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JA Solar Expects Higher Shipment

JASO JKS

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As per media report, the largest solar-cell producer by capacity, JA Solar Holdings Co. Ltd. (JASO - Analyst Report) now anticipates second quarter 2013 deliveries to exceed its prior expectation buoyed by the upsurge in demand from the U.S. and Japan.

Last month, JA Solar had projected second-quarter 2013 deliveries in the range of 410 megawatt (MW) to 430 MW. During the first quarter, JA Solar managed to narrow the loss on a sequential basis backed by strong shipments that exceeded the company’s forecast. Strong demand in the high average selling price market of Japan led to the growth. Japan accounted for a record 38% of its module shipments in the quarter. During the quarter, the company also increased its foothold in the high-margin markets of Asia-Pacific, the Middle East and Africa.

Total shipments in the last reported quarter were 442.7 MW, exceeding the high end of the company's forecast of 410 MW to 430 MW. Shipments climbed 20.9% from 366 MW shipped in the year-ago period, but decreased 11.5% from 500 MW in the fourth quarter of 2012.

JA Solar saw declining revenues for six consecutive quarters due to weak demand and a global supply glut of wafer and module, which resulted in cascading average selling prices. However, the company successfully handled it with shipments rising almost 21% year over year in the first quarter.

Chinese solar product manufacturers are currently facing the brunt of anti-dumping duties being imposed in the U.S. This was reflected in the financial performance of Chinese solar companies. We note that Suntech Power Holdings Co. Ltd.’s primary unit entered into bankruptcy proceedings in Mar 2013.

However, with the increasing need to develop renewable energy in response to stringent environmental regulations, countries worldwide are relying on solar energy for generating electricity. Chinese solar product manufacturers like LDK Solar Co. Ltd. are in their turn looking for new markets. The companies are also revamping their domestic operations and positioning themselves to compete in the crowded domestic markets.

Restructuring of the industry may last for another year and JA Solar expects to return to profitability by the first half of 2014. The company has been experiencing a recovery in the market since the end of last year with demand rising in the U.S. and Japan, where module installations are expected to increase 67% to 10 gigawatts this year. This will be equivalent to the installations in Europe. Again, module prices are now beginning to stabilize.

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, and higher conversion efficiency. JA Solar is steadily expanding its customer base worldwide in several geographic end markets including the U.S., Canada, Italy, Japan, Australia, China and India.

JA Solar retains a Zacks Rank #3 (Hold). However, another promising company in the space, JinkoSolar Holding Co. Ltd. (JKS - Snapshot Report), looks attractive with a Zacks Rank #2 (Buy).

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