JASO Solar Irrational Exuberance# Stock
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Solar Irrational Exuberance
FYI.......
In comments Tuesday, following yesterday's 70% surge in JA Solar and minimum
12% move higher in other Chinese solar stocks, Raymond James analyst Pavel
Molchanov said checks show there is simply no boom times.
Molchanov met yesterday with management from a privately held "tier 2"
Chinese PV module manufacturer and the message they heard "was in stark
contrast to the altogether excessive bullishness being exhibited by the
stocks."
Based on the conversations, the analyst noes that they made the point that
European purchases of Chinese modules have been practically nonexistent for
the past month, ever since industry speculation started intensifying about
the imminent EU tariff ruling. On the U.S. markets, the message he got was
that virtually all project developers are capital-constrained. Lastly, on
the global supply/demand balance, management's view was that industry
rationalization has yet to run its course, even with such high-profile
bankruptcies as Suntech (NYSE: STP). "Their view is that around 30% of the
currently operating module suppliers will ultimately have to exit the market
," the analyst said.
Looking at the earnings for Chinese solars thus far, Molchanov notes JA
Solar had a 6% gross margin in 1Q13 . While this was at the high end of the
spectrum, considering that Trina (NYSE: TSL) pre-announced a range of 1% to
3%, and Renesola (NYSE: SOL) came in at a negative 2%, "even in a quarter
when better-than-expected shipments enabled the margin upside, EBITDA was
barely enough to cover interest expense, leaving essentially nothing for
equity holders." In addition, guidance for the full year was not raised,
which incorporates a sequential decline in 2Q. "Is it rational that the
stock would be up 70% based on this?," Molchanov rhetorically asks. "We
think the question answers itself.
Solar Irrational Exuberance
FYI.......
In comments Tuesday, following yesterday's 70% surge in JA Solar and minimum
12% move higher in other Chinese solar stocks, Raymond James analyst Pavel
Molchanov said checks show there is simply no boom times.
Molchanov met yesterday with management from a privately held "tier 2"
Chinese PV module manufacturer and the message they heard "was in stark
contrast to the altogether excessive bullishness being exhibited by the
stocks."
Based on the conversations, the analyst noes that they made the point that
European purchases of Chinese modules have been practically nonexistent for
the past month, ever since industry speculation started intensifying about
the imminent EU tariff ruling. On the U.S. markets, the message he got was
that virtually all project developers are capital-constrained. Lastly, on
the global supply/demand balance, management's view was that industry
rationalization has yet to run its course, even with such high-profile
bankruptcies as Suntech (NYSE: STP). "Their view is that around 30% of the
currently operating module suppliers will ultimately have to exit the market
," the analyst said.
Looking at the earnings for Chinese solars thus far, Molchanov notes JA
Solar had a 6% gross margin in 1Q13 . While this was at the high end of the
spectrum, considering that Trina (NYSE: TSL) pre-announced a range of 1% to
3%, and Renesola (NYSE: SOL) came in at a negative 2%, "even in a quarter
when better-than-expected shipments enabled the margin upside, EBITDA was
barely enough to cover interest expense, leaving essentially nothing for
equity holders." In addition, guidance for the full year was not raised,
which incorporates a sequential decline in 2Q. "Is it rational that the
stock would be up 70% based on this?," Molchanov rhetorically asks. "We
think the question answers itself.
