JA Solar: This Solar Stock Looks Primed for Long-Term Gains

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Mar 29, 2015

The strategic decision to shift the product mix to more profitable modules and better geographies has paid off for JA Solar (JASO, Financial), as the company delivered solid results in the recently reported fourth quarter. Management is now confident of an upbeat performance this year. Let's see how the company will be able to achieve a better performance in 2015.

A closer look at growth drivers

It is clear that JA Solar is definitely in a solid financial position and it shows no signs of stopping soon. The company, in fact, is now focusing on various new initiatives to accelerate its growth. The company is mainly relying on its most potential markets including China and Europe. It is seeing bright opportunities in China as it is seeing strong growth in demand by the developers and utilities. It is focusing on expanding its reach to other potential markets as well. It is engaged in search for emerging market which can be a good venture for growth. Under this, it is seeing enormous growth opportunities from India and Japan. Market in Japan is big and JA Solar is busy in maintaining good relationships with clients in Japan through excellent products and operational excellence.

Moving forward, JA Solar is also boasting on its strong product pipeline. The company had already introduced high efficiency RECIUM and PERCIUM cells in 2014 which have gained good traction in the market. As a result these two products are in mass production and to add more value to this, JA Solar is planning to in production capacity for both of these products in 2015.

However, the mix shift to the module was a wise move by the company and having achieved good results from it, JA Solar is now excited to expand its sales to new and under penetrated markets such as North America and South America where it expects better response by the customers. Further the record new efficiencies in its RECIUM and PERCIUM cells are expected to contribute well in accelerating its downstream project development segment by more than doubling its planned installations in 2015.

Conclusion

Looking at the trailing P/E of just 9.06 the stock looks dirt cheap but the forward P/E of 6.64 shows good growth in the earnings in the near term. A profit margin of 3.14% is also decent and can help the company to gain further market share in future. The stock is also expected to benefit from declining oil prices the stock can also be a good long term holding as its earnings for the next five years are growing at a CAGR of 22.00% as compared to industry average of just 21.12%. Considering all these aspects I would like to suggest the investors to definitely include JA Solar in their portfolio.