Strong Numbers from JA Solar

JA Solar Holdings Co. Ltd (JASO) reported adjusted earnings per American Depositary Share (EPADS) of 47 cents in its third quarter, which surpassed the Zacks Consensus Estimate of 34 cents. Results also comfortably beat the year-ago adjusted earnings per ADS of 10 cents.

Quarterly Performance

JA Solar’s revenues in the reported quarter were $541 million, compared to $356 million in the second quarter of 2010 and $197.2 million in the year-ago quarter. Revenues in the reported quarter also comfortably beat the Zacks Consensus Estimate of $456 million.

In the reported quarter, JA Solar’s total shipments were 418MW, a 34% and 136% increase in comparison to the second quarter of 2010 and the year-ago quarter.

Proportion of sales to international customers increased during the reported quarter to 53%, an increase of 700 basis points versus the second quarter of 2010 and 30% rise when compared to the year-ago quarter. The strong growth of sales to international customers resulted from the company’s focus on establishing a well diversified global customer base. The company has a strong presence across the world in key markets, including Germany, Italy, U.S., Spain, India, Korea, China and Japan.

JA Solar’s gross profit was $121.8 million, an increase of 48% from the second quarter of 2010 gross margins of $82.2 million. Gross margin percentage in the reported quarter was 22.5% compared with second quarter 2010 gross margin of 23.1%. The slight decrease in gross margin was primarily due to increase in wafer cost, which was partially offset by an increase in the average selling price, as well as a change in product mix.

Financial Condition

JA Solar at the end of the reported quarter had cash and cash equivalents of $309.4 million and total working capital of $538.7 million. The company’s total long-term bank borrowings were $188.3 million. The aggregate face value of the convertible bonds outstanding, due 2013, was $228.2 million at September 30, 2010.


JA Solar raised its shipments guidance range for fiscal 2010 to over 1.45 GW, compared with the prior guidance of 1.35 GW. Shipments in the fourth quarter of 2010 are expected to be approximately 450 MW.

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 support its production. Positive factors include ongoing expansion programs, improving operating efficiencies, rising margins and higher conversion efficiency.

JA Solar at the end of the reported quarter had expanded its annual cell manufacturing capacity to 1.8 GW. The company expects robust demand for its products from both existing and new customers. The company 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.

The company had already signed supply agreements with multiple customers for 2011 product delivery that exceeds1.2 GW, and has received prepayments associated with these supply agreements, further improving its future order visibility.

We currently have a long-term Outperform recommendation on the stock. JA Solar has a Zacks #1 Rank, a short-term Strong Buy rating on the stock.

JA SOLAR HOLDGS (JASO): Free Stock Analysis Report

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