JA Solar Holdings Co. Ltd. (JASO) announced adjusted earnings per American Depositary Share (EPADS) of 24 cents in its first quarter, which exceeded the Zacks Consensus Estimate of 18 cents. The performance improvement came from higher shipments and growing margins.
Quarterly Performance
JA Solar’s total shipments in the reported quarter was 272 MW, compared with fourth quarter 2009 shipments of 231 MW, representing a growth of 17.7%. JA Solar is witnessing strong demand for its solar products from major solar markets worldwide, including Germany, China, U.S., Italy, South Korea, Spain, France, the Czech Republic and India. The company is also focusing on its emerging markets, such as Australia, Canada, and Japan.
JA Solar’s revenues in the first quarter of 2010 were $279.2 million, an increase of 17.1% from $238.4 million reported in the fourth quarter of 2009. Gross margin was 22.9% in the first quarter of 2010, compared with 20.5% in the fourth quarter of 2009, reflecting a high utilization rate and continuous manufacturing process improvement and cost-control efforts.
Operating income was $51.7 million, compared with $36.0 million in the fourth quarter of 2009. Operating margin was 18.5% in the first quarter of 2010, compared with 15.1% in the fourth quarter of 2009.
Financial Condition
JA Solar at the end of the reported quarter had cash and cash equivalents of $281.6 million, and total working capital of $464.7 million. The company has no short-term loans and total long-term bank borrowings were $99.6 million apart from outstanding convertible bonds of $228.2 million.
Outlook
JA Solar raised its shipments guidance range for fiscal 2010 to over 1 GW from its prior guidance range of more than 900MW. Shipments in the second quarter of 2010 are expected to be approximately 275MW.
Currently, the Zacks Consensus Estimate for full fiscal 2010 earnings is 62 cents per share, which would be a significant improvement over the fiscal 2009 loss of 12 cents.
JA Solar is one of the most cost-efficient solar producers, with a geographically diverse customer base, as well as silicon wafer supply agreements in place to cater to its production. Positive factors include ongoing expansion programs, subsidy program in China, improving operating efficiencies, rising margins, and higher conversion efficiency.
However, apprehensions over the tepid module demand in Europe, rising competition, financial stability of its customers and the company’s high R&D expenses may adversely affect performance over the near-term. Thus we maintain our near-term Neutral recommendation on the Zacks #3 Rank stock.
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