Axiom Capital Comments on JA Solar, Increases PT and Maintains Sell (JASO)

Axiom Capital commented on JA Solar JASO after the company announced its Q1 results. In a research report published today, Axiom Capital stressed many risks still ahead for JA Solar, in spite of better than expected Q1 results. In the report, Axiom states, "While JASO's 1Q11 results came in better than the whisper, the combination of: (1.) C2Q11 inventory build, (2.) lack of progress on cost reductions in 2Q11, & thus neg. margin leverage, & (3.) falling ASPs w/ just 2 weeks of fwd visibility, despite aggressive 2H11 guide, imply risk of neg. earnings revisions." Axiom increased its price target on JA Solar from $5 to $5.50, however. At the same time, it highlighted a number of risks.In the report, Axiom states, "Our 12-month price objective edges modestly higher to $5.50 vs. $5.00 previously, or 9x our estimate for JASO's normalized annual EPS of $0.44 plus our projection for JASO's C2Q11 cash-per-share of $2.06, supported by our market-based DCF analysis. Risks to our thesis include: (1) higher than expected installations in Italy, (2) additional volume contracts, (3) FX benefit, & (4) announcements from the Chinese NDRC, sparking speculation on how much will be installed in China in future periods." The increase in price target was not enough to persuade Axiom to upgrade its rating on JA Solar from Sell, however. On Friday, JA Solar lost 3.3% of its value to close the week at $6.16.