The largest solar-cell producer by capacity, JA Solar Holdings Co. Ltd. (JASO) announced a loss of 37 cents per American Depositary Share (ADS) in the third quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 42 cents. The company also cut its loss on a sequential as well as year-over-year basis. Loss per ADS was $1.56 in the year-ago period and 59 cents in the preceding quarter.
The loss narrowed due to higher-than-expected shipments backed by an improving macro environment and increased installation activity across key markets.
Quarterly Performance
JA Solar’s revenues in the reported quarter were $287.3 million, comfortably ahead of the Zacks Consensus Estimate of $270.0 million. Revenues also increased 7.2% from $268.0 million in the third quarter of 2012 and 11.0% from $258.9 million in the second quarter of 2013.
Gross profit was $32.5 million or 11.3% of total revenue, compared with $15.8 million or a negative 5.9% in the year-earlier period and $21.0 million or 8.3% of total revenue in the second quarter of 2013.
Total operating expenses declined 57.0% year over year and 41.9% sequentially to $26.4 million.
Shipments
Total shipments in the reported quarter were 500.2 megawatt (MW), comfortably exceeding the high end of the company's forecast of 450 MW to 470 MW. Shipments climbed 19.7% from 417.8 MW shipped in the year-ago period, and 7.9% from 463.7 MW in the second quarter of 2013.
Increasing shipments came on the back of a strong U.S. market where module shipments tripled sequentially. Japan also remains one of the main revenue drivers 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 and offering the subsidy. Recently the Chinese government announced 50% refunds to the value added tax (VAT) for sales taking place from Oct 2013 through Dec 2015.
Financial Condition
At the end of the reported quarter, JA Solar had a cash balance of $401.1 million with $113.7 million of total working capital. Total long-term bank borrowings were $467.4 million, of which $236.1 million were due in one year.
Guidance
JA Solar expects to ship 500–550 MW of cells and modules in total for the fourth quarter. For 2013, the company revised its total cell and module shipments outlook upward to 1.9–1.95 GW from the prior expectation of 1.7–1.9 GW.
Peer Comparison
Solar cell manufacturer Canadian Solar Inc. (CSIQ) reported earnings of 56 cents in the third quarter of 2013 versus a loss of $1.01 per share in the year-ago quarter. Canadian Solar swung into profit in the reported quarter on the back of higher shipments and revenues.
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.
Again, Chinese solar product manufacturers, like JASO, are also speeding up their domestic operations with the government becoming more and more stringent on environmental issues. The electricity generators are implementing new measures to bring down emission levels of greenhouse gases. At present, nearly 70% of China’s electricity is generated from coal-fired power plants. The country is taking active steps to idle the high operating cost coal mines. China aims to double its generating capacity by 2030, with half of all new plants having renewable sources of power.
However, tepid module demand in Europe, rising competition and the financial stability of its customers may adversely impact performance over the near term.
Zacks Rank
Shanghai, China-based JA Solar Holdings Co. currently has a Zacks Rank #3 (Hold). Promising companies in the space, Enphase Energy, Inc (ENPH) and First Solar Inc. (FSLR), look attractive with a Zacks Rank #2 (Buy).
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