Jefferies on JA Solar: Share Buyback Not Right Strategy

Jefferies & Company has published a research report on JA Solar

believing that the company's share buyback strategy is not the best choice for 2012. In the report, Jefferies writes, "JASO announced a $100M share repurchase program expiring Sept 30, 2012. The stock was up ~20% on the news given the size of the buy-back program is almost half of JASO's market cap of ~$220M. Given the weak demand, thin margin and long payment terms, solar companies need to save every penny to fund its working capital in order to survive an uncertain 2H12 and 2013. Even if a solar company has excess cash, the company should use it in the downstream projects which is one of the very few profitable parts of solar supply chain. Bottom-line, we believe a share buyback is not where solar companies should spend their cash; and see the rally as overdone. We recommend investors take profit." Jefferies maintains its Underperform rating and $0.70 price target on JA Solar, which is currently trading up ~19.35% from yesterday's $0.93 closing price.