Mixed Numbers From JA Solar - Analyst Blog

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Posted: Mar 21, 2012 8:00 AM
Mixed Numbers From JA Solar  - Analyst Blog

JA Solar Holdings Co. Ltd. (JASO) announced adjusted loss per American Depositary Share (ADS) of 12 cents in its fourth quarter of 2011, falling short of the Zacks Consensus Estimate of a loss of 10 cents. Results also came far below the year-ago adjusted earnings per ADS of 54 cents.

Quarterly Performance

JA Solar’s revenues in the reported quarter were $309.1 million comfortably ahead of the Zacks Consensus Estimate of $256 million. However, revenues decreased 21.4% from $393.2 million reported in the third quarter of 2011 and 49.5% from $612.7 million reported in the fourth quarter of 2010.

Total shipments in the fourth quarter of 2011 were 398MW, above the company's previously provided guidance range of 310MW to 330MW. This represents a 10.6% decline from 445MW in the third quarter of 2011 and a 14.0% decrease from 463MW in the fourth quarter of 2010.

Gross profit in the fourth quarter of 2011 was $1.4 million, compared with a gross loss of $16.9 million in the third quarter of 2011 and gross profit of $117.6 million in the fourth quarter of 2010.

Total operating expenses in the fourth quarter of 2011, which included an impairment of long-lived assets of $48.2 million related to the company's multi-crystalline wafer manufacturing facility in Donghai, were $78.9 million, compared with $27.0 million in the third quarter of 2011 and $23.8 million in the fourth quarter of 2010.

Operating loss in the fourth quarter of 2011 was $77.5 million, compared with an operating loss of $43.9 million in the third quarter of 2011 and operating income of $93.8 million in the fourth quarter of 2010. Excluding long-lived assets impairment of $48.2 million, operating loss would have been narrower at $29.3 million.

Other income in the fourth quarter of 2011 was $33.2 million, compared with other loss of $2.1 million in the third quarter of 2011 and other income of $56.5 million in the fourth quarter of 2010. Included in other income in the fourth quarter of 2011 was a one-time non-cash gain of $29.8 million arising from the negative goodwill recognized in the acquisition of Solar Silicon Valley. Overall, the company digested a net loss of $68.3 million in the reported quarter.

Financial Condition

JA Solar at the end of the reported quarter had cash and cash equivalents of $617.9 million and total working capital of $696.5 million. Total short-term bank borrowings were $84.2 million. Total long-term bank borrowings were $690.7 million, among which $140.6 million were due in one year. The total face value of outstanding convertible bonds due 2013 was $222.0 million.

Outlook

JA Solar expects its cell and module shipments to be in the range of 320MW and 350MW in the first quarter of 2012. For the full year 2012, the company expects total cell and module shipments to be between 1.8GW and 2.0GW.

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 U.S., Canada, Italy, Japan, Australia, China and India.

By the end of fiscal 2011, JA Solar had an annual solar cell production capacity of 2.8GW and an annual module production capacity of 1.2GW. JA Solar intends to maintain its annualized solar cell capacity at 2.8GW in 2012. The company expects to achieve annualized solar module capacity of 1.7GW by the end of the second quarter of 2012 and 2GW by the end of fiscal 2012.

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 peer like Canadian Solar Inc. (CSIQ), we assign a Zacks #3 Rank (Hold rating) on the stock.


 
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