JA Solar (JASO) With Very Nice Report

You just can't win in the solar sector right now; JA Solar (JASO), a former fund holding, reported very nice earnings this morning (without foreign exchange loss it would of been a true blowout quarter) - started the day up 12% and has given back almost all the gains. Gross margins did drop 2% which is my issue with the entire sector. Guidance looked very good. Simply said, a very tough market, where even good news is not helping most companies for long. I was bemoaning the massive overvaluation in the solar sector much of the fall and early winter, and stated I just could not find any value (and yet the stocks continued to rise on momentum). Well, the worm has turned severely - now I find a lot of value but perversely the stocks continue to falter. That is the world of 10,000 quant hedge fund computers who all chase the same strength. And also the world of human psychology - people love buying the stocks when they are racing higher in the buy high and sell to greater fool theory, but when the stocks represent actual value (meaning they are faltering) no one wants to touch them. Ironic, really.

• China-based solar cell maker JA Solar Holdings Co (JASO) reported a 47 percent rise in fourth-quarter profit as revenue tripled, helped by higher demand for solar power, and forecast 2008 revenue above market estimates, sending shares up as much as 12 percent.
• JA Solar expects 2008 revenue of $990 million to $1.10 billion. Analysts on average were expecting $779.2 million, according to Reuters Estimates.
• The company, which nearly tripled its power production capacity to 48.7 MW in the fourth quarter, said it plans to raise its annual production capacity to 500 MW from 425 MW by the end of 2008.
• "Basically JA has a higher visibility into their production ramp, as well as their gross margins due to their silicon procurement levels, which are significantly better than the industry in general," analyst John Hardy of American Technology Research said by phone.
• "It is (growth) mainly attributable to a favorable subsidy structure, the feed-in tariffs that are in place in Germany and Spain as well as feed-in tariffs beginning to take traction in Italy," said Hardy, who has a "buy" rating and a price target of $35 on the stock. Feed-in tariffs, initiated in 2004 to reach the European Union's goal of increasing renewable energy use to 20 percent by 2020, guarantee energy produced from renewable resources will be bought at three times the normal market value for 25 years.
• In the latest quarter, JA Solar's total revenue rose to $144.2 million, from $47.9 million. It posted net income of $13.5 million, or 9 cents per American Depository Share, and included a foreign exchange loss of $7.9 million. It earned $9.2 million a year ago when it was not listed.
• "They were able to get more out of their existing capacity in the quarter that resulted in 50.2 MW being shipped versus our expectation of 42," said Ries, who has a "buy" rating and a price target of $27 on the stock.

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