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JA Solar (JASO)

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http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20170707:nPNABPdHba

JA Solar doing something with a poly plant?  They wrote the press release only in Chinese!  It's like they don't want their investors knowing what they are up to.

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1 hour ago, sunnypease said:

http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20170707:nPNABPdHba

JA Solar doing something with a poly plant?  They wrote the press release only in Chinese!  It's like they don't want their investors knowing what they are up to.

I think it is a mono wafer plant. They were planning to increase wafer capacity from 2.5 to 3.0 GW this year.

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Below is the translation to the Chinese news release.

Jingao Baotou base started, reinforce the "area along the way" strategy

PR Newswire

Beijing, July 7, 2017

(Nasdaq: JASO, hereinafter referred to as "Jingao"), one of the world's largest manufacturers of high-performance solar energy products, on June 29, 2017, Inner Mongolia Baotou equipment manufacturing industry park held 3 Giva wafers production base start ceremony, Baotou City and Castle Peak area of the main leaders participated in the activities.

The world's largest manufacturer of high-performance solar energy crystal A solar energy, June 29 in Inner Mongolia Baotou equipment manufacturing industry park held 3 giva wafers production base start ceremony, Baotou City and Castle Peak area of the main leaders participated in the event.
Baotou base is the eleventh base of JA Australia's global layout, aiming to produce efficient single and polycrystalline silicon wafers, and strengthen the silicon industry chain. The base covers an area of about 26.3 hectares, with a total investment of about 30 billion yuan. Is expected to put into operation this year, fully put into operation will achieve 3 Giva silicon annual output, 4 billion yuan annual output value.

Mr. Baobao Fang, Chairman and CEO of Jingao, said: "Baotou is an important channel leading to Russia and Scandinavia, and the base of Jingao Baotou will be closely integrated with the base of Malaysia and Vietnam, Australia 's deep integration into the' one by one 'strategy of the important support point.The wafer production base will promote the further optimization of the industrial layout of the crystal, greatly enhance the industrial strength of the crystal.

"We are very pleased with the successful development of the crystal base in Baotou, JA will continue to adhere to the concept of sustainable development, green energy and regional construction will be combined to promote the development of local PV business for the local new energy and economic development to contribute. "

SOURCE JA O Solar Holdings Limite

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On Friday I submitted a Stock Manipulation complaint against JA Solar and their CEO and today I have a call into one of the law firms with a stockholder lawsuit against Sunpower to see if there is justification for a lawsuit against JASO and their CEO

Edited by skhe2116
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They've had fantastic financial performance the past 3 years compared to their low market cap and PB. And the risk of the $1b Hemlock dispute is settled and cell margins are expanding and their strategy to have a high mono and China market focus is turning into a sweet spot now. But I had amazing return on them this year and saw it starting to fade after the Chairman seems to have completely lost his mind. Despite recent profit growth it has been a sort of value investment here and I felt like diversifying along the value-chain and focusing on the best stocks for long-term growth potential instead.

JASO is still unbelievably discounted in my view, but it doesn't fit my portfolio anymore as I don't want to have as much Chinese manufacturers as I had before.

Edited by explo
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I guess on their call, they cried about weak 2H, worry about 201, etc., to try to prop up the idea that the CEO's $6.80 offer is fair.  Without that offer on the table, this would likely be a $9 or $10 stock right now.

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transcript is out: https://seekingalpha.com/article/4101011-ja-solar-holdings-jaso-q2-2017-results-earnings-call-transcript

loved the exchange between Herman and Gordo:

Gordo: "Could we see 28% decline in the second half in ASPs, second half to define as June to December?"

Herman Zhao: "I think the answer is very clear. The answer to that question is no." 

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According to JASO, their ASP was $0.38 and their cost was $0.31, that is 18.4% GM, how did they end up with 12.9% GM? If I use this math, it appears that cells sold at 0.37 per watt at the cost of 0.60. JASO was always the hardest to figure out, but in the past, at least they provided a percentage of revenue breakdown by a module and a cell.

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8 hours ago, dydo said:

According to JASO, their ASP was $0.38 and their cost was $0.31, that is 18.4% GM, how did they end up with 12.9% GM? If I use this math, it appears that cells sold at 0.37 per watt at the cost of 0.60. JASO was always the hardest to figure out, but in the past, at least they provided a percentage of revenue breakdown by a module and a cell.

You wrote they have a -38%GM on cells.  (0.6 cost & 0.37 ASP for cells)  If not a typo, then why? Selling ancient inventory?

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59 minutes ago, sunnypease said:

You wrote they have a -38%GM on cells.  (0.6 cost & 0.37 ASP for cells)  If not a typo, then why? Selling ancient inventory?

I used the information given in their cc and numbers built in their results. If you multiply modules by 0.38 average you are left with the amount which divided by cell shipment gives the price of $0.37 per cell watt. If you multiply modules by the cost of $0.31 you end up $0.60 per watt in the same for a cell. 

I can only assume there are other factors, but I cannot think of tariffs, they should not pay them. The problem is, of course, the cost. They are nowhere near the cost of $0.31, they are probably using OEM, and yes it does appear to be a very lucrative cell sale which could be selling to the third party associate, like Jinglong.  Just for exercise if you move the cost to $0.334 you end up in the place that cell sold have a lower cost of about $0.28. The GM is also close to 13%.

They said it was a blended cost, so I am not sure.

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JASO's higher than CSIQ ASP indicates they sold mono- PERC modules. Cells sold could have been mono cells as well. CSIQ with its 2GW wafer only erected by Q2 sold legacy modules, transitioning to Q4's 4GW wafer. They buy cells and will buy least of them by Q1, but they will enter 2018 with an imbalance of 2.5GW. We should know of their plans upon Q4 results if black silicon is added or will they add mono. Those actions will also be taken after Suniva activity is resolved.

 

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From Seeking Alpha--Gordon assumes costs up by ~10% and prices down by ~10% to get his big loss in Q3.  Nevermind that q3 is almost 2/3rds over and JASO did not say anything about a loss on cc

JA Solar seen in bearish light by Axiom analyst Johnson

  • JA Solar (JASO -0.3%) is not likely to keep its 16-quarter profitability streak intact, Axiom's Gordon Johnson predicts, seeing a Q3 pretax loss of $10M and warning that the company's results could deteriorate further in Q4.
  • According to Axiom’s latest checks, upstream PV prices seem to have stabilized for now but the damage may have been done to the gross margins of JASO and its competitors; at least until the U.S. government concludes its Section 201 investigation, Johnson expects it to continue to support U.S. solar module prices, which currently are in the $0.32–$0.34 per watt price range.
  • Johnson's Q3 forecast for JASO assumes the company's shipments will come in at 1.7 GW, at the midpoint of guidance, and that its average selling price will be "an aggressive" $0.36 per watt.

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17 hours ago, disdaniel said:

From Seeking Alpha--Gordon assumes costs up by ~10% and prices down by ~10% to get his big loss in Q3.  Nevermind that q3 is almost 2/3rds over and JASO did not say anything about a loss on cc

 

Jaso did not mention a loss but they did indicate that the ASP was lower in China for Q3 by a penny and that material costs were going to be higher. They also indicated they signed contracts with pricing based on the expectation of the upstream supply costs dropping.  From this they expect "stressed" margins.

From the Seeking Alpha transcript. 

https://seekingalpha.com/article/4101011-ja-solar-holdings-jaso-q2-2017-results-earnings-call-transcript?part=single

"I think the margin in Q3 we think tend to lower due to the rising material costs."

"I think we’re going to have some stress in gross margin in Q3"

"So Q3 for China market for our sales is around $0.38, but Q3 will be $0.37 something in that nature."

"For our Q2, blended ASP is $0.38 with some fractions to be exact it's $0.383

Jaso had 12.9% margins in Q2 and 11.7% in Q1 It is likely that the margins fall into the Q1 range or below.

If you use  a slight decline in ASP and a slight increase in costs of 1/4 cent, then the margins would fall back to 11.7%. 

If you use a 1/2 cent ASP decline your margins would drop to 11%.

Given top end guidance at 1700MW with some being cells, the revenue likely comes in the range of $660-$670M.

11.7% margins on $670M  is $78M in gross profit.

11% margins would be $73.7M in gross profit

Operational expenses in Q2 where $76M.

Interest in Q2 was $12M

Other Income was $2M.

Total Expenses and Interest = $86M

If you consider that most of the shipments in Q2 were to China and Asia Pac, then a reduction in shipments for Q3 guidance might shave off $6-$12M from the Opex.

If they increase shipments to Europe and the U.S., then this may have a negative impact on Opex.

As you can see buy using high end shipments with the least ASP reduction and price increases, the company is at a $10M loss unless they can reduce Opex.

It is also possible that even with certain Opex reductions, they may still post a loss.

The more concerning point should be Q4 ASP and demand that is hinted by Johnson as impacting results more than Q3.

 

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SCSolar

prices were 38.3 in q2.  prices have been increasing the past weeks (at least in USA) the quarter is 2/3rds over and JASO says prices in q3 are 38, and could fall to 37 in q4 (actually said q3, but I interpret from the entire discussion that he means q4 since he just got finished saying 38.3 in q2 and 38 in q3)  Somehow GJ believes prices will fall by 28% on Sept. 23rd.  I do not see this--but I have no crystal ball.

GJ assumes Q3 prices = 36, which implies ~32cents/W price for cells in September if we assume July and August = 38 and even shipment volume/month.  GJ is also assuming prices for materials goes up (presumably b/c of the huge demand we just saw in q2 and into q3) while simultaneously assuming demand plummets.  I think you see one (higher cost w/ high demand) or the other (lower prices), not both at the same time.  I find GJ making an absurd assumption--but if you feel JASO said a huge price drop is coming--you should not invest in JASO.

Basically I have zero respect for what GJ says, although I also believe he speaks for some powerful interests.  As for JASO seeing stress in GM, I take this as standard CYA-speak (plus it might actually be the case in Sept.) and the CEO trying to buy company for a song, so why not muddy the water to protect his low bid.

 

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Disdaniel

I read the transcripts from Q1 and Q2. Jaso indicated the ASP would be up a bit for Q2 and the costs would be down slightly. That tends to indicate an increase in GM. In fact Q2 had an increase  of 120 basis point from 11.7% to 12.9%. That builds trust in accuracy of their comments for me..

In Q2 for Q3 guidance they suggest the ASP will be slightly down and material costs would be slightly up. Those 2 dynamics would lead one to believe the margins will decrease. How much decrease is up for debate, but I would not be surprised for it to drop to 12% or as low as 11%.

Jaso covered why the margins will fall  in detail. The first detail was the ASP in China was $0.38 and they expect in Q3 it to be $0.37+/-. The China business accounts for 50% of their shipments. That would suggest a half cent drop in their ASP unless they can offset it with higher priced regional sales. The second point was they signed contracts for materials that they thought would be lower priced.

 

https://seekingalpha.com/article/4101011-ja-solar-holdings-jaso-q2-2017-results-earnings-call-transcript?part=single

Herman Zhao

For this quarter, actually, China market ASP was little over $0.38 with some fraction that this quarter. And next quarter, in Q3, we expect the price will be coming down slightly, probably around $0.37. So basically for Tier 1 pricing in the range of renminbi with tax RMB2.8 to RMB2.9, so that’s Tier 1 pricing. So if you translate it to U.S. dollar that’s $0.37 plus or minus for China.

Philip Shen

And how do you see margins evolving in Q3?

Herman Zhao

I think the margin in Q3 we think tend to lower due to the rising material costs. I think in the first half of this year, we expect a strong demand in China market probably will end in Q2. So that’s why based on that we expect the material costs will come down sometime for Q3. So that’s why when we send them orders, we expect the price will come down so we sign some deal. But now with the strong demand in China market and the material cost actually goes up that’s for wafer and also poly price come up little but as well. So with that, I think we’re going to have some stress in gross margin in Q3.

 

 

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18 hours ago, SCSolar said:

"So Q3 for China market for our sales is around $0.38, but Q3 will be $0.37 something in that nature."

If it is 37 or 38 in q3--and in the piece you quoted they seem to indicate both in the same breath (with the implication that they see the price will decline based on "is" and "will be")--it still is not 36 which GJ assumes in the piece I quoted where he projects a loss and on which you pounced. 

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Just a thought that with margins so tight, it'll be important to keep an eye on the USD / RMB / Euro exchange rates which should play a big role.

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20 minutes ago, sunnypease said:

Just a thought that with margins so tight, it'll be important to keep an eye on the USD / RMB / Euro exchange rates which should play a big role.

I agree. Much of the margin game in international trade is a currency game. USD caved further today. I increased my position in it. I've basically doubled up my USD exposure since the high, but I'm getting a creeping sense that it is not at all certain it will rebound in the very short term. Growth signals for US are weakening a bit while frozen ROW has started to heat up. ROW on the other hand is heating up on the last fumes of monetary stimilus. US being ahead can put the pedal to the metal again in its monetary policy should the Trump fiscal policy stimilus be further delayed or fail.

My increased position in USD is strategic, but timing of change is tactically opportune. Likely premature as always.

 

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12 hours ago, explo said:

I agree. Much of the margin game in international trade is a currency game. USD caved further today. I increased my position in it. I've basically doubled up my USD exposure since the high, but I'm getting a creeping sense that it is not at all certain it will rebound in the very short term. Growth signals for US are weakening a bit while frozen ROW has started to heat up. ROW on the other hand is heating up on the last fumes of monetary stimilus. US being ahead can put the pedal to the metal again in its monetary policy should the Trump fiscal policy stimilus be further delayed or fail.

My increased position in USD is strategic, but timing of change is tactically opportune. Likely premature as always.

I guess when currency fluctuations have such an outsized determination of the profits of a company, it's a good time to have a hard look at them & figure out if they might cause a surprise for the quarter, then hedge, add, or reduce based on that with a plan to do the opposite once the currency imbalance reverses.  

I suppose the smart money is already making these adjustments for the quarter, based on quality computer models.  I can be nearly automatic.

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42 minutes ago, sunnypease said:

I guess when currency fluctuations have such an outsized determination of the profits of a company, it's a good time to have a hard look at them & figure out if they might cause a surprise for the quarter, then hedge, add, or reduce based on that with a plan to do the opposite once the currency imbalance reverses.  

I suppose the smart money is already making these adjustments for the quarter, based on quality computer models.  I can be nearly automatic.

Yes and further I think many retail  investors look at how companies in the short term grow their top and bottom lines in their reporting currency and interpret movements they see there as relative strength shifts between the companies that could be based on technology or operational efficiency strengths when it in fact might just be a movement of currencies at the different companies cost and revenue centers. I think the professionals play into this, but sometimes making it seem like they know more about the companies relative strenghts or the industry direction when they just follow the currency moves.

Anyway when currencies are on the move I think that should be given more attention than backlogs, roadmaps etc. as their moves will dictate ERs in the short term.

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3 hours ago, dydo said:

I guess he can write anything but why is he allowed to publish it?

 

Exactly.  Motley Fool clearly doesn't oversee him at all.  In the 5 years or so that I've been following solar, his analysis has been far and away the worst.  I feel sorry for uninformed readers that trust MF and Travis to help them form a decision on solar stocks. 

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16 hours ago, Mark said:

Exactly.  Motley Fool clearly doesn't oversee him at all.  In the 5 years or so that I've been following solar, his analysis has been far and away the worst.  I feel sorry for uninformed readers that trust MF and Travis to help them form a decision on solar stocks. 

That was me a year ago.  I read a couple Travis articles & bought FSLR.  During the market reaction to the already known about solar glut.  My own fault, but amazing that he had written that & continued to write positive things into the 2016 Q3 results.

Why don't we, as the members of an upstanding solar research group, write a collective letter to the MF management?

I have at least one example of him writing something that was very nearly a manipulating lie.  What he had said about the Q2 SPWR ER.  Talking about "growth" and "margin boost".

 

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4 hours ago, sunnypease said:

...Why don't we, as the members of an upstanding solar research group, write a collective letter to the MF management?...

 I agree that Travis is off sometimes when it comes to solar.  The issue I see with such a letter however is that his overall ratings track record is fantastic (ranked top 1% on tipranks.com) and way better than Robert's track record on that site:
https://www.tipranks.com/bloggers/travis-hoium
https://www.tipranks.com/bloggers/robert-dydo

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2 hours ago, Klothilde said:

 I agree that Travis is off sometimes when it comes to solar.  The issue I see with such a letter however is that his overall ratings track record is fantastic (ranked top 1% on tipranks.com) and way better than Robert's track record on that site:
https://www.tipranks.com/bloggers/travis-hoium
https://www.tipranks.com/bloggers/robert-dydo

What rank does tipranks get?  They seem to cherry pick numbers.  

How could Travis possibly have a good score?  He recommended SPWR & FSLR mid last year... days before 2016 Q2 & Q3 reports.

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14 hours ago, sunnypease said:

What rank does tipranks get?  They seem to cherry pick numbers.  

How could Travis possibly have a good score?  He recommended SPWR & FSLR mid last year... days before 2016 Q2 & Q3 reports.

What makes you think they cherry pick numbers?  They provide full transparency on their methodology and data.  Just look at Travises profile above.  They analyzed 479 ratings (so many cherries!), out of which 267 were successful.  The average 1-year return on his ratings was 8.6%, corresponding to spot 69 out of 6116 bloggers ranked by performance.

I mean, I'm just saying that chances are if you write a letter to MF to discredit / reprimand / silence Travis chances are MF will point to his excellent track record vs. blogger peers as measured by some of these popular ranking sites.

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What I mean is... Travis essentially pumps FSLR & SPWR endlessly, without pause.  I'm new to solar investing, but I get the idea he has been pumping these stocks for years.

These stocks, and all of solar stocks, nosedived some time in 2012, jumped back up in 2013, bounced around highs for a few years and then dived again in 2016.  Now they are about half the way back up.  

Depending on when one decides to pair a sell to a buy, his results are either great or horrible.  As would be anyone recommending solar stocks.  

I remember him pumping FSLR & SPWR before Q2 & Q3 earning reports, with nary a mention of the glut.

Now he *still* recommends SPWR. SPWR has obvious problems: can't produce cheaply enough & new competition in the high efficiency market from Panasonic & LG.  He doesn't mention these problems at all, or ever.

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1 hour ago, sunnypease said:

These stocks, and all of solar stocks, nosedived some time in 2012, jumped back up in 2013, bounced around highs for a few years and then dived again in 2016.  Now they are about half the way back up.  

 

These stocks peaked in 2014. They are running on a 7 to 8 month peak to peak cycle since. With each peak lower than the prior peaks. The most recent peak to peak cycle was in February 2016  to the peak of a few days/weeks ago. You can see these trends in most solar stock. Here is a yahoo chart for FSLR SPWR JKS and CSIQ

 

https://finance.yahoo.com/chart/CSIQ#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%3D

 

 

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