Chinese solar power products manufacturer JA Solar Holdings Co., Ltd.'s (NASDAQ: JASO) share price surged 7.8% to $10.05 on Apr 14, 2014 from the previous day's closing as it expects higher shipments in the first quarter 2014. The company is expected to report the final results in the first two weeks of May, 2014.
JA Solar now expects first-quarter 2014 total shipment volume to increase to 620 megawatt (NYSE: MW) from the previous guidance of 580–610 MW provided during fourth-quarter 2013 earnings call. The current estimate is also substantially higher than the prior-year figure of 442.7 MW. However, quarterly shipment guidance is down 6.9% sequentially primarily due to slackness in the Chinese demand as a result of seasonality.
In addition, JA Solar reaffirmed cell and module shipments guidance for 2014. The company expects its cell and module shipments in the range of 2.7 gigawatts (GW) to 2.9 GW, which is up from 2.1 GW in 2013. An increase in shipments from Latin America and the Middle East is expected to lead to the upswing in shipment volume projection.
Also, JA Solar expects its quarterly gross margin to improve from fourth-quarter 2013 level of 15.5%. A steady effort towards cost-containment initiatives and strong shipment volume are expected to play an important role for the surge in gross margin.
We note that JA Solar is progressing well on its utility-scale solar projects, where it acts as an Engineering, Procurement and Construction contractor. The company caters to a geographically diversified customer base, spread across Asia, Europe, Africa, and North and Latin America.
It is evident from past records that JA Solar has a strong order book and wins contracts from both domestic as well as international clients at regular intervals. In Mar 2014, the company inked an agreement with U.K.-based large-scale renewable project developer British Solar Renewables to deliver 7.8 MW of high-efficiency full square mono solar modules.
We believe that strong solar product demand from Japan will act as an important driver for increase in shipment. Moreover, utilization of renewable energy is gradually increasing in several South American countries including Chile, Guatemala and Panama, which is expected to boost JA Solar's order book.
JA Solar currently has a Zacks Rank #3 (Hold). However, some better-ranked stocks in the same industry include Canadian Solar Inc. (NASDAQ: CSIQ), ReneSola Ltd. (NYSE: SOL) and JinkoSolar Holding Co., Ltd. (NYSE: JKS). While Canadian Solar and ReneSola hold a Zacks Rank #1 (Strong Buy), JinkoSolar carries a Zacks Rank #2 (Buy).
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