Canadian Solar Inc (NASDAQ: CSIQ) Q4 2019 Earnings Call Transcript

Canadian Solar Inc  (NASDAQ: CSIQ) Q4 2019 Earnings Conference Call
Mar. 26, 2020

Call Participants:

Ed Job — Managing Director, Investor Relations

Shawn Qu — Chairman, President and Chief Executive Officer

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Huifeng Chang — Senior Vice President & Chief Financial Officer

Steven Pan — Vice President Finance and Corporate Controller

Analysts:

Colin Rusch — Oppenheimer — Analyst

Philip Shen — ROTH Capital Partners — Analyst

Mark Strouse — J.P.Morgan — Analyst

Jun Liu — China International Capital Corporation — Analyst

John Segrich — Luminus Management LLC — Analyst

Alex Liu — UBS — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Canadian Solar’s Fourth Quarter and Full Year of 2019 Earnings Conference Call. My name is Annie, and I’ll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Ed Job, Managing Director, Investor Relations at Canadian Solar. Please go ahead.

Ed Job — Managing Director, Investor Relations

Thank you, Annie, and welcome everyone to Canadian Solar’s fourth quarter and full year 2019 earnings conference call. Joining us today are Dr. Shawn Qu, Chairman and Chief Executive Officer; Yan Zhuang, Acting Chief Executive Officer; and Dr. Huifeng Chang, Chief Financial Officer.

On this call, Shawn will provide a brief update, followed by Yan who will review our recent progress and outlook, Huifeng will then review our financial results before we open the call to your questions.

Before we begin, may I remind listeners that management’s prepared remarks today, as well as their answers to your questions will contain forward-looking statements, which are subject to risks and uncertainties. Therefore, the Company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management’s current expectations.

Any projections of the Company’s future performance represent management’s estimates as of today. Canadian Solar assumes no obligation to update these projections in the future, unless otherwise required by applicable law. A more detailed discussion of the risks and uncertainties can be found in the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission.

Management’s prepared remarks will be presented within the requirements of SEC Reg-G regarding Generally Accepted Accounting Principles or GAAP. Some financial information presented during the call will be provided on both a GAAP and a non-GAAP basis. By disclosing certain non-GAAP information, management intends to provide investors with additional information to allow further analysis of the Company’s performance and underlying trends.

Management uses non-GAAP measures to better assess operating performance and to establish operational goals. Non-GAAP information should not be viewed by investors as a substitute for data prepared in accordance to GAAP.

At this time, I would like to turn the call over to Canadian Solar’s Chairman and CEO, Dr. Shawn Qu. Shawn, please go ahead.

Shawn Qu — Chairman, President and Chief Executive Officer

Thank you, Ed. Welcome everyone. 2019 was a strong year, as our revenue and profit both exceeded expectations. Yan will go through our business review and outlook in more details. Given the current pandemic and macro situation, I would like to share with you some of my views and perspective.

First of all, we have been working hard to ensure the health and safety of our employees. This is our top priority. We’re also taking all the necessary measures to support our customers and partners in the current market environment, while still planning for the market to rebound. Today, solar is already one of the most environmental and economically attractive sources of energy. Innovation continues to drive solar energy’s competitiveness.

As the costs and performance of storage continues to improve Solar’s ability to gain market share in the global energy generation mix will accelerate. In addition to market forces, global decarbonization efforts are intensifying, encouraging even greater demand for clear energy and solar assets. The current shock resulting from coronavirus will likely interrupt the clean energy transition, but there is no turning back.

Canadian Solar has a proven track record of 19 years, and has established strong foundation to capture an outsized share of the demand growth. We have built a globally diversified and flexible capacity structure, strong customer relationship and bankability and a resilient business model that adapts to change in the market.

Currently, we are also putting in place risk controls to preserve cash and navigate the market volatility. We believe that the robust and conservative nature of our long-term strategy will allow the Company to emerge stronger from the current period of uncertainty.

With that, I would like will pass the line to Yan. Yan, please go ahead.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Thank you, Shawn. Let me start with some key messages. First, we achieved strong results for the fourth quarter and full year 2019 with revenue and profitability meaningfully above our expectations. Second, we continue to grow and monetize our operating solar assets and pipeline.

We currently have 880 megawatts under operation, 512 megawatts under construction, 3.7 gigawatts in backlog and 11.7 gigawatts in pipeline. We are expanding our presence in regions such as EMEA, while solidifying our leadership position in North America, Latin America and Asia-Pacific.

Third, we are evaluating the Energy Business model and expanding previously successful strategies. For example, the Canadian Solar Infrastructure Fund in Japan, which was sponsored by the company, was a successful way of capturing additional value by retaining partial ownership in selective projects we developed. This strategy will increase the predictability and stability of our revenue streams through power cells, O&M and asset management services.

Fourth, we have set up a global team with a focus on system integration and energy storage, which will help to build the new technology DNA of the Company and lead the next wave of growth in this industry. It is the natural next step as we have the advantage of a strong anchor brand, a large project pipeline and a tight control over our distribution channels.

And finally, I’d like to echo Shawn’s comments. We had a robust start to the year but have starting to see more negative demand impact from the COVID-19. Q1 was somewhat affected by the capacity loss in China, and now there is greater uncertainty over demand in Q2 and Q3. However, the recovery is bound to come. So we have kept a fairly wide range for the 2020 guidance. The pandemic is a new challenge and over the past years we have many lessons in navigating volatile markets.

Now, let me go through this quarter’s results. On the Energy Business side, we closed various project sales while we continued to originate, develop and finance new projects. In Japan, we closed the project sales of 10 megawatts in Q4 2019 and 56 megawatts in Q1 2020 as guided. We also achieved commercial operation on one project and started construction of another two projects, continuing to build our leadership position in Japan.

In the LatAm region, we sold our 49% interest in the 370 megawatt portfolio of projects in Mexico that are currently under development to South Korea’s largest electric utility, KEPCO, and a leading fund manager Sprott Korea. We build from the success of our first transaction with KEPCO in 2018 when we sold them over 230 megawatts of projects is in California.

Additionally, we’re growing in the commercial and industrial space signing more PPAs with large corporate off-takers. For example, in Australia, we announced a PPA with Amazon for electricity to be supplied from our 146 megawatts Gunnedah solar plant, while in Mexico we signed a 15-year PPA with Techgen, S.A. to build a 103 megawatt solar plant.

In order to capture more of the solar value chain, we are increasingly retaining partial ownership of solar project assets to reduce lumpiness of the Energy business, increase income predictability and therefore shareholder value. The Canadian Solar Infrastructure Fund listed in the Tokyo Stock Exchange is an example of how we successfully executed on this strategy.

Now, we are exploring ways to expand this approach in other regions. On the MSS side, Q4 revenue reached $766 million. Down the line gross margin improved 380 basis points quarter-over-quarter to 27.1%, driven by growth in shipments, especially in the U.S., stable ASPs and lower blended cost of production.

One of the key drivers of Canadian Solar’s sector-leading margins is our focus on profitable growth. For example, over the past few years, multi-crystalline modules have accounted for a greater share of our product mix. This leverages our leadership in multi-technology, provides customers with the most LCOE competitive products and delivers an attractive margin due to the lower cost of production.

At the same time, our manufacturing capacity has the flexibility to produce both multi and mono, which allows us to respond nimbly, should market conditions change. Given the latest supply and demand dynamics, we have recently shifted some of our capacity over to mono. We also continued to innovate. In 2019, we broke the world record in multi-crystalline cell conversion efficiency three times in a row.

Our latest record was announced a few weeks ago when we achieved 23.81% efficiency for N-type, large-area, multi-solar cells. These R&D activities allow Canadian Solar to stay at the forefront of technological innovation as we continue to introduce more high efficiency modules of 400-plus-watt.

Now let me comment on guidance for Q1 and full year 2020. For the first quarter of 2020, we expect total module shipments to be in the range of 2.15 gigawatts to 2.25 gigawatts, including approximately 250 megawatts of module shipments for our own projects that may not be recognized as revenue.

Total revenue for Q1 is expected to be in the range of $780 million to $810 million. Gross margin is expected to be between 26% and 28%. For the full year of 2020, we expect total module shipments to be in the range of approximately 10 gigawatts to 12 gigawatts with total revenue expected to be in the range of $3.4 billion to $3.9 billion.

As we noted in the press release, our guidance is based on current views, given the existing market conditions, which may be subject to change due to uncertainties, including the ongoing COVID-19 pandemic. We were experiencing strong demand across all regions until the past few days, as we started to see some delays and weakening demand.

We’re closely monitoring and analyzing market conditions. We have a globally diversified revenue base and tight control over the supply chain, which gives us significant flexibility and room to adjust to external change. Our long-term outlook remains optimistic as we continue to execute on our strategy and create value for the Company and its shareholders.

Now, let me turn over the call to Huifeng for a review of our financial results and latest risk mitigation strategy. Huifeng, please go ahead.

Huifeng Chang — Senior Vice President & Chief Financial Officer

Thank you, Yan. As Shawn and Yan noted, we closed Q4 and 2019 above our expectations. Total revenues in Q4 were $920 million, up 21% sequentially over Q3. The higher than expected revenue was driven by increased module shipments and a stable ASP that track above our peers. Total revenues for the full year 2019 was $3.2 billion, down 15% year-over-year but in line with guidance.

As you would recall, in 2018, we sold several large solar power plants in the U.S. We knew that the sales cycle of our project business was such that 2019 will be lower and more of a trough year, which we indicated in our guidance back in Q3 2018.

The beauty of our business is that whenever our project business was in the build part of the cycle, the MSS business will be strong. As a result, we have delivered profits every year since 2013. In addition, our non-module revenues in MSS increased by 80% year-over-year from $238 million in 2018 to $426 million in 2019.

This includes sales of system kits, EPC and O&M services. We see our beyond module revenues as a key top line driver for Canadian Solar. It accounted for 17% of MSS revenues in 2019, up from 11% in 2018. We expect this trend to continue as Yan is pushing the team from manufacturing to technology, to roll out system integrated products and solutions particularly related to battery storage.

The Q4 non-GAAP underlying gross margin for the company excluding the AD CVD effect was 24.3%, 130 basis points higher than Q3. The improvement was mainly driven by a higher MSS gross margin. For 2019, the underlying gross margin was 20.8%, the highest gross margin Canadian Solar has ever achieved since 2011.

While we grew our business, we continue to keep tight control of operating expenses. Opex, excluding other operating income, grew by 3% in 2019, mainly driven by higher shipping and handling expenses and labor costs associated to the higher shipments. Let’s move on to liquidity and balance sheet. Our liquidity and leverage are both at healthy levels. However, given the macro circumstances, we are taking a more cautious than usual approach.

Let’s review the numbers; we generated $247 million in operating cash flow in Q4, 2019 and $600 million in the full year. We increased our total cash position to $1.2 billion, of which $670 million is unrestricted. We reduced our total debt slightly to $1.95 billion and lengthened the average maturity of our total debt. Short-term debt accounted for 50% of the total debt, down from 73% just two years ago.

We have no major finance — principal repayments due in 2020 as the maturity of the short-term debt is on an annual rolling basis at the Chinese banks and we do not see any high-risk in rolling over those loans. We also have around $3.3 billion in credit facilities of which only $2.2 billion have been drawn. Our GAAP EBITDA over net interest expense coverage was at healthy 6.3 times in 2019, the highest level since 2014.

As part of our financial discipline, we continue to maintain tight control over working capital. Typically, two-thirds of our inventory is in finished goods, of which over 70% is in transit to the customers. At the end of 2019, inventory turnover was 62 days lower than most of our competitors. Likewise, we have tightened control of accounts receivable, which is currently at 60 days. In 2019, our provision for doubtful accounts was just over $1 million. This is incredibly low for a Company of $3.2 billion in revenues.

Overall, we have consistently kept a negative cash cycle of approximately 25 days in the past three years. Nevertheless, we remain alert on managing risk from every possible direction. To reflect, capex in 2019 was $291 million. This was associated with our capacity expansion in Thailand and Xinjiang as well as factory upgrade.

Given uncertainties in the current market environment, we have decided to be extra prudent in our capital expenditures in 2020 and cancel all non-essential spending. This is why our 2020 year-end capacity is lower than what we previously announced. However, note that these projects can be restarted very quickly should demand rebound faster than expected.

Given the ongoing volatility in the currency market, I also like to add a word on our FX exposure. U.S. dollar strength relative to RMB benefits our top line and margin as a larger portion of our revenues are denominated in U.S. dollar while a large portion of our cost base is denominated in R&D.

We also have revenue exposures to currencies such as the Brazilian real and Australian dollar, which have been depreciating relative to the U.S. dollar. Anticipating the currency fluctuations to continue, we have increased the hedging ratios of those currencies and have reduced our risk exposure.

Of course, hedging comes with a cost. So we take a balanced approach that is willing to run the risk of certain level loss, while keeping the hedging cost at a reasonable level. To sum up, we exited 2019 in a strong business and financial position. Our liquidity and balance sheet are healthy and continue to improve. We are actively taking contingency measures to preserve cash and minimize risk exposure in the current market environment. Meanwhile, our business and financial plan have the flexibility to quickly switch gear if and when the global economy recovers.

With that, I would now like to open the call to your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Colin Rusch of Oppenheimer. Please go ahead.

Colin Rusch — Oppenheimer — Analyst

Thanks so much guys. As you look at the initial indications of weakness from your channel, can you be a bit more specific about which geographies and which portions of your sales channel are seeing that weakness? Specifically, we’re looking for a bit more color on the direct sales channel where we know you guys have a defensible position, a little bit outsized margin there.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Well, this is Yan and right on question. So I think the immediate impact actually comes from the residential market and we are observing the channel inventory is increasing and the demand is slowing down. So that — not slow down, but we made assessment. As of today the drop off from Q1 is very low. There’s nothing in Q1 and in Q2 we start to observe something slowing down, but we know that things are changing. So the residential market slowdown mainly coming from Europe and the U.S. and — but that has not material yet in a significant way. So Japan, and in Japan, which is the most profit comes from, we do not see a slowdown. So everything still normal.

Colin Rusch — Oppenheimer — Analyst

Okay.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

And the second channel is probably the impact on ITC. So — that is more about second half, which is less scary, some Q2 and some mostly second half, but we have time to remedy that. We can find other demand. So that’s the impact that we are observing.

Colin Rusch — Oppenheimer — Analyst

Perfect. And then on the project business and your construction timelines, have you looked at a priority list yet of which projects may be delayed for work stoppages or shelter in-place type mandates on a country-by-country basis? And what that waterfall looks like at this point?

Yan Zhuang — Senior Vice President & Chief Commercial Officer

We’re following that situation on a daily basis. Actually until today, there is not even a single solar project construction has been stopped. We even — we checked, we have almost nothing in Italy. So we don’t know what’s happening there, but in Spain, in the U.S., the construction is proceeding, without being disrupted — with no disruption.

Colin Rusch — Oppenheimer — Analyst

Okay. Thanks so much guys.

Operator

Thank you. Our next question is from the line of Philip Shen of ROTH Capital Partners. Please go ahead.

Philip Shen — ROTH Capital Partners — Analyst

Hey guys, thanks for the questions. I know you just shared with Colin what you’re observing as it relates to the impact of coronavirus in the markets throughout the world, the U.S., Europe, but was wondering if you could share what you expect to happen? So for example, you guys have experienced coronavirus and really effectively dealt with it as a country in China.

But what do you expect, given the measures that are being taken in Europe, in the U.S., how do you expect, for example, demand to change in Q2? Never mind the observations today. Clearly, in the past four days, things have changed or the past few days, as you mentioned in your prepared remarks, but play the game out for us. What does Q2 look like maybe from a volume standpoint? Are we down 10% or 20% from, I know you haven’t provided guidance, but just help us understand how Q2 demand could evolve Q3 and potentially in Q4? What does it look like by quarter? Thanks again.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Well, good question. This is what we always do. We always try to anticipate instead of being reactive to today’s situation because what matters is actually the future. So we’re not medical doctors and we’re not very good magicians and — but I would say solar is probably less affected industry comparing to others.

And our annual guidance already reflected our judgment for the year and I would not say Q2 is going to be fully utilizing our capacity. But I don’t think it’s going to be disaster. So, I think we’re still optimistic about this whole thing. So, we have taking into the consideration of the immediate impact — the coming impact to the rooftop residential market and also the impact to ITC. So I think overall, we believe the annual — our assessment of annual demand for the year should be still okay. Shawn?

Philip Shen — ROTH Capital Partners — Analyst

Okay. Hi, Shawn. Did you want to comment as well?

Shawn Qu — Chairman, President and Chief Executive Officer

Yeah, I agree with Yan. The situation is…

Philip Shen — ROTH Capital Partners — Analyst

Okay. Sorry, I missed that.

Shawn Qu — Chairman, President and Chief Executive Officer

[Indecipherable] on the ground, and we have made our best estimate.

Philip Shen — ROTH Capital Partners — Analyst

Okay, great. Shifting over to some housekeeping questions. Was wondering if you could share the number of megawatts recognized in revenue for Q4 and how many megawatts or systems?

Steven Pan — Vice President Finance and Corporate Controller

It’s around — hi, this is Steven. It’s around 2.1 gigawatt on a pure module sales in Q4.

Philip Shen — ROTH Capital Partners — Analyst

Great, thank you. So, I get to roughly, I think ASP in Q4 of about $0.28. Can you confirm if that’s right? And then, how do you expect the ASP to trend in Q1 and through the rest of this year?

Yan Zhuang — Senior Vice President & Chief Commercial Officer

You mean ASP?

Philip Shen — ROTH Capital Partners — Analyst

Yes.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

We’ve been observing some down — decline on ASP from Q4 into Q1. However, costs also coming down. So you can see our guidance for Q1 — our gross margin, of course, that’s blended between module and project. But for Q1, our module gross margin is still healthy.

So even with the ongoing situation, I think with the aggressive competition on pricing, I think the costs, we’re already seeing that cell cost is coming down already this week. So it’s going to accelerate. So very quickly, we’ll see that move on pricing — module pricing and upstream material costs will be in parallel reaching a balance.

Philip Shen — ROTH Capital Partners — Analyst

Okay, great. One more big-picture question. You talked about Yan, building the new DNA for the Company with systems and storage. Was wondering if you could share when do you expect new revenue to come from systems and storage to be meaningful? Are we looking at six months from now, could it be a year from now? I’m guessing coronavirus might impact that, but was wondering if you could elaborate more on your comment there about that new DNA for the Company? Thanks.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Thank you. The team actually is actively working on setting up the value chain for this direction. So it’s not — aside from the technology knowhow, it also involves setting up technology partnership with the leaders in the industry and identify the companies that has the right bankability but also the cost competitiveness aside from technology strength.

On top of that, we have to set up economic modeling of this business line. And besides that — beyond that also there is legal risk financing element of this business model. So we’re moving pretty fast and we’re closing one deal — we are on our way to closing one deal, not sure one, because there is certain impact from this coronavirus. But we’re pretty — at pretty last minute of the deal.

And in terms of revenue, it will come from — it will come in next year, not this year. And in our project pipeline, we have pretty big pipeline with storage requirements. So that will be — more or less will be our capital market so that provide a foundation for the Company to move fast and far in that direction.

Philip Shen — ROTH Capital Partners — Analyst

Okay, Yan, thank you very much. I’ll pass it on.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Mark Strouse of J.P. Morgan. Please go ahead.

Mark Strouse — J.P.Morgan — Analyst

Yeah. Thank you very much for taking our questions. Most of them actually have been answered. But Huifeng, a couple of modeling questions if I can. So I understand it’s early in the year and things can certainly change. But as we stand here today, what are your expectations for mix between the two segments this year for the Energy, the Energy segment either on a dollar basis or on percentage of total basis? That would be helpful. Thank you.

Huifeng Chang — Senior Vice President & Chief Financial Officer

I think this question is better answered by Yan. Yan, would you please give some color on the breakdown of our total annual revenue guidance?

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Well, somehow we anticipate this question is coming. But to be honest, we find that a little early to provide that, given the situation right now is so fluid and — on both sides. So, we will provide that information when we have more clarity, maybe in the Investors Presentation, maybe slightly later. So that’s not, I know this is not a real answer, but I hope it can help you.

Mark Strouse — J.P.Morgan — Analyst

Yeah, no, that’s fair. I get it. And that’s probably going to be the same answer for this next question. But as we think about gross margins this year, I mean, you’ve obviously got a very strong start in 1Q. You’re coming off of a 2019, which is the highest, like you said for several years in gross margin. Do you think 2020 could be even higher than 2019 or I imagine it’s still early to tell, but just wanted to ask?

Yan Zhuang — Senior Vice President & Chief Commercial Officer

I think 2020 is going to be a little — a bigger challenge than 2019. I think we will have that consensus but that’s always, I’m the guy who always have faith and with supported facts. So, I think at least our business from Japan and Korea is not affected. And we have locked almost all the orders for Q2 and even for second half we have almost 40%, 50% already locked and — demand.

And we assess our — so when we look at our different channels by different geographical locations that we realize that most of our profit is actually less impact — less affected by this coronavirus. Japan, Korea and now U.S., I think we have project already locked and the module deal where we already signed the contract and locked and for now we don’t see bigger impact yet.

Although there’s also, of course, there’s uncertainties moving forward, but I think the chance for a huge impact on utility scale projects is low for this year, for 2020. So we’re still optimistic, I cannot provide you exact number on gross margin, but I don’t think it’s going to be end of the day.

And also in 2020, we believe China with more stimulus, I think the government will try to promote the demand side, given the situation we’re doing right now. So we’re confident that actually we — the China demand will help to breach the gap as well. So it’s not going to be end of the day. Once again we believe solar is going be one of the least affected in this industry during this crisis.

Shawn Qu — Chairman, President and Chief Executive Officer

Hi, Mark. Mark, this is Shawn speaking. I will add some color on the module and on the breakdown of module and project business. For 2020 on the revenue side the module and the system what we called MSS will probably be somewhere around $3 billion and the balance will be for the energy business. However, on the bottom line it’s different. The bottom line contribution or the net margin contribution from the project side is, could be larger or at least in part, what is the module and system business. Now, all those numbers are non-GAAP and there will be some cancellation between the two businesses. And I hope those numbers give you some indication for your model.

Mark Strouse — J.P.Morgan — Analyst

Okay, very helpful, thank you very much.

Operator

Thank you. Our next question is from the line of Jun Liu of CICC. Please go ahead.

Jun Liu — China International Capital Corporation — Analyst

Hi management. Thanks for taking my question. My first question is coming with the demand. So you have just mentioned that Q2 capacity are already fulfilled and over 60% of the second half is secured. So my understanding is like 75% of our full year guidance is already secured and — but I would still like to know if you can share some color on our recent new order flow whether we have some difficulty in signing new orders? Do you see coronavirus impact on the transportation?

And my second question is on the gross margin side. We are seeing a very amazing gross margin in the 4Q and we are improving the gross margin in the first quarter this year. So may I understand a little bit more about the breakdown of the gross margin, whether it’s coming from the — we see as part of ASP in the first quarter. So whether it’s coming from the product mix improvements, if we have more mono modules in the first quarter than before? Whether it is coming from this part or whether it’s coming from the cost reduction, as you mentioned the sale price declined very quickly, or is it coming from our like in-house production costs reduce? Yeah, that’s my two questions.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Okay, thank you. So for the first question, I think I need to make a little correction. So I said for Q2, we’re already 100% booked. But actually we lost some orders in Q2. So our capacity guidance for Q2 is not 100%, but it’s not a heavy loss. So it’s still okay. So, over the year — for the entire year, yes, we are like 70%, 75% booked. That’s for sure. That’s true. And so, demand wise, we’re still optimistic. We’re not just seeing any disasters, and we’ll still be healthy, so with good volume.

And remember — look at the last year’s volume was 8.5 gigawatts and this year we’re at — our guidance is between 10 gigawatts and 12 gigawatts, a major growth with the market. That could be similar market size. So it shows our confidence for the market. It’s pretty healthy.

And the second question is for Q1. We do have a project from Japan that we sold and recognized. That is a decent — it has a decent profitability. However, although the module part — the overall gross margin of the Company is actually boosted by this project from Japan. The module gross margin is still above 20% in Q1. So, it’s still very healthy. So that answer your question?

Shawn Qu — Chairman, President and Chief Executive Officer

Hi, Jun. I think you also asked about transportation, right?

Jun Liu — China International Capital Corporation — Analyst

Yeah.

Shawn Qu — Chairman, President and Chief Executive Officer

There are some — a little bit chaos, some countries closed for today and they’re opening tomorrow after heavy protest. For example, it happened in Brazil, and also I’m told that it is also happening in India. But fortunately, we’re not shipping that much to India as well. Different government — it’s kind of panic, so things can happen.

But we have experience to deal with that kind of road block or that kind of stuff in China already. Usually it takes a few days really, and then people come to a stand. They realize that “Hey, cargo doesn’t really carry virus, it’s the human.” So, I think it is kind of laughable, but it does happen, it already happened. And I think those are going to be short-term impact rather than long-term.

Jun Liu — China International Capital Corporation — Analyst

Okay. Yeah, I understand. Thanks Shawn and thanks Yan. That’s all my questions. Thanks.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Thank you.

Jun Liu — China International Capital Corporation — Analyst

Thank you.

Operator

Thank you. Next question is from the line of John Segrich of Luminus. Please go ahead.

John Segrich — Luminus Management LLC — Analyst

Hey, guys. Thanks for the question. I’m just wondering, can you give us an update on your share buyback program? Looks like you did a little bit in December but how much have you bought to-date and when would you expect to complete the plan by?

Yan Zhuang — Senior Vice President & Chief Commercial Officer

I’ll leave that to Huifeng.

Huifeng Chang — Senior Vice President & Chief Financial Officer

Hi. Thank you John. This is Huifeng. The stock buyback program is still going on.

John Segrich — Luminus Management LLC — Analyst

Hello? You there? Hello.

Shawn Qu — Chairman, President and Chief Executive Officer

I think Huifeng is dialing from another location. We probably lost him, but John I can give you some update. Yes, we executed the buyback in December. We also executed recently. But we are looking at it, the marketing — or the purpose is to; number one, to support the share price to a certain level; and number two, to buy back when the stock price is way below the book value. So we can create value for the shareholders. So yes, we are executing the buyback program. And the details, you can wait until Huifeng come back to line, then we can have more discussion, John.

John Segrich — Luminus Management LLC — Analyst

Okay, thanks.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

He’s back.

Operator

Thank you. [Operator Instructions] Next is Alex Liu of UBS. Please go ahead.

Alex Liu — UBS — Analyst

Thanks. I got two questions. One is regarding to the module price. So what’s your view on the module price across the year? Do you think is there any chance that the module price need to be cut a lot to stimulate the demand, given the coronavirus situation? And the second question is about the module technology. So, as you know that the larger size of wafer is applied across the supply chain. So do you think there could be some major impact from the larger size of wafer itself? And what you are doing to prepare for the potential change? Thanks.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Okay, so first question, pricing. Actually, I think we’re seeing out of this panic, we’ve already seen a bottom, and actually I’m seeing a rebound moving into second half. So, the demand is actually — some of the volume and demand will be shifting, say first half into second half. So, it will create certain search — demand search against better capacity, so, bankable capacity. So, this is what we are observing.

And we are observing we believe most of the volume — most of the volume this year will — I will say 70% of the volume this year will be owned by — shipped by top five manufacturers. So, this is what is happening. So, being part of the top five, so we still see enough demand that is there for us. So — and also the China projects, the 40 gigawatts of China projects will be mainly in second half. So that’s why we believe price is at least stabilized and may go up into second half.

Shawn Qu — Chairman, President and Chief Executive Officer

Hey, Alex. I would like to address the technical question. The first question is mono versus multi. As a matter of fact, our statistics shows that in 2019 we had higher — significantly higher or meaningfully higher gross margin in our multi-product than the mono product. Percentage wise, we provide some numbers, we shipped way more than — we shipped like 70% multi versus 30% mono, give and take. And our average margin in multi is still higher than mono.

So, as a matter of fact, as long as you’re the leader in certain technology, you can demand good margin. In this case, we are one of the — only leading player in high power multi. So we do demand high margin. Meanwhile, we also shipped very good and high quality mono products to certain markets. So those products also helped us to capture more than 20% gross margin in 2019. So that’s in terms of mono versus multi.

You also asked about the wafer size. Again, as a matter of fact Canadian Solar is the driver of the new wafer standard. For example, we were the first one to introduce so called HiKu product, which is based on the 166 millimeter wafer size back in 2018. At that time, nobody has been owning it. Canadian Solar is first one. That new product also — it’s also one of questions [Phonetic] we can get, relatively high gross margin in 2019 than many of our peers.

So you’re right. Technology and product use our technology and innovation is our DNA. You probably know that some other companies recently are promoting even larger wafer. But I believe there’s a limit of wafer size, or module size. And the module is not the bigger the better, you still have to be able to handle it and carry it to — in the installation site or even to the rooftop. So there has to be a balance. I believe our solar module strike the right balance between high power and installation efficiency and also good safety, like, protect health and safety of installation workers.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

And also, actually you need to balance between the benefit of bigger panel and the cost adder on maintaining the reliability of the module itself and also the tracker. And also the possible cash order, one, the workers have to slow down their movements on installation. And so there are a lot of factors you need to worry about and this — if wafer is too big, too thin then upper stream has a little benefit, which they will not be able to — they may not be willing to pass it on to downstream. And the downstream guys needs to invest capex to rebuild the cell line and the module line. So, it’s a skew about efficiency and LCOE and less about just size.

Alex Liu — UBS — Analyst

Okay, got it. Very clear. Thank you Shawn, thank you Yan.

Shawn Qu — Chairman, President and Chief Executive Officer

Thanks Alex.

Operator

Thank you. [Operator Instructions] No question at this time. And I’d like to turn the conference back to the management for closing remarks. Thank you.

Shawn Qu — Chairman, President and Chief Executive Officer

Thanks very much. And thanks for everyone who joined the call. And if you have any further questions, you can reach us through e-mail or telephones to our department. Thank you and have a nice day.

Yan Zhuang — Senior Vice President & Chief Commercial Officer

Thank you.

Operator

[Operator Closing Remarks]