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JA Solar Kept at Neutral

Zacks Equity Research

We have maintained our long-term Neutral recommendation on one of the most cost-efficient solar manufacturers, JA Solar Holdings Company Ltd. (JASO), on Oct 8, 2013.

Why the Reiteration?

JA Solar − the largest solar-cell producer by capacity – has a geographically diverse customer base as well as silicon wafer supply agreements in place to feed its production.

JA Solar caters to an increasingly geographically diversified pan-continental customer base, which spans Germany, Italy, the U.S., Spain, India, Korea, China and Japan. The company also effectively uses its low-cost locational advantage in China. A consistent focus on widening its geographical customer base has resulted in incremental international sales.

In the domestic market, JA Solar would stand to gain from the Chinese government boosting its target to 35 gigawatt (:GW) of cumulative solar installations by 2015. The company has also made major progress in accessing new markets like Thailand and Australia.

The company now anticipates third quarter deliveries between 450 megawatt (MW) and 470 MW. Although the company incurred a loss in the second quarter, it managed to cut its loss both sequentially as well as year over year. The narrower loss came on the heels of higher-than-expected shipments. Strong demand in the high average selling price market of Japan led to the growth. The company also increased its foothold in the high-margin markets of Asia-Pacific, the Middle East and Africa.

On the flip side, given the industry-wide high inventory level, we believe margins will likely go downhill from here. In addition, tepid module demand in Europe, rising competition, wafer dependency, the financial stability of its customers and the oversupply of solar cells may adversely impact performance over the near term.

Other Stocks to Consider

JA Solar Holdings Co. currently has a Zacks Rank #2 (Buy). Other attractive stocks in the solar space are SunPower Corp. (SPWR), LDK Solar Co., Ltd. (LDK) and ReneSola Ltd (SOL). While SunPower and ReneSola hold a Zacks Rank #1 (Strong Buy), LDK sports a Zacks Rank #2.

Read the Full Research Report on JASO
Read the Full Research Report on LDK
Read the Full Research Report on SOL
Read the Full Research Report on SPWR

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