Operating leverage is significant for the solar company as revenue grows and exposure to China and Japan will offer baseline growth opportunity, according to analyst Colin Rusch.
"With JASO increasing its module capacity in 2014, we expect the company will be able to see manufacturing increasing margin as some peers see margins begin to flat line. We also believe the company has among the best non-silicon costs in the industry, exiting 2013 at $0.43/W and targeting <$0.40/W...We believe JASO should see all in manufacturing cost of <$0.50W by the end of the year...We believe the company should be able to reach near 20% GM by the end of 2014 for its manufacturing business," Rusch said.
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TheStreet Ratings team rates JA SOLAR HOLDINGS CO LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate JA SOLAR HOLDINGS CO LTD (JASO) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its poor profit margins and generally high debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for JA SOLAR HOLDINGS CO LTD is currently extremely low, coming in at 11.28%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, JASO's net profit margin of -12.98% significantly underperformed when compared to the industry average.
- JASO's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that JASO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.66 is low and demonstrates weak liquidity.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, JA SOLAR HOLDINGS CO LTD's return on equity significantly trails that of both the industry average and the S&P 500.
- JA SOLAR HOLDINGS CO LTD has improved earnings per share by 25.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, JA SOLAR HOLDINGS CO LTD reported poor results of -$6.81 versus -$2.80 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus -$6.81).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 37.8% when compared to the same quarter one year prior, rising from -$60.31 million to -$37.51 million.
- You can view the full analysis from the report here: JASO Ratings Report