Sunday, February 7, 2010

JA Solar Holdings Co. Ltd. (NASDAQ: JASO): Q4 Earnings Preview 2009

JA Solar Holdings Co. Ltd. (NASDAQ: JASO) is scheduled to release its fiscal fourth-quarter 2009 financial results on Thursday, February 11, 2009. Analysts, on average, expect the company to report earnings of 11 cents a share on revenue of $213.51 million. In the year ago period, the company posted a loss of 11 per share on revenue of $143.50 million.

JA Solar Holdings Co., Ltd., through its subsidiaries, engages in the design, manufacture, and marketing of high-performance solar cells. It offers monocrystalline and multicrystalline solar cells. The company sells its products to solar module manufacturers who assemble and integrate solar cells into modules and systems that convert sunlight into electricity for power generation.

In the preceding the third quarter, the Shanghai China-based company reported that it swung to net income of RMB 106.83 million or RMB 0.66 per share, compared with a net loss of RMB 142.75 million or RMB 2.47 per share in the same period previous year. In dollar terms, net income was US$15.65 million. Earnings per share was US$0.10, compared to a loss of US$0.36 in the past year.Net revenues for the quarter dropped 37.8% to RMB 1.32 billion from RMB 2.12 billion. Analysts, on average, expected the company to report earnings of US$0.03 per share on revenue of US$136.23 in the third quarter.

The company registered its highest ever quarterly shipments of 177MW, up 78.8% from 99 MW in the third quarter of 2008. The company has benefited from strict cost controls. Total operating expenses reduced to RMB 72.3 million or $10.6 million from RMB 24.8 million or $3.6 million.

In December, the solar cell maker said it expects fourth quarter 2009 shipments to exceed the high-end of its prior guidance provided on November 10, 2009 due to an increase in current customer orders and product deliveries. JA Solar expects fourth quarter shipments to exceed 210 MW and full year 2009 shipments to exceed 488 MW. Previously, the company anticipated quarterly and yearly shipments in the range of 170MW to 200MW and 448MW to 478MW, respectively.

Baofang Jin, chairman and chief executive officer of JA Solar said, "Demand has continued to be strong from our existing customers as well as new customers." "While we anticipate Q4 2009 to be even stronger than Q3 2009 in terms of shipments, we also expect strong shipments for the full year 2010 based on robust orders from existing customers and new customer wins," Jin added.

For the full year 2010, the company anticipates shipments in the range of 750MW to 800MW due to high expected demand from all major markets, including Germany, China, U.S., Italy, South Korea, Spain and France. JA Solar also sees growth in newer markets including Czech Republic and Japan.

Ming Yang, the vice president of business development for JA Solar Holdings, told reporters in January that he expected the global market for solar power to grow at "a 30 percent per year clip over the next two to three years." He said further that overseas sales had been on the rise, and could jump by as much as 50 percent by the end of the year.

Globally, solar industry depends upon government subsidies and incentives and support to remain competitive. However, recent developments suggest that subsidies will inevitably be reduced or phased out. Evergreen Solar sells bulk of its panels in key European markets like Germany and Spain, where generous federal subsidies ensured high electricity rates for solar energy system. According to media reports, the German government is planning to cut solar subsidies for new roof and open-field sites from April by 16 percent to 17 percent. Additional cuts to the subsidies will be made from 2011 if solar projects amount to more than 3,000 megawatts, and even more if they total more than 3,500 megawatts. Already France in January slashed the tariffs for electricity produced from rooftop solar panels by 24 percent. Spain too has taken similar steps.

However, the industry as a whole is likely to benefit from growing attention to global warming, skyrocketing oil prices, cheap financing and technological advances. At the Copenhagen Summit held in December 2009, the five major polluters of the world agreed to take action to reduce CO2 aggressively, with $100B per year pledged to help developing nations adopt green energy technology to cut greenhouse gas. Meanwhile, the US, China, Brazil and India continue to invest heavily in wind and solar energy with China's $454B in the next 5 year period as the most aggressive one. As part of the stimulus bill signed last year, the federal government approved around $60 billion in loan guarantee authority and $30 billion in energy grants for renewable energy and transmission companies. Congress has also granted a 30% renewable-investment tax credit to help expand the development of alternative sources of energy.

Among other developments during the quarter, the company approved a share repurchase program, effective Dec. 14. Under this program, JA Solar will repurchase up to an aggregate of US$75 million of its American Depositary Shares, or ADSs, representing its ordinary shares.

The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 14.25. In terms of stock performance, JA Solar shares have lost 13 percent over the past year.

Full Disclosure: None.

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