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JASO Cuts Q2 Loss, Shipments Rise

JASO SPWR

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JA Solar Holdings Co. Ltd. (JASO - Analyst Report) announced a loss of 58 cents per American Depositary Share (ADS) in the second quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 62 cents. The company also managed to cut its loss on a sequential as well as year-over-year basis. Loss per ADS was $1.91 in the year-ago period and 86 cents in the sequentially preceding quarter.

The narrower loss came on the heels of higher-than-expected shipments. Strong demand in the high average selling price market of Japan led to the growth. During the quarter, the company also diversified its geographical presence. Europe accounted for 20% and the Americas accounted for about 8% of its total shipments this quarter.

Quarterly Performance

JA Solar’s revenues in the reported quarter were $258.1 million, comfortably ahead of the Zacks Consensus Estimate of $252.0 million. However, revenues decreased 12.3% from $294.4 million in the second quarter of 2012, and 5.5% from $273.3 million in the first quarter of 2013.

Gross profit was $21.0 million, compared with $14.0 million in the year-earlier period and $16.3 million in the first quarter of 2013.

Total operating expenses declined 33.0% year over year and 12.6% sequentially to $26.4 million.

Shipments

Total shipments in the reported quarter were 463.7 megawatt (MW), comfortably exceeding the high end of the company's forecast of 410 MW to 430 MW. Shipments climbed 11.0% from 417.8 MW shipped in the year-ago period, and 4.7% from 442.7 MW in the first quarter of 2013.

Japan is the main revenue driver for the company despite intensifying competition. JA Solar also remains proactive in the domestic market with the Chinese government boosting its target to 35 gigawatt (GW) of cumulative solar installations by 2015. The company has also made major progress in accessing new markets like Thailand and Australia.

Financial Condition

At the end of the reported quarter, JA Solar had a cash balance of $354.8 million with $111.5 million of total working capital. Total long-term bank borrowings were $576.8 million, of which $328.0 million were due in one year.

Guidance

JA Solar expects third quarter 2013 deliveries between 450 MW and 470 MW. For 2013, the company reaffirmed its total cell and module shipments of 1.7 GW to 1.9 GW.

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, 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.

However, Chinese solar product manufacturers, like JASO, LDK Solar Co. Ltd. and Suntech Power Holdings Co. Ltd. , are facing the brunt of U.S. anti-dumping duties. The U.S. Department of Commerce (DOC) imposed these tariffs to tighten Chinese solar-products supply in the U.S. and encourage domestic players to tap the growing renewable U.S. market. Given the situation, we expect domestic contract to bring some relief to the company’s growth prospects.

Recently, JA Solar announced plans to develop three solar power projects in eastern China’s Hebei province. Located in Xingtai City's Lincheng, Neiqiu and Xingtai counties, these projects will have a capacity of 300 megawatt (MW) in total. The company has already won approval for the first 50 MW in the Lincheng County project. The company expects to receive development rights for Neiqiu and Xingtai counties by the end of this year. China aims to double its generating capacity by 2030, with half of all new plants having renewable sources of power.

Zacks Rank

Shanghai, China-based JA Solar Holdings Co. currently has a Zacks Rank #3 (Hold). A promising company in the space, SunPower Corp. (SPWR - Analyst Report) looks attractive with a Zacks Rank #1 (Strong Buy).

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