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JA Solar (JASO)

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Guest Klothilde

Conference Call is tomorrow 3/25 @8:00 eastern and press release may be 1/2 hour before that.

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Guest larryvand

500MW, $268.1 net revenues, -4.6% gross margins, $88.2 mil operating loss, $102.4 net loss, -$2.65/sh, operating cash flow negative $4.4 million Business Outlook For the first quarter of 2013, the Company expects total cell and module shipments to be between 410MW and 430MW. For the full year 2013, the Company expects total cell and module shipments to be between 1.7 GW and 1.9 GW. Manufacturing Capacity Update In the fourth quarter of 2012, in an effort to streamline production processes and increase production efficiency, JA Solar retired 300 MW of cell production capacity and 300 MW of module production capacity. As of December 31, 2012, JA Solar had an annual wafer production capacity of 1.0 GW, an annual cell production capacity of 2.5 GW and an annual module production capacity of 1.8 GW. JA Solar intends to maintain its annualized wafer, cell, and module capacities in 2013. http://finance.yahoo.com/news/ja-solar-announces-fourth-quarter-103000098.html

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Guest larryvand

Who knows. I'm sure the street already knew what they were going to do with JASO since Friday.

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The company projects first quarter sales of 410 to 430 megawatts of cells and modules, sharply lower than the 500 megawatts sold in the fourth quarter. For the full year, shipments are forecast at 1,700 to 1,900 megawatts, compared with about 1,700 megawatts this year. The company said nothing about prices or revenues, so there is little reason to believe that JA Solar’s results will improve much in 2013. Also margins were -3.3% for normal business expiring writedowns. Expecting little to no YoY growth on shipments. Many other solars seem to have stronger outlooks and margins than JASO. Nothing to write home about with this one. But again with it being so depressed wouldn't surprise me to see it dip at open and rally. Who knows.

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Guest JulyWebb

Fourth Quarter was revised before ER announced to be 25% Higher than Company earlier projected. 1'st Quarter Shipment is always lower than 4'th Qtr's. Still Higher than what they originally estimated 4'th Quarters to be. I believe they said 1'st Quarter could see positive marigins. JA has one of the Best Cash Balance Sheets

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Have you gotten a grip on their Q4 cogs? How are they doing on transparency?

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Guest larryvand

Klothilde, they are not the only one. Only bankrupt STP is green. We must be in bizarro world :(

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TSL and YGE are tanking too. What's up today? Module business gross margins are heading for mid teens this year. Better than low single digits.

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Guest Klothilde

Module business gross margins are heading for mid teens this year. Better than low single digits.

Are you talking about JASO or in general? COGS transparency sucks big time. A.o. they don't quantify an inventory provision and don't separate module revenue and cogs from the module tolling numbers. Still crunching numbers to see if I can salvage anything. One thing they mentioned was their non-poly module cost in Q4 which was 53 cent. They target 46 cent by end of 2013. Considering that this is mostly high-efficiency mono I think it's quite competitive. Their module ASP looks horrible in Q4, I get 58 cents. But then again we don't know how much module tolling there is that is driving down the average. They did however ship 50% modules to China so the overall ASP has to be low.

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Guest sony1

When the cake get 30% smaller over night, and there is still massive overcapacity, of course GM will improve. And handing SOL $50M certainly won't improve things, wtf are they thinking about? 3 or 4 more need to follow STP.

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Are you talking about JASO or in general?

JASO

COGS transparency sucks big time. A.o. they don't quantify an inventory provision and don't separate module revenue and cogs from the module tolling numbers. Still crunching numbers to see if I can salvage anything.

Looking forward to see what you arrive at.

One thing they mentioned was their non-poly module cost in Q4 which was 53 cent. They target 46 cent by end of 2013. Considering that this is mostly high-efficiency mono I think it's quite competitive.

It sounds like they might mean non-Si cost at 53 cents in Q4.

Their module ASP looks horrible in Q4, I get 58 cents. But then again we don't know how much module tolling there is that is driving down the average. They did however ship 50% modules to China so the overall ASP has to be low.

Tons of shipment in China can explain 58 cents. HSOL had 60 cents and should be higher module tier and shipped geographically nicely. What I don't get is that SOL said they shipped 50% to China and still had 63 cents. Does it mean they get more premium than YGE? ASP is a mystery. Tier, high efficiency and good geographical footprint should decide, but some of the guys are just coming in way low and some surprisingly high.

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Guest Uncle Chang

Question 1. Does JASO have tolling services with YGE or TSL? It is understandable why JASO drags SOL and LDK down, it always did, but YGE and TSL are down huge for no good reason. Question 2. Why do they still need the Wafer capacities? How much can they sell it for?

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They did module tolling service in Q4, so forget 58 cents ASP. Keeping us in the dark.

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Guest larryvand

Trying to read JASO's Q4 report is the utmost in frustration. Number hidden in numbers. Clear as mud. I haven't looked at a prior report, but Is it like that every quarter?

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Guest Klothilde

Similar. If it's not one thing it's the other. This time they hit us with the stupid module tolling.

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Guest JulyWebb

Highlights on Quarter 1 Looks Good Needham & Company Thanks for taking my question. I guess a follow-up to Satya's question, your first quarter guidance was the full-year guidance, how much do you think that this business will come from China and Japan and other markets. And I guess what we're trying to ask is, does it relate to end demand rather than just some of your customers who is buying cells from you in China and use it for other markets? Thank you. Bill Chen For the guidance with China and Asia-Pacific, Asia-Pacific is 30% to 40%, China 20%, Europe we've 20% and U.S. about 10%, the rest of world is 10% to 20%. Satya Kumar - Credit Suisse "Just wanted to clarify on the gross margins. Are we looking to having a positive gross margin in Q1 based on what you are expecting"? Jian Xie "Yeah. I think that we expect a positive gross margin. That's for sure. As you know we have focused the market in emerging markets, especially in Japanese and also some other Asia Pacific market. Some emerging markets from South America and Middle East as well. Those are areas gross margins are much higher than traditional market in Europe and some markets in China as well". Satya Kumar - Credit Suisse Okay. So it sounds like mix is helping gross margin become more positive in Q1

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Guest Klothilde

Gotta love your JASO IR! This is what I got only a few hours after emailing them:

Hi XXX (aka Klothilde),

Thanks for getting in touch. In answer to your question, module tolling accounted for 15% of total module shipments and 11% of total module revenue in Q4.

Thanks,

Nick

From this we get:

Module revenue: $167.3M

Module shipments: 273.7MW

Module ASP: $0.611/W

Module tolling revenue: $20.7M

Module tolling shipments: 48.3MW

Module tolling ASP: $0.428/W

Cell & Cell tolling revenue: $80.2M

Cell & Cell tolling shipments: 178.0MW

Cell & Cell tolling ASP: $0.450/W

Total revenue: $268.1M

Total shipments: 500.0 MW

Total ASP: $0.536/W

61 cts. module ASP is imho consistent with selling about half of their modules in China. 43 cts. module tolling ASP points to wafer - module tolling.

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Thanks. Yes, 61 cents makes sense. Now only the cogs is in the dark. Great module tolling ASP. Must be like you said, including both cell and module tolling.

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Guest Klothilde

...Now only the cogs is in the dark...

Actually the mud is slowly clearing. My cost model aligns pretty good with their overall COGS. I did a costing based on spot poly in Q3 and their stated non-si cost of 53 cents. Assumptions for breakdown: poly cost: 0.103 (10% above multi poly cost assuming mostly mono cells - thus $17.4/kg * 5,4 g/W *1,1) wafer conversion: 0.16 (mostly mono) cell conversion: 0.17 module conversion: 0.20 Module cost per watt: 0.103+0.16+0.17+0.20 = $0.633 Module shipments: 273.7MW Module COGS: $173.3M Module tolling cost per watt: 0.17+0.20 = $0.37 Module tolling shipments: 48.3MW Module tolling COGS: $17.9M Cell & cell tolling cost per watt: 0.103+0.16+0.17 = 0.433 (assume only cells - no cell tolling) Cell & cell tolling shipments: 178.0MW Cell & cell tolling COGS: $77.1M Total COGS: $268.3M I assumed little to none cell tolling since historically the tolling numbers were pretty low and their high cell&cell tolling ASP (45 cents) also suggest little tolling volume. $268.3M is not too far away from their overall COGS of $280.5M. Higher cost poly and wafer inventory can help explain some of the difference.

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Nice. They are buying wafers too, so you need to model that. Did they confirm low poly cost?

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Guest Klothilde

No, they didn't say anything about their poly. Though looking at the aggregate COGS of my model space for expensive poly is limited, approx to 13 cts. Yes they also buy wafers, this was a first shot to model the thing in-house. I think working in external wafers won't change results much, though, since wafers were trading at next to zero margin in q4.

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Thanks. The cell processing cost looks high. Probably why they don't want to discuss it. 16 cent mono wafer processing sounds low (I usually model 10 cents multi 20 cents mono), but it could be a strength they have.

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Guest Klothilde

Sorry - maybe I wasn't clear. All they said was that non-si cost was 53 cts. per watt. The breakdown shown is based on my own assumptions, i.e. 16/17/20. 20 cents for mono wafer conversion like you suggest strikes me as too high. Do you have any source / link for mono wafer conversion costs relative to multi? I'm still trying to nail down cost per watt for mono. What I've gathered so far points to 10% higher poly cost, 20% higher wafer conversion cost, 5% higher cell conversion cost, and 10% lower module conversion cost, all relative to multi. 100% higher wafer conversion relative to multi is completely new to me.

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Mono and multi ingot growth are very different processes. Diff has been 10 cent and I think that remained duing the major cost improvement of multi ingot growth. Would be good to get some real numbers on this though.

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Guest Klothilde

That I know, CZ vs. casting. However look at YGE, who mentioned that the total cost gap at module level between Panda and multi was 15 cents and that they wanted to reduce it to 10 cents. And this is n-type mono, which on top of the CZ wafering includes much higher cell conversion costs than multi. Have a look at page 19. This is outdated but useful for a "feelin": http://www.semi.org/ch/sites/semi.org/files/docs/1205_SolarSector_DAIWA.pdf

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the total cost gap at module level between Panda and multi was 15 cents

that translates to around 18 cents on wafer level.

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