86 replies to this topic

[explo]

Yes unequivocally a negative. These stocks will tread water at best until there is clarity on the tariff situation. The market's reaction to JASO this morning makes that very clear. Earnings don't matter unless there is visibility on the sustainability of those earnings.

 

Please explain how 4.1% of their shipments (with most of the profits going to Taiwanese cell makers) at risk of USITC decision impact would cause JASO earnings to have no visibility. JASO have not made their revenue streams dependent on political decisions. They did the same thing during the EU uncertainties.

[BIPV Investor]

All solar revenue streams are dependent on political decisions. Japan, EU, US, China. It is all controlled by politics. How long do you think Chinese names can continue to ship ~2GW of modules to Japan each quarter before politicians pull the plug on that? Last I heard there is a huge amount of tensions in Asia right now between Japan and China. 

 

Global demand is essentially has four legs; EU, China, US & Japan. Saying that you can remove one of those legs and the table will be just as sturdy is nonsense. Yes, Jaso doesn't ship much to US, but if that market shuts down to mainland companies, where do you think they are going to turn to place their modules? Sweet Japan and other locations that Jaso is very strong in. Look at the pricing JKS targeting in the US as a good example of the competitive pressures that suddenly arise when a company needs to move product.

 

Remember, the market is not looking to analyze things from a very high level; the default mindset is that solar and China are junk. The narrative needs to be spotless for the market to decide otherwise. People here are very good at partial differentials and multivariable calculus, but remember the market is only looking to do basic addition/subtraction.

[eysteinh]

I agree Japan at some point could cool down a bit. But remember EU is going to open again in 2015 so I am not that worried. Who will ship where is not that important actually, what is important is if everyone will be able to ship and even more important that our favorite companies will be able to ship at good prices. That is actually dictated by world demand since if someone is blocked at say US they ship to other parts. Remember also that capital flows with where the projects go. I speculate if we see a block in US / Japan then you will see more projects in Africa. Also remember that when some is blocked then others go there quickly as asp usually rise dramatically, thus the demand is organic over the world. There is no stopping this solar growth as there is too much financial incentive to go on with it. I am fairly confident we are going to see an overall growth  going forward as well. And besides most of the tier 1 is already producing from several international locations. 

 

Regarding your overall post I agree with it, the market will at some point see this as while we are forecasting quite complex into the future when it becomes more clear to the market as well they will follow. And that will happen when as you say the market see that it is very clear the path going forward.  That clear path by the way should not be that ASP is going to stay high, it will go down. I would urge anyone doing estimates to keep in mind the overall trend of solar panels is still both cost reduction and lower sale prices as well, even if Balance of System costs now is taking over its fair share of the margin compression and thus making solar module manufacturers more profitable. Anyhow that is why I am in JKS, i prepare for the worst and hope for the best. I have estimated already a drop now 4 cents in global price for JKS in 2014 and I have still very good EPS numbers in my calculations, for the next years I have 3 cents reduction asp both 2015 and 2016 but conservatively only 2 cent cost reduction in all 3 years so I think there is a lot of room for upside.  I find it helps a lot to look at long historic trends of solar panel asp and you start to see some trends. Granted history is no true indication of future but it sure seems to correlate well and a lot of scenarios keep happening over and over again. Also helpful is to run the actually IRR numbers and see if IRR stays in the range of around 7-12% (before reducing for loan costs.) that in my opinion tends to be a sweet spot for solar projects and good indication of where module asp heads most of the time. 

[JulyWebb]

They expect GM (for them) to be flat (IMO at best) for the rest of the year. But if they see any further pressure to GMs, they'll concentrate on the revenues and the bottom line. 

 

I'm not seeing that they said this in the CC at all http://seekingalpha....ipt?part=single

 

Oh now I see this is your opinion & not fact based. 

[Pop2mollys]

They said 2Q flat to slightly down but they see Q3 and Q4 margins up... That is straight from CC. Also big demand again by end of May in China through rest of year...

Not to mention they said strong demand from Japan rest of year. It was a very bullish CC by a very conservative CEO.

[JulyWebb]

They said 2Q flat to slightly down but they see Q3 and Q4 margins up... That is straight from CC. Also big demand again by end of May in China through rest of year...

Not to mention they said strong demand from Japan rest of year. It was a very bullish CC by a very conservative CEO.

 

Thanks and always JA has been conservative in their guidance. If not they wouldn't continue to pre-guide higher.

[Pop2mollys]

Just in case your interested in TA... Check out the huge inverted head and shoulders on the long term chart.... A bullish inverted head and shoulders is at bottom of downtrend and right shoulder has completely formed. I know many here are extremely frustrated but I'm telling you expect the unexpected....

http://www.nasdaq.co...f&sDefault=true

[explo]

One thing to note for JA is that they plan to complete (and sell) 200 MW of projects this year. They had a firm offer for one of their projects (should be 50 MW). One such sale and they can almost double their quarterly net profit level from 15m to 30m. Annualized that's a 120m profit level for 2014 (if they sell 200 MW) for a company with a 450m market cap and lowest net debt among peers. Maybe trading 40% below book value is a bit too cheap in that scenario. On top of the 120m profit is another 100m operating cash flow from depreciation, so that's 240m cash generation from operations with already 800m equity, 423m cash and just 550m debt on the BS all for 450m market cap. A profitable company in a future growth industry producing both topline and margin growth momentum is priced as if it was a value play without growth hope. Still market is resisting.

[eysteinh]

Mcap is 570. They have 228 million weighted average shares outstanding according to q1 report. 228/4 = 57 million ADS. 10 $/share = 570 mcap. Stll value offer I agree. Cash they have 313 and 100 + restricted so 413 total. short+long term debt is 430 so almost as much cash as debt. More importantly they have more equity than mcap with 793 million equity vs 570 million mcap. And even if the series b warrent of 12 + million ads is used before q2 (it is expiring now) it would still add more cash so equity will stay higher than mcap. 
 

[explo]

JASO ADS is 5 shares. I think you are thinking about JKS who has 4 shares per ADS. Now JASO is going to look cheap to you Eys.

[eysteinh]

Yeah your right. Too late in the evening for me here in Norway (1:30 am) Indeed JASO looks cheap. Even if we add the 12 mil ads from warrent series b. I would still stick with jks as I have a much higher eps for 2014 and they can stand a lower asp better, but JASO is one of the best buys. They are profitable, doing well on tech, expanding quickly, strong balance sheet and they have very strong fundamentals (example more equity than mcap.)

[sunnysky]

Eysteinh, use 58,949,957 = 59 M ADS for JASO. This includes all potential shares from warrants. As I said before, if you simply divide the net income by it, you match their EPS. So your calc above is not that far off.

[eysteinh]

yeah with the series b warrent it is around 59 million ADS. But without it explo is correct that currently mcap is damn low.Even with the warrent included the mcap shows that equity is much higher. 

[odyd]

JA paid $34M in debt but added $39 in accounts payable. Project assets must have come out from PPE. The equity add was only $16M and Q4 add was like $60M, does that play a role? Of course under today's market nothing works.

[explo]

Eysteinh, use 58,949,957 = 59 M ADS for JASO. This includes all potential shares from warrants. As I said before, if you simply divide the net income by it, you match their EPS. So your calc above is not that far off.

If one hold series B exercise as likely one can use 59m ADS but then need to add 110m to equity and to cash (reduce net debt with 110m) to properly relate the higher market cap to the even stronger financials. I like using EV since when issue price of new shares is around current PPS the EV does not change since increase in market cap and reduction in net debt cancel eachother out.

[explo]

The equity add was only $16M and Q4 add was like $60M, does that play a role?

I reacted on the missing 24m from February warrant exercise too. Then I realized that it was due to currency translation changing between Dec 31 and Mar 31. The 2.62% depreciation of the Yuan against the Dollar caused the equity to got down $20m. We should see this effect for others reporting too. So for Trina with around 800m equity too and making a profit a bit above 20m, they might not add much equity measured in dollar. When currency move a lot like this it is better to check equity added in RMB and then convert to dollar. That way at least the same conversion rate is used for equity at beginning and end of the period.

[explo]

Project assets must have come out from PPE.

PPE did not go down more that their around 25m quartely depreciation of it, so unless there were capex its decline is not unexpected. Plus the project assets they declared in the 20-F as of Dec 31 was now listed as non-current assets on Dec 31. These were moved to current assets on Mar 31, so my assumption is that the rest were probably just added (from other current assets like inventory and cash) in the quarter. This is good news since they have more than 200m of project assets to create this year to meet their 200mw plan. Other moves if I remember correctly was some AR and inventory increase. So they use some cash in the quarter.

[explo]

Just saw now that PPE went up in Yuan so there was capex. This currency move probably makes the dollar move of BS lines too misleading. To check BS move I think it is best to use Yuan for all lines (not just the mentioned equity and PPE line problem) and then convert the Yuan move to dollar.

[explo]

Yahoo update for Q1. They got the EPS wrong, since they used per share not ADS. Thus no beat.

 

http://finance.yahoo...alyst Estimates

[nanofrogfish_spf]

One thing to note for JA is that they plan to complete (and sell) 200 MW of projects this year. They had a firm offer for one of their projects (should be 50 MW).

Aren't these projects in China, with lower margins? I'm really concerned about the even lower GM's these will likely bring in the future...