JA Solar Scores a Comeback

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JA Solar Holdings Co. Ltd. (NASDAQ: JASO) reported fourth-quarter and full-year 2013 results before markets opened Monday. The China-based solar panel maker reported adjusted diluted earnings per American Depositary Share (ADS) of $0.16 on revenues of $357.3 million. In the third quarter of 2013, the company reported a loss per ADS of $0.37 on revenue of $290.5 million. Fourth-quarter results compare to the Thomson Reuters consensus estimates for earnings per ADS of $0.01 and $291.82 million in revenue. One ADS represents five ordinary shares of JA Solar stock.

For the full year, JA Solar reported an adjusted net loss per ADS of $1.55 compared with a year-ago net loss of $7.05. The consensus estimate called for a loss of $1.28. Full-year revenues came in at $1.2 billion, compared with $1.1 billion in 2012 and an estimate of $1.12 billion.

JA Solar’s higher-than-expected revenues in the fourth quarter were due to a 21% higher level of shipments than the company expected. Shipments totaled 665.5 megawatts, compared with a forecast of 550 megawatts. Shipments rose 33% sequentially. Full-year shipments rose nearly 22%, from 1,700 megawatts to 2,100 megawatts. For the quarter, gross margins rose sequentially from 11.3% to 15.5% and for the full year gross margins rose from a negative 0.8% to positive 10.6%.

The company said it plans to expand its module manufacturing capacity from 1,800 megawatts to 2,800 megawatts and its cell manufacturing capacity from 2,500 megawatts to 2,800 megawatts. The expansions are expected to be completed in the second quarter.

For the 2014 fiscal year, JA Solar expects total ships of 2,700 to 2,900 megawatts. For the first quarter, shipments are forecast at 580 to 610 megawatts.

The company’s CEO said:

We continued to perform well in all of our key regions in the fourth quarter, notably China, which is proving to be one of the cornerstone markets of global solar demand. With Japan expected to remain a major growth driver in 2014, we’re pleased to have solidified our position there as one of the leading international solar suppliers. We also continue to see healthy demand in a range of European markets, with our progress in the U.K. utility market being a particular highlight. … We will also continue to explore downstream opportunities that diversify our revenue mix and deliver attractive returns. With a positive revenue outlook and a very competitive cost structure, we are focused on delivering full-year profitability in 2014.

The company said it expects to supply 200 megawatts of module shipments to its own downstream projects in 2014. That’s a start, but that number has to get bigger if JA Solar wants to flourish. The cell and module markets have recovered somewhat after the capacity overload was shaken out, and that has helped JA Solar to recover. To flourish, though, the company needs to expand its downstream business both inside and outside of China.

Shares were up more than 17% in premarket trading Monday to $13.50, sharply above a 52-week range of $3.37 to $12.80. Thomson Reuters had a consensus analyst price target of around $10.90 before the results were announced.