International growth should bode well for this discounted solar stock, which is expected to see triple-digit growth.
JA Solar Holdings Co. Ltd. (JASO)
from Top Stocks under $10
Among the beaten-up solar names, JA Solar Holdings Co. Ltd. (JASO) stands out as a high-quality solar-module producer for some the toughest, most-arid and hottest climates. It is based in China, but only 35% of its revenue comes from that country—and everything it produces is under the strict watch of PV Lab Germany GmbH. That helps ensure that its panels are reliable and have high conversion efficiency and, consequently, high energy outputs.
Solar stocks have been hit hard in the market volatility, and it is unfair because the world is continually looking for alternative-energy needs. Countries that enjoy long hours of the sun’s irradiance each year want to convert that natural light into power for their homes, farms and equipment.
Solar-power demand is likely to grow in key areas like India, China, Japan and the U.S. because of policy incentives. And it’s also expected that countries, like Saudi Arabia, that use oil to fuel energy will want to diversify their economies and become less reliant on oil. Solar energy usage has already grown, as noted in the chart below, but with more countries taking advantage of lower costs and better storage abilities – that demand may accelerate. For instance, Mexico, Brazil and Chile are now also in the mix to add solar capacity.
An added advantage, especially for countries like China and India, is that tons of carbon dioxide is removed from the environmental equation.
JASO’s shipments in China were about 34.8% of its total, while 46.4% was from the rest of the fast-growing Asia-Pacific region. The company has long-term strategic partnerships with companies like SunEdison, British Solar and China Huaneng Group, so it’s continually going to be called on for its high-quality solar panels to sites across the globe.
JASO sales in the most-recent quarter increased 71.8% in dollar terms, accelerating from 52.9% and 35.7% growth in the quarters prior—not bad, but the company has also been growing its margins, allowing for better earnings.
That’s great, but it’s just the beginning. India recently increased its targeted solar production to 100 GW, from 10GW, a target it hopes to reach by 2022. And JASO has already declared 21.4MW of modules for Gujarat, India.
JASO has a valuation of 6.3x next year’s earnings, vs. peers’ average of 20.7x, and it trades at just 0.4x book value, a 60 percent discount from peers at 1.0x. The average analyst has a $14 price tag on this name, and I don’t see any reason why it couldn’t get into double digits in the next six months from around $8 now.
Mandeep Rai, Top Stocks under $10, published by Money and Markets, a Division of Weiss Research, Inc., www.moneyandmarkets.com/services/trading-services/top-stocks-under-10, issues@e.moneyandmarkets.com; 1-800-291-8545, January 15, 2015