Why Shares of Hanwha SolarOne Co. Ltd. Popped Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Hanwha SolarOne (NASDAQ: HSOL  ) jumped as much as 30% today after the solar panel manufacturer reported earnings. Shares settled at a 12% gain late in trading.

So what: Fourth-quarter shipments rose 10.8% sequentially to 352.2 megawatts and revenue was up 14.1% to $213.9 million on strong demand from China and Japan. The company still lost $3.6 million, but that was down 95% from a quarter ago and management said it would have posted a profit without some noncash charges.  

Now what: This quarter was really a mixed bag despite the market's euphoria today. Hanwha's 14.1% gross margin is far from leading the solar industry; if not for gains on derivative contracts and changes in the value of convertible bonds the loss would have been even larger in the quarter. On the plus side, $803.8 million in debt actually gives Hanwha one of the better balance sheets among Chinese solar manufacturers. If margins grow and the company can generate enough cash to reduce debt next year it could have enough capital to invest in the next generation of equipment, which will likely start being installed this year. Companies that can't make a profit now risk missing out on the next generation and that's the risk investors take long term.

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Comments from our Foolish Readers

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  • Report this Comment On March 13, 2014, at 6:11 PM, JAVKO wrote:

    "Co tha can't make a profit..."

    How many stocks are being bumped despite no earnings?

    Shall I name a few for you and your articles just paying attention to Rev growth?

    I wish you were conssitent

  • Report this Comment On March 13, 2014, at 8:29 PM, stockbutterfly wrote:

    Lots to like about HSOL, they have the second best efficiencies in China (after JASO), they moved from 5th to 4th place on the export market in Q4, they had over half their export sales in Japan which is the fastest growing market. The only company i like better is JASO for value. i think its going to hit $20 after it reports Q1 as its also going greater in Japan and is the technology leader.

  • Report this Comment On March 16, 2014, at 11:43 AM, camarodan64 wrote:

    hsol will perform great this year, i say profit next quarter.

    target hsol $15 dec 2014

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