JinkoSolar Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 28, 2023

There are 8 speakers on the call.

Operator

Hello. Thank you for standing by, and welcome to the Q1 2023 JinkoSolar Holding Company Limited Earnings Conference Call. All participants are in listen only mode. There will be a presentation followed by a question and answer session. And now I'd like to turn the conference over to Stella Wang.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's Q1 2023 earnings conference call. The company's results were released earlier today and are available on the company's IR website at www.seikosolar.com as well as our newswire services. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr.

Speaker 1

Li Xanda, Chairman of the Board of Directors and Chief Executive Officer of JinkoSolar Holdings Mr. Jina Miao, Chief Marketing Officer of JinkoSolar Company Limited Mr. Pan Li, Chief Financial Officer of JinkoSolar Holding Company Limited and Mr. Charlie Cao, Chief Financial Officer of JinkoSolar Company Limited. Mr.

Speaker 1

Li will discuss JinkoSolar's business operations and the company highlights, followed by Mr. Niao, who will talk about the sales and marketing, And then Mr. Tan will go through the financials. We will all be available to answer your questions during the Q and A session that follows. Please note that today's discussion will contain forward looking statements made under the Safe Harbor provisions of the U.

Speaker 1

S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks to update any forward looking statements except as required under applicable law.

Speaker 1

It's now my pleasure to introduce Mr. Li Sango, Chairman and CEO of JinkoSolar Holdings, Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, We are pleased to deliver year over year improvements in module shipments, total revenues and gross margin. With polysilicon prices being volatile in the Q1, We adjusted our supply chain strategy to effectively control our costs.

Speaker 1

Meanwhile, the ratio of anti product shipments approached nearly 50% of our total module shipments. Thanks to their high efficiency and our strong global marketing network, which partially contributed to the improvement Our profitability. Gross margin was 17.3% compared with 15.1% in the Q1 last year. Our profitability in the Q1 remained under pressure from the demurrage costs in the U. S.

Speaker 1

Market. We have proactively taken measures to address this and we have seen both the efficiency of customers' clearance And the size of our module shipments to the U. S. Market gradually improved recently. As we continue to make effective progress, We expect our shipments to the U.

Speaker 1

S. Market to gradually increase in the coming quarters. Recently, our Owned principal offering subsidiary, Dansu Sinko, successfully issued convertible bonds in the principal amount of RMB10 1,000,000,000 to strongly support the expansion of our high efficient N type capacity. Growth in PV demand in the Q1 remains strong despite some seasonal factors. The Chinese market benefited from falling prices of PV projects and delays in PV projects from 2022.

Speaker 1

The new installations of PV reached 30 3.7 gigawatts AC, an increase of 154.8% year over year. As a result, the cumulative installations of PV has surpassed that of hydro power for the first time, Making TV the 2nd largest power source in China. In addition, exports of solar cells and modules from China's overseas RMB13.1 billion in the 1st quarter, an increase of RMB15.3 billion year over year. Since the 2nd quarter, As pricing gains between different segments along the supply chain relatively stabilized, we see price of polysilicon started to decrease Moderately. And current module prices has been attractive for the economies of PV projects.

Speaker 1

With small production volumes gradually released during the year, we believe polysilicon price declines will stimulate large market demand. The top manufacturers are expected to increase their market share thanks to stronger supply chain management, Market footprint and the competitiveness of their R and D and products. We are optimistic about global market demand and opportunities brought by Niu Technologies in 2023. We will continue to invest in R and D and advanced N type capacity To enhance our NTTAC leadership in terms of mass production capabilities, product performance and cost, While exploring the PV plus areas to proactively respond to competition. The second phase of 11 gigawattop console capacity The Yinjiang has reached 4 production and the average mass produced efficiency of 182 N type top count sales reached reached 25.3%.

Speaker 1

We have also further improved our N type ecological trend, Constantly enhancing our all around competitive advantages of N type wafer cell and modules With improving supply chain management for key and auxiliary materials, iteration of core technologies and process improvement. Recently, we were ranked in the highest AAA category in the Q1 edition of PVTech's module tech bankability report, A recognition by the industry of our advantages from outstanding manufacturing, finance and technology. By the end of the Q1, our accumulated anti wazhu shipments exceeded 16 gigawatts, Providing support for hundreds of projects globally in the past year. In January this year, We launched the 2nd generation Tiger Neo Panel Family. The module efficiency of the upgraded Tiger Neo Family of 4.45 watts P For 54 sale, 615 wodpi for 72 sales and 635 wodpi for 78 sales were up to 22.27%, 23.23% and 22.72%, respectively.

Speaker 1

Meanwhile, we increased investments in energy storage business, furthering its development and continuously Provided our clients with high efficient, reliable and safe solutions at competitive cost To lead the clean energy transformation, in Cambodia, future competition will be based on comprehensive strength. We are confident in our ability to further increase our competitiveness and profitability in the global market. With our continuously improved global industrial chain and cutting edge the N type technology and products. Before turning over to Jenna, I would like to go over our guidance for the Q2 and full year of 2023. By the end of this year, we expect mass produced end type cell efficiencies to reach 25.8% And high efficient anti cell capacity accounts for over 70% of our total solar cell capacity.

Speaker 1

We are confident we will achieve our module shipment target set at the beginning of the year with anti modules accounting for about 60% of We expect the module shipments to be in a range of 16 to 18 gigawatts for the Q2 of 2023.

Speaker 2

Thank you. Total shipments in the Q1 reached about 14.5 gigawatt, We have about 90% on model shipments, second on new hire. From a regional perspective, China and Europe accounted for over 60% of the total shipment. Shipments in China market increased more than 2.4% on a year over year basis, while the Europe market grew over 50% year over year. In addition, emerging markets like Latin America and the Middle East, North Africa also made a remarkable contribution.

Speaker 2

Recently, the industry value chain price has gradually returned to a normal level, and the domestic utility scale PV projects have Share started their speed invitation. The current module price is acceptable to clients, which can support them to achieve their predetermined installation target at a stable order pace. We expect that the decrease of industrial supply chain price will drive the growth of utility scale PV demand, especially in China market. The European PV market has vast potential, and the decrease in industrial chain prices It is expected to further drive demand for distributed and utility scale power stations. The U.

Speaker 2

S. Market has robust demand and some utility scale power station demand may be delayed until 2023 Due to price factors and the supply constraints, we expect that 40 gigawatt DC of PV installed capacity in in U. S. By 2023. Over the past year, we have continuously improved our risk management capabilities, Continuously improved our supply chain visibility system and maintained close communication and coordination with customers, suppliers and other parties To jointly promote the efficiency of the customer clearance in U.

Speaker 2

S. Based on the experience of supply chain construction and the marketing network layout, We are committed to meeting our customer delivery with outstanding products and services. Regarding the products, Tiger Nio achieved a shipment volume of near 60 gigawatts in the 1st quarter, Maintaining a competitive premium. China, Europe and emerging market have become the main contributors to shipments. At the same time, we observed that Tiger Neo is accelerating its penetration in market like Asia.

Speaker 2

Recently, we were awarded the title of Australia Number 1 Margin brand for 2022 by Sunwize. Tiger NIO not only has multiple advantages such as high conversion efficiency, High power output and bifacial factors, but also leads the industry in terms of degradation rates, Temperature coefficient and weak light performance, meeting customers' demand for household scenarios. With the release of untapped capacity and the continuous improvement of Tiger Neo's product performance, Taizeniu's penetration rate and premium are expected to continue to lead the market. In terms of business, Distribution market accounted for more than 40% in the Q1. Considering the sustained demand for In 2023, our order book visibility exceeded 60%, with the majority being overseas orders.

Speaker 2

As upper stream raw material costs decrease, we expect the module market price to experience a slight decline. Our signing price will fluctuate within a reasonable range in line with market trend. We will continue to focus on customer centric approaches to provide high quality products and services to our customers. At the same time, we will adjust our marketing strategy to flexibly according to market conditions. With that, I will turn the call over to Pan.

Speaker 3

Thank you, gentlemen. We are pleased to report a year over year increase About 73 percentage in our shipments in the Q1 with strong demand from global markets In response to the polysilicon price decline, we adjusted our procurement strategy and achieved significant year over year growth in key financial metrics, including revenue, gross profit and operating margin. Let me go into more details now. Total revenue was $3,400,000,000 an increase of 58 percentage year on year. Gross margin was 17.3 percentage compared with 14 percentage in the 4th quarter and 15.1 percentage in the Q1 of last year.

Speaker 3

The sequential and year over year increase We're mainly due to the decrease in the cost of polysilicon and the increase in the shipment of n type modules, which have A premium compared with P type modules. Total operating expenses were RMB412,000,000, down 21 percentage sequentially and up 29 percentage year over year. The sequential decrease was mainly due to a decrease in shipping cost for solar modules and a decrease in impairment loss on property, plant and equipment. And the year over year increase was mainly attributed to an increasing loss of disposal on PPE and increase in demurrage charges. Total pricing expenses accounted for about 12 percentage of total revenues Compared with dividend in the 4th quarter and 15 percentage in the 1st quarter Last year, improving year over year.

Speaker 3

Operating margin was over 5% compared with 2% in the 4th quarter. Excluding the Packed off the change in fair value of notes, a change in fair value of long term investments At our share based compensation expenses, adjusted net income attributed to JinkoSolar Holding Company Limited ordinary shareholders was over $121,000,000 at over 2x sequentially and at 1 point 5 times year over year. Moving to the balance sheet. At the end of the Q1, our cash and cash equivalents were about $1,500,000,000 down from $1,600,000,000 at the end of the 4th quarter and compared with $2,700,000,000 at the end of the 4th quarter of last year. Total debt was about $4,400,000,000 at the end of the first quarter Compared to $4,000,000,000 at the end of the Q4 last year, net debt was about RMB 2,900,000,000 compared to RMB 2,300,000,000 at the end of the Q4 of last year.

Speaker 3

And our total debt per fire has improved. This concludes our prepared remarks. We're now happy to take your questions. Operator, please proceed.

Operator

Yes. Thank And the first question comes from Ryan Lee with Goldman Sachs and Company.

Speaker 4

Hi. I guess first question I had was just around the ASP environment. I know you guys have seen some good margin expansion here quarter on quarter. It sounds like most of that was driven by The decline in polysilicon costs. So what's the status of that?

Speaker 4

How much more sort of Leverage do you have to lower polysilicon costs relative to what you're shipping out and your inventory base today? And then can you kind of give us a sense of what you expect module ASP trends to look like into 2Q and maybe the back half of the year, we are hearing there's Sort of double digit declines in certain markets for solar panels. I'm wondering where your

Speaker 2

Hi, Brad. This is Chen. Thanks for the question. Firstly, about the price side. So the market Price is somehow stable in Q1 Q1 and Q2, mainly in first half.

Speaker 2

So I don't see there's too much, let's say, different opinion across the industry about the first half module price. But for the second half module price, We have seen some different opinions about based on different expectations of the polysilicon price. However, in our opinion, the polysilicon price might steadily going down step by step. We are not expecting a Significant free fall over the second half, but we are more expecting a stable Stepping down quarter over quarter. So based on that expectation, I think that's how we expect market price will go for the rest of the year.

Speaker 2

And I hope that answers your question.

Speaker 4

Yes. That's helpful. And then maybe just I know you made some comments around the U. S. End market.

Speaker 4

Can you give us Your latest thoughts around shipping into the country, how you're navigating The UFLPA and then also any thoughts around Manufacturing or expanding your manufacturing base domestically in the U. S?

Speaker 2

So for the U. S. Market side, I think we are both working with our Suppliers even sub suppliers to make sure we can provide the document or feasibility documents We have successfully done that quite based on quite a lot of shipment in the last We can ship or we can get more approved based on what we are doing right now. At least that's the expectations. And based on that, we are planning to resume our shipment in U.

Speaker 2

S. Market gradually. And we hope we can get back to a relatively stable or let's say Or make the situation under control in the next quarters, let's say, 2 to 3 quarters.

Speaker 4

Okay, understood. And last question for me. I don't know if I might have missed it, maybe you didn't provide it. But can you get the What the CapEx was in the quarter? What the free cash flow was in the quarter?

Speaker 4

And then any thoughts on kind of The financing needs and strategy for the rest of the year to cover the CapEx here? Thank you.

Speaker 5

Hey, Brian, this is Charlie. And we have the subsidiary, The JinkoSolar, we have completed the $10,000,000,000 convertible bonds in Chinese Capital Markets recently. And second one is the CapEx is in a range of RMB 1,500,000,000 to RMB 2,000,000,000 R and D and the focus is to solidify our leading position in end type The supply chain, including the wafer cell and module capacities, And we're expecting the performance if you look at that Q1 performance is pretty good. We're trying to expand expect the expansion of the gross margin and our profitability And the operating cash flows last year, it's kind of the I think it's around RMB0.4 billion and continue to improve. So the financing is already there and It's sufficient enough to meet our needs for the CapEx.

Speaker 4

Okay, fair enough. I'll pass it on. Thanks guys.

Speaker 6

Thank you. Thank

Operator

And wait for your name to be announced. And the next question comes from Philip Shen with ROTH and

Speaker 6

Hi, everyone. Thanks for taking my questions. First one as a follow-up to Brian on the UFLPA Question, how many gigawatts have been released thus far in the U. S? And how many gigawatts do you have detained total?

Speaker 5

Philip, I think we have significant starting from Q4 last year, our modules and under UFLPA has started to go through the customs and speak to our customers. And we have, I think, achieved a significant amount of the module shipments. And For the detained, I don't think we have or we're very, very small and tiny. And the most important thing is looking forward, We think the mechanism has already been there and we have just feasibility, very strong feasibility Capabilities and we expect quarter by quarter, our shipments to the U. S.

Speaker 5

Will improve gradually. And hopefully, We think it's possible in the Q3, our shipments to the U. S. Will be back to normal situations.

Speaker 6

Great. Thanks, Charlie. So of the more than 60% of the order book visibility, Can you talk about how much of that or how much of that do you expect to go to the U. S? Thanks.

Speaker 2

Phil, this year, the total volume we are planning to send to U. S. Will be Around 5% across the whole year's shipment plan. Because like Charlie is saying, we are gradually We'll resume our shipment plans and revenue recognition, but because of the time consuming of the logistics and the U. S.

Speaker 2

P. A, etcetera. So the revenue side, it won't be too much. That's why we say around 5%, maybe 5% to 10%, between 5% Present. I got it, Anderson.

Speaker 3

Got it,

Speaker 6

Anderson. Right. So 5% to 10% of the annual guidance is roughly 65 kwatts. Yes. Good.

Speaker 6

So Thank you. And then our work suggests that the non China Module non China poly modules that you have that can access the U. S. Market is roughly 5 gigawatts annually. Does that sound right?

Speaker 6

And then is it the case that you can smoothly import modules that Contain non China Poly now, so there's no issue there at all?

Speaker 2

Thanks for the question, Bill. Currently, we are planning with more of our resources of polysilicon, At least we are trying to do because if we rely on single resource of polysilicon, it might significantly Constrained capability of the supply to U. S. Market, I personally, I still believe that might be a For the U. S.

Speaker 2

Customers as well, so that's what we are trying to do.

Speaker 6

Okay, got it. And then shifting back to margins for a bit Two margins per bit. Can you give us a sense for what how do you expect margins to trend in Q2 and Q3, Especially given the ASP comments that you had earlier, do you expect margin expansion in Q2 and then Q3 perhaps Margins compressed a little bit with some risk to back half pricing. Thanks.

Speaker 2

I think that the margin wise, we have the confidence to gradually improve. Actually, that's what we believe. Because thanks to the new technologies, And top term based Tiger News, which is highly appreciated by the end market and indeed create Additional values to the customers. So based on the value additional value sharing business models, we definitely I have the confidence to gradually improve our gross margins.

Speaker 6

Okay, great. One last question. As it relates to U. S. Expansion, I think Brian asked the question.

Speaker 6

Just want to check-in to see if you can give a little more color on the timing of that. My guess is you have to wait for The domestic content rules to be out. And then, what do you see for U. S. Module pricing trends, do you think maybe by year between this year 2024 2025?

Speaker 6

Thanks.

Speaker 2

I think we missed the last question. I had to briefly talk about it, then we can pick up the next one, right? Yes. So regarding the U. S.

Speaker 2

Expansion, we have the confidence that we have the plan to do it. But for sure, we are still waiting for some more clarification on the policy side and or approval on the policy side. We are closely following that. Hopefully, we can get some clearance good to go in the next coming weeks or months. We will see.

Speaker 2

Thank you. Let's take the next one.

Operator

And the next question comes from Alan Lau with Jefferies.

Speaker 7

Thanks a lot for taking my question and congratulations for the really great results and the margin So my first question is, I would like to know how much did the port charges related to the detainment The U. S. Border has went down. And if this is going to be 0 going forward, then would that How much would that contribute to the margin expansion?

Speaker 5

Yes. In the Q1, we have roughly RMB 300,000,000 to RMB 400,000,000, The demurrage and additional storage costs for the U. S. Shipment situations. And it's roughly, I think, it's 2%, 1.5% to 2% gross margin Impact.

Speaker 5

And we're expecting Q2 will dramatically decrease to Maybe 25% of the Q1 level. So it's going to

Speaker 7

Thanks a lot. So another question is, would like to know how much is Yes. Poly prices for the polysilicon purchased from Wacker, so is it the same is it going down at the same pace as The policy item price in China is going down a bit slower.

Speaker 5

Yes. It's very typically confidential, but it's a separate market, right? It's the poly out of the China, the main purpose is for the U. S. Markets, and it's no expansion of capacity for the Calling outside of China.

Speaker 5

So it's kind of very, let's say, very Yes, shutoff supply situations and the prices were is very sticky. And the different situation in China, the supply is sufficient, and we expect maybe some relatively oversupply situation in your 4th quarter this year. So it's kind of different pricing, depending on different situations.

Speaker 7

Understood. So is it possible that if the U. S. Customs accepted some of the Tongwei polysilicon, then your shipment to the U. S.

Speaker 7

Will get even higher margin because you get

Speaker 2

I think it will really depend on the market principles, right? So the supply is like China is saying, The polysilicon of non China polysilicon is a series of short supply. And the end market is very strong. So definitely this Create a favorite market for the upper stream players. If we have additional polysilicon supply approved, definitely it will make the situation Easier, but how far it will go, it depends on finally, still the supply versus demand story.

Speaker 2

We will see.

Speaker 7

Thank you. That's clear. I think my last In relation to the Southeast Asia capacity expansion potential, so what is the latest Plan in terms of the Southeast Asia capacity expansion? Thank you.

Speaker 5

Yes. Currently, we have 7 gigawatts integrated capacity, We have planned to expand the capacity in Vietnam. And It's possible that it reached to maybe 11% 11 gigawatt So 12 gigawatt integrated capacity by the end of this year.

Speaker 7

Thanks a lot. That's very clear. So Looking forward for the great results in second what I had. Thank you. Thank

Operator

you. Okay. That does conclude our conference for today. Thank you for participating. You may now disconnect your lines.

Powered by Quartr
Earnings Conference Call
JinkoSolar Q1 2023
00:00 / 00:00