Stock Preacher

JA Solar Holdings Co. Ltd. (Nasdaq: JASO)

JA Solar Holdings Co. Ltd. (JASO), through its subsidiaries, designs, manufactures and markets high quality solar photovoltaic cells, which convert sunlight into electricity. It 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 boasts of state-of-the-art manufacturing facilities in Ningjin, Hebei Province and in Yangzhou, Jiangsu Province. Ningjin was JASO’s first production center, which began operations in March 2006, and achieved annual capacity of 425MW by the end of 2008. The Yangzhou operation began production in the second half of 2008 and hosts the Company’s new R&D center with more than 10 current production lines capable of 250MW solar cells output per year.

The Company was established in May 2005, and is headquartered in Shanghai, China.

Source: Reuters.com

*USD 1.00 averages RMB 6.83

Financial Summary

On August 12, 2009, JASO reported second-quarter 2009 losses of $0.09 per share, which was in line with the consensus of the 13 analysts following the company and underperformed last year’s second-quarter results by $0.19. Revenue for second quarter 2009 came in at RMB 600.7 million ($88.0 million), a decrease of 51.4% from RMB 1.2 billion ($181.1 million) in the second quarter of 2008, and an increase of 159.3% from RMB 231.7 million ($33.9 million) reported in the first quarter of 2009. While JASO posted year-over-year quarterly decline, total operating expenses for the second quarter increased to RMB 177.4 million ($26.0 million), compared with RMB 72.1 million ($10.6 million) in the second quarter of 2008, which include a charge of RMB 81.1 million ($11.9 million) of non-cash stock-based compensation charge in the second quarter of 2009, compared with RMB 44.3 million ($6.5 million) in the second quarter of 2008.

As of June 30, 2009, JASO had cash and cash equivalents of RMB 2.2 billion ($328.8 million), compared with RMB 1.3 billion ($192.9 million) at March 31, 2009.

The Company reported that it used long-term loans with favorable interest rates obtained from Chinese banks to retire certain short-term loans during the second quarter of 2009. It has also repurchased RMB 128.1 million ($18.8 million) face value of convertible bonds at discount, and RMB 170.7 million ($25.0 million) face value subsequent to the quarter end.

JASO reported a 37.6% improvement in its working capital balance at June 30, 2009, from RMB 2.6 billion ($385.4 million) at the end of the first quarter to RMB 3.6 billion ($530.5 million) at June 30, 2009, attributable to its strong cash flow in the quarter and the effort to strengthen the balance sheet. The convertible bonds outstanding at June 30, 2009, were RMB 2.0 billion ($296.5 million) and RMB 1.9 billion ($271.5 million) as of today. Total long-term bank loans outstanding at June 30, 2009, were RMB 920.0 million ($134.7 million).

The Company is slated to announce its next earnings on November 09, 2009.

*USD 1.00 averages RMB 6.83

Source: Reuters.com

Analyst Consensus
Consensus Recommendation

Recent analysts polled rate shares of JASO a “Hold.” This is the consensus forecast amongst 17 polled investment analysts.

Source: Reuters.com

Investment Highlights

JASO, through its subsidiaries, engages in the manufacture, development and marketing of high-performance solar cells. It offers high quality solar PV products to solar manufacturers worldwide who assemble and integrate solar cells into modules and systems that convert sunlight into electricity for residential, commercial and utility-scale power generation. The Company has partnership with the JingLong Group, the world’s largest monocrystalline silicon manufacturer, which provided the Company a deep understanding of the technical aspects of silicon wafer supply that provides distinct advantage in terms of cell consistency and quality.

The Company utilizes various innovative approaches to develop crystalline silicon based solar cells with high conversion efficiency that can be mass produced in a cost-effective way. Its solar cells feature higher efficiency and power output (with average conversion efficiency greater than 17.5% for its standard product); homogeneity of energy conversion efficiency of the cell, with the use of advance diffusion technique; dark blue silicon nitride anti-reflection film of homogenous color and attractive appearance, which result from advanced PECVD film forming; good conductivity with the use of high quality metal paste for back surface and electrode, high pulling strength and ease of soldering; and accurate busbar location for ease with automatic soldering a laser cutting. As of December 31, 2008, JASO’s monocrystalline solar cells have reached conversion efficiency rates in the range of 16.77% to 17.27% while its multicrystalline solar cells have achieved conversion efficiency rates in the range of 15.12% to 15.62%.

In addition to providing high efficiency crystalline-based PV cells, JASO produces a wide variety of high-cost-performance module types that fulfill different customer requirements, from on-grid systems to off-grid systems, commercial use to industrial use and residence, buildings to public utility, as well as product customization for specific requirements. The Company’s modules have passed the IEC61215 performance test and UL1703 safety test, and feature a standard waterproof junction box with bypass diode, which protects it from burning caused by hot-spot effect because of shading. In addition, these modules offer five-year quality guarantee and 10 to 25-year power output guarantee. The Company’s current solar module annual capacity is 200MW.

JASO, just like other solar cell manufacturers, increased production significantly in the June and July of 2008 amid strong demand for alternative energy, only to suffer from delayed or canceled orders as demand declined. In 2009, Reuters reported that solar panel prices have declined by 50% amid oversupply.

Backed by government incentives for solar energy, rising environmental concerns, as well as international efforts to boost research and development activities, solar penny stocks were recently seen on the rise as reports indicate strong demand in recent weeks. Despite the lingering issue on oversupply, the solar sector is already attracting bulls into the arena as major solar players report recent developments suggesting that demand is picking up.

In China, reports indicate that local demand is picking up at a faster rate while the government pushes its aggressive solar plan. It was previously reported that China had launched an economic stimulus package to boost the profitability of Chinese solar companies. JASO is expected to be among the country’s top 10 solar producers to potentially receive 95% of the subsidies. On top of this government incentive, the Jiangsu province, one of JASO’s manufacturing locations, had also allotted subsidies for JASO to build 20MW by 2011.

While a speedy development in the PV market is expected to take place in China, a research report from RNCOS stated that markets such as the U.S., Japan and Europe will still dominate the global market through 2013. According to the report, the cumulative installed PV capacity worldwide will grow at a compound annual growth rate (CAGR) of around 28% in 2009-2013.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

As of last close on Sept. 11, 2009, JASO shares closed at $3.90, 151.61% above the 52-week low of $1.55 set on November 20, 2008.

Currently, the MACD for JASO indicates a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

JASO is trading above its 13-day moving average. While this is normally considered to be a bullish sign, the moving average is downward sloping which means that investors have been liquidating shares during this time period and tempers the bullishness of the signal.

JASO is trading within its Bollinger Bands. This is a normal condition and suggests that the small cap stock is neither overbought nor oversold relative to the recent price action.

Comparative Analysis

Source: Yahoo! Finance, Analyst Estimates.

Insider Trading Activity

NET SHARE PURCHASE ACTIVITY

Data provided by Thomson Financial

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