is analysts are not modeling TSL's project sale into estimate so there could be positive beat. For CSIQ, analysts are modeling project sale using company's COD information so pushing project sale into future quarter could result miss. Still, QoQ CSIQ should see greatest improvement among all.

[explo]

Josh how do you see CSIQ stacking up to TSL these days? I am not trying to compare $0.07 to $0.37 I am talking about level of execution for the rest of the year.

My view is that with worse BS and close to twice PPS of TSL the market expects them to be able to achieve double TSL's EPS or awards CSIQ a higher valuation of earnings.

[joshchang]

My view is that with worse BS and close to twice PPS of TSL the market expects them to be able to achieve double TSL's EPS or awards CSIQ a higher valuation of earnings.

With good execution on project sale in 2H it's doable. But again, TSL's project sale has more uncertainty so TSL's full year result could have a wide range depending on project recognition. Good thing is seems analysts are not including project sale in quarterly estimate. As for BS, CSIQ has $500m project asset and it could have a much stronger BS position (net debt) if it carries similar amount project asset as TSL and JASO.

[sunnysky]

Q2 for CSIQ looks fine based on guidance - I see they earn 68 cents. I still like CSIQ but unlike TSL, JKS, and JASO, CSIQ is not profitable in their module business. It's good to see they are working on it by teaming up with GCL and adding cell capacity, even though they are cautious at this stage. Still, I wonder if they have enough focus on cost reduction and how much they can do about it and by when. The lumpiness of project revenue recognition has caused much more damage than I had initially envisioned.

 

Also, compared with others, CSIQ is taking slow steps in the Chinese market. Maybe warranted right now, but it could also be a mistake when looking back at 2014.

[odyd]

3. is $51M that is a dollar alone in EPS when fixed.

[odyd]

CSIQ is not profitable in their module business

 

They have only 2 cents difference than TSL, and they will have higher ASP, moving forward than TSL, as they stay from selling in China.
TSL is going to have capacity gap between cells and modules as they expanding. CSIQ already expanded its module shop, so they will be working to close the gap while Trina will be expanding it.  The risk here analysts count on a lot to be delivered by CSIQ in area of projects, good observation Josh, for TSL this is not part of the calculation.  

[odyd]

Sunny, what makes TSL a lot more profitable is the scale. shipping 800MW to third party buyers at 17% is a huge boost versus 550MW.

If CSIQ had 71M shares it would be priced around 5 dollars more than TSL. If we use criteria of $2 per share and that way created PE, CSIQ is trading at expectation of $2.74 right now.

[sunnysky]

3. is $51M that is a dollar alone in EPS when fixed.

 

I modeled for $4M loss in Q2 and hope it's going to be a positive surprise.

[pg6solar]

As per above, both CSIQ and TSL should enter H2 with H1 profit of about .77 each behind them (current MC is 30+% higher for CSIQ). Since TSL's profit is back loaded as CSIQ's is, does CSIQ expected to earn that much more than TSL in H2 to warrant current pricing discrepancy? If anything, even if CSIQ earns more, shouldn't TSL get its momo back going forward in terms of higher PE, hence the price difference should narrow in TSL's favor? 

[sunnysky]

Sunny, what makes TSL a lot more profitable is the scale. shipping 800MW to third party buyers at 17% is a huge boost versus 550MW.
If CSIQ had 71M shares it would be priced around 5 dollars more than TSL. If we use criteria of $2 per share and that way created PE, CSIQ is trading at expectation of $2.74 right now.

That is true. But I see Q2 module GM: 14.93% for CSIQ and 16.92% for TSL, being conservative on TSL side. So the gap is still large.

Under some assumptions, I see the number of MWs recognized (different from sales volume) on the project side in H1 is going to be about 70 MW. Anyone has an estimate on how much will be recognized in H2? To make it simpler, how many MWs will be sold? Josh, please chip in here.

I hope they can sell 500MW.

One negative with the new equity offer is now the share count is bigger, a problem shared by CSIQ and JKS. TSL is clear from this but it might do one when stock trades steadily in high teens.

[joshchang]

That is true. But I see Q2 module GM: 14.93% for CSIQ and 16.92% for TSL, being conservative on TSL side. So the gap is still large.

Under some assumptions, I see the number of MWs recognized (different from sales volume) on the project side in H1 is going to be about 70 MW. Anyone has an estimate on how much will be recognized in H2? To make it simpler, how many MWs will be sold? Josh, please chip in here.

I hope they can sell 500MW.

One negative with the new equity offer is now the share count is bigger, a problem shared by CSIQ and JKS. TSL is clear from this but it might do way when stock trade steadily in high teens.

i am using cod date on presentation slide but project sale recognition could be pushed back. i hope they show execution on project sale. you don't want 500m asset sitting on your bs without generating profit but keep accruing interest.

[odyd]

As per above, both CSIQ and TSL should enter H2 with H1 profit of about .77 each behind them (current MC is 30+% higher for CSIQ). Since TSL's profit is back loaded as CSIQ's is, does CSIQ expected to earn that much more than TSL in H2 to warrant current pricing discrepancy? If anything, even if CSIQ earns more, shouldn't TSL get its momo back going forward in terms of higher PE, hence the price difference should narrow in TSL's favor? 

 

Yes this is a good point. Both should be sitting at the same entry point into H2. Using both companies views, I see that in H2 CSIQ would make around $1.7B while TSL would make $1.25B, so this would be some $450M more than TSL.

Now this means TSL sold no plants, as well. Since financial obligations flat out, and the opex looses its percentage, when more volume is being sold, as long as one belives that timeline, CSIQ will have better net income on the scale of revenue. I also believe that CSIQ will be around 19% more likely while (without plant sales )TSL will be at 17%.

gross profit CSIQ 323M, TSL 204M, I look at CSIQ opex being favorable. by at least 1% and going further apart as more revenue is collected.

So CSIQ Opex will be in area of 8% and TSL around 9%, CSIQ is 136M, and TSL 113M,

TSL will borrow more and I suspect CSIQ to borrow less. They are already vested in $520M in projects, TSL $45M. This capital holds already $280M in borrowing for CSIQ. To erect 500MW, TSL would need at least $750M of cash flow. Do not forget that TSL will have to invest $190M of cash flow in own build outs, as far as I know CSIQ has to put out 60MW of cell for this year, which is at worse scenario $30M.

 

So after opex CSIQ is looking at $187M of income from operations and TSL is at 91M.  I would say if Forex is in check CSIQ is looking at 60M off the books. so now you are looking at $127M, TSL I am generous, at $30M financial stuff for TSL you have about $61M. Both companies have tax assets, CSIQ has 59M, TSL has 46M. So let's say taxes are even here. So 2.30 for CSIQ and some $0.85 for TSL, total 3.07 CSIQ and $1.57 for TSL.

If this hold CSIQ should be at double of TSL. Risk for CSIQ timing and revenue recognition. Benefit for TSL plant sales.

[Bodhi]

Yes this is a good point. Both should be sitting at the same entry point into H2. Using both companies views, I see that in H2 CSIQ would make around $1.7B while TSL would make $1.25B, so this would be some $450M more than TSL.

Now this means TSL sold no plants, as well. Since financial obligations flat out, and the opex looses its percentage, when more volume is being sold, as long as one belives that timeline, CSIQ will have better net income on the scale of revenue. I also believe that CSIQ will be around 19% more likely while (without plant sales )TSL will be at 17%.

gross profit CSIQ 323M, TSL 204M, I look at CSIQ opex being favorable. by at least 1% and going further apart as more revenue is collected.

So CSIQ Opex will be in area of 8% and TSL around 9%, CSIQ is 136M, and TSL 113M,

TSL will borrow more and I suspect CSIQ to borrow less. They are already vested in $520M in projects, TSL $45M. This capital holds already $280M in borrowing for CSIQ. To erect 500MW, TSL would need at least $750M of cash flow. Do not forget that TSL will have to invest $190M of cash flow in own build outs, as far as I know CSIQ has to put out 60MW of cell for this year, which is at worse scenario $30M.

 

So after opex CSIQ is looking at $187M of income from operations and TSL is at 91M.  I would say if Forex is in check CSIQ is looking at 60M off the books. so now you are looking at $127M, TSL I am generous, at $30M financial stuff for TSL you have about $61M. Both companies have tax assets, CSIQ has 59M, TSL has 46M. So let's say taxes are even here. So 2.30 for CSIQ and some $0.85 for TSL, total 3.07 CSIQ and $1.57 for TSL.

If this hold CSIQ should be at double of TSL. Risk for CSIQ timing and revenue recognition. Benefit for TSL plant sales.

great breakdown dydo.  don't forget the 'C' portion of CSIQ.  Being headquartered outside of China, like it or not, gives it a premium not easily accounted for.

[pg6solar]

Thank you, Odyd. Very good comparison of the two. Completely understand your 100% swap now.

[zendoc1love]

Lots of intangibles in this comparison.

TSL stated 80-150MW of projects that will be for sale...some of which have already been built.

This also doesn't account for retained projects in China by Canadian as well as Trina and the FITs collected as well as recurrent revenues from power production on the 250-420MW of projects in China that will be most likely held by Trina. 

Another huge intangible is DG.  Will Trina be able to roll out higher efficiency modules to secure greater GM for projects in DG.  I will have to find out from IR what the specifics are with regard to Honey and the IBC module roll out this year since none of the analysts seem to want to ask about what I think is potentially a huge impact to the bottom line.

As per JASO's executive statement that 1% increase in efficiency leads to 7-8% savings on BOS costs.  I believe that this statement actually was made with regard to standard projects and that the BOS savings would be even greater with DG. 

China response to companies concerns about DG may provide for more elucidation on how this will effect bottom lines on a go forward basis. 

TSL has given rough figures that 10-15% of their projects will be DG (as per Odyd's previous quote)...but has Canadian guided what they intend to do for DG?

I am excited about both TSL and CSIQ.  I currently hold more TSL than CSIQ but may transition over if the gap is incrementally closed between the two.

[odyd]

TSL stated 80-150MW of projects that will be for sale...some of which have already been built.

 

 

This is an interesting point  I would like to know how the 50MW was accounted for on the balance book. I see that $33M drop in the asset line, but perhaps this was on PPE, since I thought they added 23MW in UK.

I would imagine the cost building in UK would be a lot more intense, to match 50MW plant exchange in China dollar for dollar.

I read they are planning for 190MW in China, and 16MW in Greece. that 20MW shipped in Q1 is probably Greece and 150 is China, sounds to me for Q2. Those are not properties generating FiT until Q3.

 

I did not put any income from FiT because both companies are back-end loaded on projects.

I looked really deeply into their statements and the only thing they seem to go for is the Honey mono this year on efficiency, which is a great module.

I doubt any of the IBC or HJT will be made available this year.

 

Lastly, Trina needs to intensely borrow to build what they plan to build. The way they are talking we have $1B expenditure for those plants and their Capex for equipment. I am not sure how did CSIQ did their capex they never disclose it but they got everything build but cell.

 

CSIQ put $42M on prepaid expense and current asset line, which has to do with insurance for their warranties and they took 42M in current other liabilities. I am curious if this has to do with some future insurance payments (due to fire compensation), which were capitalized and will be used against COGS to offset.

[sunnysky]

Yes this is a good point. Both should be sitting at the same entry point into H2. Using both companies views, I see that in H2 CSIQ would make around $1.7B while TSL would make $1.25B, so this would be some $450M more than TSL.

Now this means TSL sold no plants, as well. Since financial obligations flat out, and the opex looses its percentage, when more volume is being sold, as long as one belives that timeline, CSIQ will have better net income on the scale of revenue. I also believe that CSIQ will be around 19% more likely while (without plant sales )TSL will be at 17%.

gross profit CSIQ 323M, TSL 204M, I look at CSIQ opex being favorable. by at least 1% and going further apart as more revenue is collected.

So CSIQ Opex will be in area of 8% and TSL around 9%, CSIQ is 136M, and TSL 113M,

TSL will borrow more and I suspect CSIQ to borrow less. They are already vested in $520M in projects, TSL $45M. This capital holds already $280M in borrowing for CSIQ. To erect 500MW, TSL would need at least $750M of cash flow. Do not forget that TSL will have to invest $190M of cash flow in own build outs, as far as I know CSIQ has to put out 60MW of cell for this year, which is at worse scenario $30M.

 

So after opex CSIQ is looking at $187M of income from operations and TSL is at 91M.  I would say if Forex is in check CSIQ is looking at 60M off the books. so now you are looking at $127M, TSL I am generous, at $30M financial stuff for TSL you have about $61M. Both companies have tax assets, CSIQ has 59M, TSL has 46M. So let's say taxes are even here. So 2.30 for CSIQ and some $0.85 for TSL, total 3.07 CSIQ and $1.57 for TSL.

If this hold CSIQ should be at double of TSL. Risk for CSIQ timing and revenue recognition. Benefit for TSL plant sales.

 

Nice analysis Odyd.

 

Looks to me that you only counted 300 MW of project revenue getting recognized in H2 for CSIQ or you assumed a lower ASP. I guess that's the former. If so, then it's conservative since I think they would recognize at least 400 MW. If we also assume TSL sells 150 MW in H2, then I have the following:

 

                                  CSIQ                     TSL

Net Income:               $164.852               $85.855

2014 EPS:                 $3.69                     $1.91

 

Trailing PE:                15                          15

2014 PT:                    $55                        $29

 

Under this scenario, CSIQ offers a bit higher potential returns at this particular point of time. When looking from the point view of the prior highs, it's however a bit disappointing for CSIQ. A few comforting points, CSIQ might be able to sell more plants, PE could be a bit higher, or higher projected 2015 EPS. Just for the fun of it, I get a PT of $66 if CSIQ manages to recognize 500 MW of project revenue.

[sunnysky]

One thing I want to add is that the above estimates are more or less in line with Yahoo analysts consensus for CSIQ. For TSL, not only plant revenue is not counted for, the average is also pretty low. Maybe they will revise it now. Otherwise, this could be a plus for TSL.