* JA Solar, Solarfun profits beat
* Shares reverse gains as 2011 seen not so sunny
* $67.8 mln share issue weighs on Solarfun stock
* Other Chinese solar shares also pare gains
(Adds analyst comment, updates shares)
By Adveith Nair
BANGALORE, Nov 9 China's JA Solar Holdings Co
(JASO.O) and Solarfun Power Holdings Co Ltd SOLF.O posted
solid results and signalled strong demand, but their shares
fell amid concern that margins may have peaked.
Solar firms' sales have surged this year on strong demand,
especially in Germany, which consumes over half the world's
supply of the modules that turn sunlight into electricity.
But declining subsidies in Germany and other European
countries threatens to compress profit margins as solar
companies cut prices for their products.
First Solar (FSLR.O), the leading photovoltaic company,
last month posted higher quarterly profit, but weaker margins
and rising costs drove its shares down 7 percent.
JA Solar's third-quarter profit comfortably beat estimates,
with gross margin above the company's forecast at 22.5 percent,
helped by higher average selling prices (ASP). [ID:nN09272424]
But analysts said margins, and profit, would slip in 2011.
"Because of escalating wafer costs, gross margin is set to
decline further in the fourth quarter," Raymond James analyst
Pavel Molchanov said. "Given that gross margins seem to have
already peaked, we see a small EPS decline in 2011."
JA Solar, which shipped 418 megawatts (MW) in the quarter,
raised its full-year shipment view for a second time in three
Smaller peer Solarfun also raised its annual shipment
forecast, but said fourth-quarter shipments would slip
sequentially. It also announced a secondary share offering,
which weighed on its shares. [ID:nSGE6A80K8] [ID:nWNAB1154]
Oppenheimer analyst Gary Hsueh said Solarfun had a solid
third quarter, but investors would soon see that fourth-quarter
guidance was not as positive as at some peers. He also noted
the dilutive impact of a second equity raise in as many
Solarfun shares slumped as much as 10 percent to $10.36,
erasing earlier pre-market gains. JA Solar shares, which rose 4
percent in early trade, were down 3 percent at $9.13.
Other Chinese solar stocks, including Suntech Power
Holdings Co Ltd STP.N, Canadian Solar (CSIQ.O) and LDK Solar
LDK.N also turned. LDK, which posted strong results on
Monday, rose 11 percent to a year-high in morning trade, but
were later up just 3 percent. [ID:nN0884048]
The WilderHill Clean Energy index .ECO, which includes
U.S. solar giant SunPower SPWRA.O, First Solar and Suntech,
and has risen more than 11 percent in three months, eased 1.5
SunPower reports on Thursday and Canadian Solar a day
While both JA Solar and Solarfun reported estimate-topping
results, smaller solar company Energy Conversion Devices Inc
(ENER.O) offered a revenue outlook for the first time in a
year, indicating better visibility. [ID:nSGE6A80LM]
To cash in on solid demand, solar companies around the
globe, particularly in China, are racing to build capacity for
cells and modules. Chinese firms have been among the fastest
growing in the world as they win market share in Europe and
Both JA Solar and Solarfun indicated they would look to
expand capacity going into next year.
JA Solar said its annual cell manufacturing capacity rose
to 1.8 GW at end-September, while solar capacity rose to 1.9
GW, ahead of its expansion schedule.
Solarfun expects its module manufacturing capacity to
increase by two-thirds to 1,500 MW by 2011. It expects solar
cell capacity to more than double to 1,300 MW.
(Reporting by Adveith Nair and Vaishnavi Bala in Bangalore,
Editing by Ian Geoghegan)