Friday, May 6, 2011

JA Solar Holdings Co. Ltd. (NASDAQ: JASO): Q1 Earnings Preview 2011

JA Solar Holdings Co. Ltd. (NASDAQ: JASO) is scheduled to release its first-quarter before the opening bell on Tuesday, May 10, 2011. Analysts, on average, expect the company to report earnings of 32 cents a share on revenue of $551.50 million. In the year ago period, the company reported earnings of 24 cents per share on revenue of $279.16 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. The company has a strong presence across the world in key markets, including Germany, Italy, U.S., Spain, India, Korea, China and Japan.

In the preceding fourth quarter, the Shanghai, China-based company's net income was $118.7 million, or 59 cents per share, compared to $22.3 million, or 14 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned 41 cents per share in the fourth quarter. Revenue jumped to $541 million from $193 million. Revenue more than doubled to $584.3 million. Analysts, on average, expected the company to report earnings of 48 cents a share on revenue of $569.21 million. 

At its last earnings call in February, the company said that cell and module shipments would exceed 2.2 GW in 2011, a rise of about 50 percent from 2010. Module shipments are expected to be approximately 500MW to 600MWThe company said that it has signed sales contracts accounting for about 90 percent of its expected shipments for the year. The company expects capacity by the end of fiscal year 2011 to be 3 GW.

The company anticipates first quarter shipment to increase to a range of 465 to 475-megawatt. JA solar anticipates gross margin to be in the high-teens percentage range. The company expects pressures on its gross margins to ease in the second half of this year because it expects supply of polysilicon, the solar industry’s key raw material, will rise sharply.

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 support its production. Positive factors include ongoing expansion programs, improving operating efficiencies, rising margins and higher conversion efficiency. The company expects robust demand for its products from both existing and new customers. 

JA Solar is steadily expanding its customer base worldwide, with strong growth in several geographic end markets including, U.S., Canada, Italy, Japan, Australia, China and India. 
Recently, JA Solar entered into a two-year strategic alliance with Jabil Circuit Inc. (NYSE: JBL), under which it will supply Jabil with up to 400 megawatts of solar cells, as well as certified module designs. In MArch, the company said that it will supply Germany-based Solar-Fabrik AG with more than 110 megawatts (MW) of photovoltaic products this year. JA Solar supplied over 70 MW of products to Solar-Fabrik in 2010. Last month, JA Solar formed a 50-50 joint venture with MEMC to build and operate a 250-megawatt facility at JA’s site in Yangzhou, Jiangsu province to make solar cells.

Solar industry as a whole has benefited from continued strong demand thanks to growing awareness about global warming, skyrocketing oil prices, cheap financing and technological advances. Companies involved in the production of semiconductors used in solar panels have enjoyed a positive quarter. Many have experienced rising shipments over the last few quarters, resulting in a sequence of record quarters. The world is becoming increasingly environmentally conscious. Both commercial and private demand for solar power is rising. Solar options are becoming more attractive as more governments provide better options for buildings producing solar power to feed into and out of the grid as required. US President Barack Obama has called for 80 percent of the nation's electricity to come from clean sources by 2035. Meanwhile, China has doubled its target for installed photovoltaic power capacity over the next five years to 10 gigawatt by 2015. The government has also raised its installed solar capacity target for 2020 to 50 GW, up from the previous goal of 20 GW.

Thanks to better cost advantages, Chinese solar module maker have grabbed more market share from their international competitors. Local solar companies have also benefited from China's well-developed supply chain, cheap electricity, supportive policies and even low environmental standards.

However, the solar industry relies on government incentives to make electricity created by the sun competitive with sources such as coal and natural gas. Many governments, particularly in Europe, have implemented generous subsidies for solar power in recent years as they seek to reduce their reliance on fossil fuels and combat climate change. Late in February, German lawmakers passed a law, cutting solar power subsidies by up to 15 percent from this summer, six months ahead of schedule, dealing a blow to the world's biggest photovoltaic market. Similarly, Italy’s government recently approved a decree that reduces incentives to solar projects. The Italian solar market became the second-largest in Europe following Germany last year after the government offered the highest feed-in tariffs in the region.

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