JA Solar Holdings Co. Ltd. (JASO) announced adjusted earnings per American Depositary Share (EPADS) of 54 cents in its fourth quarter, which beat the Zacks Consensus Estimate of 47 cents. Results also comfortably beat the year-ago adjusted earnings per ADS of 14 cents.
Quarterly Performance
JA Solar’s revenues in the reported quarter were $584.3 million comfortably ahead of the Zacks Consensus Estimate of $565 million. Revenues also were greater by 6.6% versus $548.3 million reported in the third quarter of 2010 and a 137% rise from $246.5 million in the year-ago quarter.
In the reported quarter JA Solar’s total shipments were 463MW, 11% and 100% hike when compared to the third quarter of 2010 and the year-ago quarter.
Proportion of sales to international customers during the reported quarter was 53%. The strong growth of sales to international customers resulted from the company’s effort to establish a well diversified global customer base. The company has a strong presence round the globe in key markets, including Germany, Italy, U.S., Spain, India, Korea, China and Japan.
JA Solar’s gross profit was $112.2 million versus $123.6 million in the third quarter of 2010 and $50.8 million in the year-ago quarter. Gross margin was 19.2% versus 22.5% in the third quarter of 2010 and 20.6% in the year-ago quarter. The decrease in gross margin was primarily due to an increase in wafer cost and lower module prices.
Financial Condition
JA Solar at the end of the reported quarter had cash and cash equivalents of $346.9 million and total working capital of $662.8 million. The company’s total long-term bank borrowings were $230.3 million. The aggregate face value of the convertible bonds outstanding, due 2013, was $228.2 million at December 31, 2010.
Outlook
JA Solar expects its cell and module shipments to exceed 2.2GW in fiscal 2011, representing an increase of approximately 50% versus fiscal 2010. Module shipments are expected to be in the range of 500MW–600MW.
Our Take
JA Solar is one of the most cost-efficient solar producers in the world, with a geographically diverse customer base as well as silicon wafer supply agreements in place to feed its production. Positive factors include ongoing expansion programs, improving operating efficiencies, rising margins and higher conversion efficiency.
JA Solar is steadily expanding its customer base worldwide, with strong growth in several geographic end markets including, U.S., Canada, Italy, Japan, Australia, China and India. The company had already signed supply agreements with multiple customers to meet 2011 product demand that exceeds 2 GW, and has received prepayments associated with these supply agreements, further improving its future order visibility.
We currently have a long-term Neutral recommendation on the JA Solar stock. In the near-term however apprehensions over the tepid module demand in Europe, rising competition, wafer dependency, the financial stability of its customers and the oversupply of solar cells in the market will restrain the valuation of the company.
Thus for the short-term in line with its peers like China Sunergy Co. Ltd. (CSUN) and Canadian Solar Inc. (CSIQ); we assign a Zacks #4 Rank, (Sell rating) on the stock.
CANADIAN SOLAR (CSIQ): Free Stock Analysis Report
CHINA SUNERGY (CSUN): Free Stock Analysis Report
JA SOLAR HOLDGS (JASO): Free Stock Analysis Report
Zacks Investment Research
