JinkoSolar Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2023

There are 9 speakers on the call.

Operator

Ladies and gentlemen, and thank you for standing by for Genco Solar Holdings Limited Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, Ms.

Operator

Stella Wang, Ginkgo Solar's Investor Relations.

Speaker 1

Thank you, operator. Thank you, everyone, for joining us today for Syncro Solar's Q2 2023 earnings conference call. The company's results were released earlier today and available on the company's IR website at www.jinkosolar.com as well as on Nucyvirus 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 Singko Solar are Mr.

Speaker 1

Liqian De, Chairman of the Board of Directors and the Chief Executive Officer of Singko Solar Holding Mr. Janet Miao, Chief Marketing Officer of JinkoSolar Company Limited Mr. Pan Li, Chief Financial Officer of XinkoSolar Holding Company Limited and Mr. Charlie Cao, Chief Financial Officer of XinkoSolar Company Limited. Mr.

Speaker 1

Li will discuss Syncro Solar's business operations and company's highlights, followed by Mr. Miao, who will talk about the sales and marketing, and then Mr. Tan Li, who 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 is included in Syncosolar's public filings with the Securities and Exchange Commission.

Speaker 1

Syncosolar does not assume any obligation to update any forward looking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Li Xian De, Chairman and CEO of JinkoSolar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English.

Speaker 1

Please go ahead, Mr. Li. We are pleased to report solid growth as we overcame volatility in Slide 10 prices and ended demand, Thanks to our excellent market network, the highly qualitative products and our highly effective supply chain management. Module shipments in the Q2 were approximately 17.8 gigawatts, up 36.2% sequentially. Shipments of the competitive N type module were approximately 10.4 gigawatts, up 74.1% sequentially.

Speaker 1

We are happy and proud to be the 1st module manufacturer to reach the milestone of shaping 10 gigawatts of N type modules in a single quarter. Besides, our shipments to the U. S. Markets increased from the Q1, largely reducing demurrage charges. Our efforts inside chain management, technology advancement and the process improvement also improved our profitability.

Speaker 1

Net income was $180,100,000 in the 2nd quarter, up 65.6% sequentially. Adjusted net income was $196,700,000 up 70.5% sequentially. Diluted earnings per ordinary share were US0.77 dollars up 48.5 percent sequentially. Due to the substantial release of polysilicon production volumes and excessive inventory, Polysilicon prices declined sharply in the second quarter, which also caused certain volatility in module prices. Since most customers are sensitive to price, they were cautious and slowed down their orders, which to some extent affected our module demand.

Speaker 1

As the loyal supply chain prices stabilized in the Q3, domestic customers started to place orders and major projects were initiated and started construction in China. The lower prices also led to a surge in demand from some overseas Markets. We expect production sales in the PV market to rebound in the second half. With more and more players deploying Topcon production capacity, Anhai's Hong Kong is certain to become the mainstream technology in the industry. However, some of the new entrants experienced the project delays The slower than expected production and efficiency ramped up due to insufficient technical know how and differences in technology and process, keeping competitive N type production in short supply.

Speaker 1

As of the end of the second quarter, the mass produced efficiency of our 182 N type top On capacity had reached 25.5 percent with n type module power output of around 5 80 watt P, which is about 25 to 30 watt P module P type modules of the same version. The integrated cost of N type module remains Competitive competitive P type modules. We are confident we will continue to lead in efficiency and the cost through technology iteration and process optimization. At the end of May, we announced the construction of a major production base of T6 gigawatts integrated wafer cell module capacity in Shanxi, which will become the largest N type integrated production facility in the industry. Our Shanxi Integrated Base is another strategic expansion of the production model championed by Zinco Solar in the PV industry that will fully demonstrate our advantages in highly efficient technology and products, lower investment costs and greater operational efficiency as well as intelligent and smart manufacturing capabilities.

Speaker 1

Meanwhile, we proactively responded to shift in the global PV landscape by expanding our overseas industrial chain. The 1 gigawatt capacity expansion for N type modules in the U. S. Is expected to start production in September this year. So far, we have established an industry leading overseas industrial chain network with integrated production Capabilities from wafer cell to module, resist traceability and excellent product competitiveness.

Speaker 1

As we continue to invest in entire capacity expansion overseas in the second half, we will reach an integrated capacity of over 12 gigawatts overseas by the end of 2023, with end type accounting for over 75%. We will continuously strengthen our and expand our global industrial chain to provide premium and high quality products and services to our global clients. As one of the largest and the most innovative solar module manufacturers In the world, we have always carried on social responsibility and taken a continuous improvement of our ESG management

Operator

As a

Speaker 1

key measure for our sustainable development, in the second quarter, we set up a goal and a road map to net zero emission based reduction and addressing climate change with concrete actions. With outstanding performance In social responsibility fulfillment, we led the mainstream PV industry in the S and P Global Corporate Sustainability Assessment. We improved our traceability system and independent third party audit mechanism to enhance our supply chain reliability. Meanwhile, we enhanced our cooperation with leading institutions and professionals in global renewable energy development and joined the International Renewable Energy Agency, IRENA. Through sharing that the practice and experience, We are dedicated to making a positive contribution to the sustainable advancement of renewable energy globally.

Speaker 1

In summary, We are confident in the development of the PV industry. We will continue to enhance our integrated operations and management. We are positive about the long term prospect of PV plus energy storage model and will continue to grow our competitiveness by actively Developing our Energy Storage Business. Before turning over to Jenna, I would like to go over our guidance for the Q3 and the full year of 2023. By the end of 2023, we expect mass produced We are optimistic that demand will grow as industrial chain prices Stabilize and raise our full year module shipments to be in the range of 70 to 75 gigawatts with N type module accounting for approximately 60% of the total module shipments.

Speaker 1

As demand for N type products continues to increase In the global market, we will move on to invest in entire capacity, which is competitive both in technology and costs. We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 85, 90 and 110 gigawatts respectively by the end of 2023. This end type capacity accounted for over 75 We expect the module shipments to be in the range of 19 to 21 gigawatts for the Q3 about 2023.

Speaker 2

Thank you, Ms. Li. Total shipments in the 2nd quarter were around 18.6 gigawatts, over 95% of which were module shipments. We are glad that total module shipment in the first half of twenty twenty three It's 30 gigawatts, making us the number 1 in the PV industry for the first half module shipment. In terms of product mix, N type Hyper Neo accounted for 58% of the module shipment in the 2nd quarter, a steady increase from nearly 50% in the previous quarter, thanks to its high power output, quality and reliability.

Speaker 2

In terms of geographic mix, China and Europe remained the largest regions in the 2nd quarter, accounting for over 50% together. The proportions of other market remained relatively stable. Most importantly, we are glad and Proud to see both the efficiency of customer clearance and the size of our shipment to the U. S. Market improved sequentially, benefiting from our dedicated efforts.

Speaker 2

As we continue to make effective progress, We expect our shipments to the U. S. Market to gradually increase in the second half. For orders and the prices, with the of our order book has reached about 80% for the whole year of 2023, improving compared with the Q1 with overseas orders making the majority. Declines in raw material prices drove module price lower.

Speaker 2

Recent prices for our NIO contracts have fluctuated within a reasonable range in line with market trends And Tiger NIO retained a competitive premium over p type. With the gradual release of our n type capacity, We expect the Tiger NIO to accelerate its penetration into China, Europe and emerging markets in the second half. The proportion of Tiger NIO shipment for the full year 2023 to reach around 60% of our total module shipments and its product strength to continue to lead the industry. Recently, we were awarded the top brand PV Europe Seal 2023 by EUPD Research. This recognition by our downstream partners Does not only prove that JinkoSolar is one of the preferred European brand for installers to work with, but also reflect our strong reputation and commitment to our customers as a leading supplier and N type top com technology leader.

Speaker 2

In addition, We are recognized as 2023 overall highest achiever for the 1st consecutive year in Renewable Energy Testing Center's PV module index report, a reaffirmation of quality, bankability and reliability of our product. In summary, we are happy to navigate through volatility in supply chain prices and end demand in 2nd quarter leveraging our advantage in terms of global marketing network, industrial chain layout and product competitiveness. Meanwhile, we continued to improve our mechanism to cope with risks and enhance our customer relations and marketing network. As supply chain prices stabilized recently, we are optimistic about the return of demand in the global market for the second half. In medium and the long term, as the economy of solar power becomes more and more prominent, The PV market will move forward at a healthy and sustainable growth pace.

Speaker 2

We expect China, The U. S, Europe and other developed markets to grow at a steady pace and the emerging markets will continuously expand inside. We are confident we will provide more economic value to our customers with excellent products and services We have continued to grow our market share. With that, I will turn the call to Pat.

Speaker 3

Thank you, Gener. We are pleased to report strong financial results in the Q2 with quarterly total revenues, gross profit, income from operations And net income all reaching historical new high. Recently, our majority owned principal operating subsidiary, Shingo Solar Company Limited announced its intention to issue ordinary shares for no more than RMB9.6 billion to fund construction of our anti integrated production facility in Shanxi. This expansion of advanced integrated production capacity will help us to continuously improve our cost structure and increasing equity capital will also help us improve our capital structure. As we keep enhancing our global industrial chain, marketing network and product competitiveness, We hope to achieve healthy and sustainable profitability.

Speaker 3

Let me go into more details now. Total revenue was over CNY 4,200,000,000, up 32 percentage sequentially and up 63 percentage year over year. Gross margin was 15 point 6% compared to 14.7% in the Q2 last year. We continue to make good progress in clearing customs in the U. S.

Speaker 3

Market, significantly reducing demerit charges compared with the Q1 this year. Total operating expenses accounted for 11 percentage of total revenues compared with 12 percentage in the Q1 this year and 16 percentage in the Q2 last year, improving sequentially and year over year. Income from operations was $212,000,000 compared with income from operations of $576,000,000 in the first quarter This year, our loss from operations of $43,000,000 in the Q2 last year, improving sequentially and year over year. Operating margin was about 5 percentage, Flat compared with the Q1 this year and loss margin of 1.5 percentage in the 2nd quarter last year, also improving year over year. Net income attributable to JinkoSolar Holdings' ordinary shareholders was about $180,000,000 up 66 percentage sequentially and compared to a net loss attribute to the JinkoSolar Holdings ordinary shareholders of about $93,000,000 improving year over year.

Speaker 3

Excluding the impact from a change in fair value of notes, a change in fair value of long term investments and share based compensation expenses, Adjusted net income attributable to the ordinary shareholders

Speaker 4

was about RMB197

Speaker 3

million, up about 70 1 percentage sequentially and up to 0.9x year over year. Diluted earnings per share was $0.07 in the second quarter, up about 49 percentage sequentially and Compared to diluted loss per share of $0.04 in the Q2 last year, improving year over year. Moving to the balance sheet. At the end of the second quarter, our cash and cash equivalents were about CNY 2 point RMB35 1,000,000,000 up from RMB1.48 billion at the end of the Q1 this year, improving sequentially. Accounts receivable turnover days were 79 days compared with 95 days in the Q1.

Speaker 3

Inventory turnover days decreased to 17 days in the 2nd quarter from 100 days In the Q1, total debt was RMB4.7 billion at the end of the second quarter compared to RMB 4,400,000,000 at the end of the first quarter. Net debt was 2 point RMB4 1,000,000,000 compared to RMB2.9 billion at the end of the Q1 this year. This concludes our prepared remarks. We're now happy to take your questions. Operator, please proceed.

Operator

Thank The first question today comes from Brian Lee with Goldman Sachs. Please go ahead.

Speaker 5

Hi, thanks for taking the questions. This is Grace on for Brian. I guess first question around ASP trajectory. Obviously, Polysilicon had a big decline in 2Q, though it has stabilized in recent week. At the same time, like we are hearing some oversupplied in certain areas of the market.

Speaker 5

So just wonder if you can talk about the ASP and Maybe the margin trajectory moving through the rest of the year and maybe into 2024? Thank you.

Speaker 6

This is Charlie speaking. And Firstly, I want to talk, this year, it's a very big solar market and A lot of markets are very strong, including China, United States and European markets, and we delivered a very strong performance for the first half year. And in terms of the revenue shipments, the next generation and top comp, we are leading the industries And taking about 50% market share, now 50% of our portfolios is from Earnheim. And we believe we are continuing to the momentum throughout the year. And when time because of the cutting edge And it's a very strong, great functions for the end customers and have And once more power output for the end customer and we are seeing the market It's accepting the N type is going to dominate the market and will continue the supply Relatively shortage even throughout next year.

Speaker 6

So back to your questions on ASP, The first half is pretty relatively stable and starting from the June this year because of the polysilicon Relatively oversupply situations and make the solar modules have the relative adjustments. It's if you're looking for the near term perspective, we think it's very good for the downstream And accelerate to the demands from different markets and it will also generate Solar and storage, the big markets in the future. And for the SP trained, It's relatively in line with the industry. The second half year is for sure in a downward trend, but it has been stabilized. And we believe, thanks to the very, very strong China installations, particularly in Q4 this year, the ASP We'll make sense and maybe possibly relatively in upward trends.

Speaker 6

And For the profit margins and profitability, just we are we strongly believe and we almost Closed out the sales order this year and over 80% is boxed. And so we are planning Actually, for the next year and for this year, we believe the momentum will continue. And year over year, It's a very good year for Jinko in terms of the profitability, even the second half year. And We then type will take more shipments for Jinko in the second half year, 60% to 65% versus 50% in the first half year. And on top of that, U.

Speaker 6

S. Market is very positive for us Starting from the Q3, our modules were detained starting from last year, And we have done a lot of work, traceability, ESGs and the communications with relevant U. S. Regulators. And starting from July and our modules and the speed of the, let's say, going through the Customs has been speed up and we are expecting our shipments to the U.

Speaker 6

S. Market will be accelerated Starting in the Q3. And we have also get ready for the overseas capacities, 12 gigawatts Integrated starting from wafer to modules and to for the U. S. Market next year.

Speaker 6

So next year will be a very big Marked a year for Jinko to have more markets here in the U. S. And as well as we have been in expansion for the U. S. Module capacities, 1 gigawatt is in place and we plan to start operations from this End of Q3.

Speaker 6

So yes, that's back to your questions overall.

Speaker 5

Thanks, Charlie. That's super thanks, Charlie. That's super Maybe I missed it. Can you provide us your updated CapEx number for 23? And then also you talked about like 12 gigawatts for overseas capacity next year.

Speaker 5

So just wondering if you can provide us the CapEx number and how you're thinking about funding it Because I think you mentioned like these that the equity that or the capital that you raise in China cannot be used in the U. S. So I just wonder how you're thinking about the capital raise here. Thank you.

Speaker 6

Yes. And for the CapEx this year, it's roughly RMB 15,000,000,000 And we estimate first half year, we have generated around Roughly, let's say, RMB 55,500,000,000 in operating cash flows. And this year, we Estimate over $10,000,000,000 operating cash flows this year. And As RAS, we have completed the convertible loan convertible loans in the Q2 in Asia. So we have sufficient cash to support the CapEx.

Speaker 6

And next year, the overseas capacity is Almost we will complete it by the end of this year. So we don't foresee any additional cash needs Next year for the 12 gigawatts integrated capacities.

Speaker 1

Thank you. I will take the rest offline.

Speaker 7

Thank you.

Operator

The next question comes from Philip Shen with Roth and Kilometers. Please go ahead.

Speaker 7

Hey, guys. This is Matt on for Phil. Thanks for taking the questions. Looking at the U. S.

Speaker 7

Market, there is this expectation in the industry that modules made With China Poly that was not from Xinjiang to get into the U. S, but we haven't really been seeing that yet. Do you know what might be taking so long? And When non Xinjiang China Polymers made in Southeast Asia might get cleared by CBP?

Speaker 6

Yes. We for Jinko, we focus on 100% Polysilicon out of China to serve the U. S. Markets. And just Like I said, we are very pretty smooth and speed up the process starting from the Q3.

Speaker 6

And for the China based Poly and the probabilities of the We're not sure, but it's possible or impossible, but from Jinko perspective, we will continue. We have signed long term contracts with the Tier 1 and the Polymakers out of China, and we will Continue to increase the up in the source and the volume from the poly producers. And the Poly Auto China, the volume is roughly 10,000 metric tons, Which we believe is sufficient to supply the U. S. Market.

Speaker 6

As Tier 1 Companies, We can take the advantage and we have the largest integrated capacity, 12 gigawatts, Including 75% top car, the end type. So I think we can take the lead in terms of The market share as well as the partly sourcing from the suppliers out of China.

Speaker 7

Do you think it's possible that non China Poly not made in Xinjiang ever makes it into the U. S? Just kind of curious on your view.

Speaker 6

I'm not in a position to make the Protection is a judgment, but from the legal perspective, the traceability is And if you can do, but from the implementation perspective from the The relevant regulators, we are not sure of their positions.

Speaker 7

Okay. Thank you for the color. I'll pass it over.

Speaker 6

Thank you.

Operator

The next question comes from Rajiv Chaudhry with Sunpro Capital. Please go ahead.

Speaker 4

Good morning and good evening. And first of all, congratulations on a superb quarter And for the very strong guidance. One question that has not been asked yet and is about the inventory reserve that you have Taken in the quarter, normally your inventories tend to go up every quarter because you are growing the business And they grew up by $200,000,000 to $250,000,000 a quarter. This time, your inventories sequentially were down about $200,000,000 Quarter to quarter. And so my first question is, is it reasonable to think that the inventory reserve that you took Was actually in the neighborhood of $400,000,000 which would make sense given the sharp decline in the prices And obviously, at any point in time, you have a lot of poly in your work in process.

Speaker 4

So the first question Is the inventory reserve in the ballpark of $350,000,000 or $400,000,000 and that your gross margin Without this inventory reserve would actually be in the mid-20s in the second quarter?

Speaker 3

Yes. Hello, Reggie. This is Han. And as I mentioned to the inventory reserve, yes, actually, we made some inventory reserve in the second quarter. And this has also impacted our Margin?

Speaker 3

Gross margin? Yes. This is only a temporary treatment Of the inventory, we don't think it will be

Speaker 8

a long

Speaker 3

term treatment to our inventory.

Speaker 4

I understand that part. Obviously, it's a one time thing. The question is, was it in the ballpark of $400,000,000 And that your if the reserve was not taken, your true earnings would be $400,000,000 higher?

Speaker 6

You mean RMB 400,000,000 is one number. We provided roughly, I think RMB 500,000,000 inventory provisions. And but the second quarter, I think we do pretty Good. And we anticipated, let's say, the poly decline starting from June. So we Speed up the inventory, goods delivery and control the inventories very tight.

Speaker 6

That is why you are saying our total inventory, the numbers is relatively lower quarter over quarter. And we still have some kind of the orders and targeting the residential markets. And in the initial markets, it's kind of the 2C customers and They are typically when the supply chain, particularly the end price has a significant, That's the adjustment, which we typically will offer some price discounts to the residential customers. That is why, From an accounting perspective, by the end of the second quarter, we recorded additional inventory one time provisions, And we don't believe that is returning items in the future.

Speaker 4

Charlie, I understand it is not an ongoing thing. My question simply is reflecting what was the true earning power of the company In the Q2 and what I'm trying to get at is that if the poly if you exclude The impact that the sharp decline in poly prices has had on the inventory reserve that your earnings would have been a lot higher, not just somewhat Higher, but a lot higher, maybe as much as $400,000,000 higher.

Speaker 6

You mean, let's say the product price has relatively stabilized and the module price Yes. It's very, very stable. And for sure, if that is the case, and we are able to Generated more earnings, yes, significantly.

Speaker 4

So is it fair to say that without this inventory reserve, The gross margin could have been in the mid-twenty percent, 24%, 25%?

Speaker 6

Well, I think it's roughly, I think, without that, it's roughly up to 20%.

Speaker 4

And you expect it to be higher in the 3rd quarter Because the rate at which the price of modules is coming down It's slower than the rate at which the poly price is coming down.

Speaker 6

Yes. We expect strong continue the strong earnings And because of the M type module, they have strong earning generation power, we began more percentage shipments. And 2nd one is we have higher shipments in the U. S. Markets.

Speaker 6

And so that is a combination of the 2 key factors. And of course, the party is down to be stabilized and module is still It's reaching kind of the stabilized point.

Speaker 4

Also, my next question is about the storage business. Did the storage business contribute any revenues in the second quarter? And what should we expect for the full year?

Speaker 6

Yes. Storage is from long term perspective, it's our We expect it's going to be a very big very important business unit from the long term 3 to 5 years, but this year is kind of an investment year. We invest on the teams, sales channels And R and D, even we still invest some small capacities, the revenue contribution For this year, it's not significant. And we even made some we are expecting this year, investment Yes. We will make some kind of small losses for the business.

Speaker 6

But for the future, looking to the next year, it's going to be a very big, let's say, High growth segment for Jinko.

Speaker 4

So will you hit a few $100,000,000 this year or not really?

Speaker 6

Not this year. No, not this year. No. This year, I think Maybe I think but we don't disclose the numbers. But again, it's kind of the Early investment segment, the business unit.

Speaker 6

But we have roughly reached our Sizable teams, including the key functions by the end of this Q4, and we are we think we are in a good position And for next year, to penetrate storage market.

Speaker 4

Right. Also, going back to the cost of polysilicon, is it fair to think that The average cost of the polysilicon in the second quarter was roughly $0.03 lower Than the cost of polysilicon that you had in the Q1?

Speaker 6

So, Sarek, did you repeat your question?

Speaker 4

Yes. My question is on the cost of polysilicon. And I'm talking not about the cost of polysilicon in the market, but the cost of polysilicon that you embedded In your earnings in your operations and therefore your earnings, is it fair to think that the cost of polysilicon In the second quarter was roughly 0.3 dollars excluding the inventory reserves was roughly $0.03 lower Dan, the Q1 cost of polysilicon?

Speaker 6

I didn't have the numbers. I know your questions. And Q1, I think the poly starting January is kind of very big rebound And it's slightly down month over month and significantly declined starting from the June. And our second is, but starting in June, it's a small impact on the Q2 financial figures because we have No, the inventory turnover is 60 days, 30 days. So it's We can get back to you after the call, but I think it's slightly lower the party

Speaker 4

And also, one last question. Is it fair to say that at this point in the 3rd quarter, Your average cost, your total cost per watt is under $0.15

Speaker 6

We don't disclose the numbers. It's a kind of competitive advantage, let's say, the information, But it's a significant improvement back to your questions in Q3 starting from July And as well as we continue to improve our internal operations versus the supply Chen, the cost. And so it's a significant improvement, but we don't disclose the cost Structure, even the including a total collection cost.

Speaker 8

And final

Speaker 4

question, Charlie. First Solar has made a point of noting that they have A lot of long term contracts going out multiple years, going out 2, 3, 4 years and Maxeon has said the same thing. And these contracts are for prices in the high 20s, high 20s going out multiple years. Do you think that that kind of pricing that far out is really sustainable given what is actually happening to prices In the market right now?

Speaker 2

Yes. I think

Speaker 6

U. S. Market generally is a very big market, It's sustainable loan growth. And there are a lot of disruptions from the recent 2 years Because of the, let's say, the WLO, UF, LPA, so makes the supply tight. And So some of the let's say, the local producers take that advantage, sign a lot of long term contracts.

Speaker 6

From the long term perspective, we feel the silicon based technology has the absolute 100% advantage This is other technology. And so now the focus is overseas polysilicon supply, relative shortage. And we are able to let's say next year, we're going to be a very big year for Jinko. And we have secured sufficient, I think, partly out of China. And So we are able to sign very I think very decent contracts.

Speaker 6

And with, let's say, the policy stabilized and we are able to get more contracts not only next year, maybe Next 2 or 3 years. So that's historically, we take the majority, a very big market share in U. S, 20%, 25%, Because of disruptions, we have overcome the disruptions. And so for the long term, we think We are in good positions with our peers.

Speaker 4

Final question. Will you be able to take advantage of the IRA in terms of the production that you are starting with the 1 gigawatt N type product in the U. S?

Speaker 6

Jinko is, let's say, applicable or not. We think it's IRAs kind of very transparent in the policies and It's for the local productions in the U. S. And when we do that, we don't let's say, depend on what it is on We think relatively sized local productions and Mobile content makes Jinko more competitive in the market. We strongly believe that IRAs we are qualified, let's say, the IRAs.

Speaker 4

Okay. So you expect that you will be able to benefit from it, but you're not counting on it?

Speaker 6

Yes. We don't account it as we do very conservative accounting. I know some peers, the U. S. Producers do accrue basis even as recorded on the cost of goods sold, that's a different accounting perspective, but We didn't do that.

Speaker 6

We want to do it on cash basis based on the packaging and

Speaker 4

Okay. Thank you and congratulations again.

Speaker 6

Thank you. Thank you.

Operator

And wait for your name to be announced. The next question comes from Alan Miles with Jefferies. Please go ahead.

Speaker 8

Thanks for taking my questions and congratulations for the great results. So a couple of questions to follow-up. So first of all, I would like to Clarify. So the amount because in Asia reporting, the overall impairment in 2Q was around RMB 1,300,000,000. So in U.

Speaker 8

S. Reporting, around RMB 500,000,000 is recorded in cost of revenue and the remaining is under the impairment of non life assets. So is this understanding correct?

Speaker 6

Yes, you're right. That's kind of different presentations in different accounting standards. And in the U. S, inventory provisions It's typically an item of cost of goods sold, but in China, the CRC standards, they have separate I called kind of the assets in common, including everything, the fixed assets And as well as the inventories. So that's kind of the presentation, different accounting standards.

Speaker 8

So if we add back $500,000,000 of inventory impairment, so the gross margin in Q2 was actually Improving compared to Q1, right?

Speaker 6

Yes, yes, you're right.

Speaker 8

Yes. And then another thing is the impairment of long life assets to my understanding are those equipment, Which we can also expect it as a one off thing, right? Because the impairment of equipment won't happen every quarter.

Speaker 6

It's a one off and we provided for the small Size and small size module cell capacity is and we to make our assets to be more competitive on the balance sheet.

Speaker 8

Thank you. And then another question is in relation to the port charges because I recall that in 4Q last year and In the Q1 of this year, there were port charges affecting the margin. So what is the situation of the port charges in the U. S. In 2Q?

Speaker 8

And what Do you expect in 3Q versus the acceleration in the clearance of the products?

Speaker 6

So for the cost charges and

Speaker 2

In the Q1, we have RMB

Speaker 6

400,000,000 in RMB. Core charges for the U. S. And because it's Detained modules and very high storage costs. And the 2nd quarter, the improvement on loss to RMB 200,000,000, 1 quarter.

Speaker 6

And starting from the Q3, we believe that For charges, we are very small numbers and because our modules have been cleaned up and speed up On the U. S. Customs side.

Speaker 8

So thanks a lot. So this is an exciting development actually. So it leads to the next question as to how much U. S. Shipment has been sold to the U.

Speaker 8

S. In the first and second quarter.

Speaker 6

You mean the shipments of percentage, right, the total Okay. I think the total shipments, it's 5% to 10% in that range.

Speaker 8

Understood. So for this year, after we raised our guidance to 70 to 75 gigawatts, 5% to 10% is around like 4 to 7 gigawatts. So next year, our target is 12% is it correct?

Speaker 6

It's roughly 10% of market shipments next year. And it could be in the range, Let's say above 10 gigawatts and depending on Let's say, particularly the supply side, the Polytech, and we are confident with 10 gigawatts is kind of

Speaker 8

Thank you. So that's actually quite a strong improvement from this year, Like 4 to 7 gigawatts or 10 gigawatts still. So would like to know what is your expectation on U. S. Installation next year On this basis, this year, probably U.

Speaker 8

S, I think the base case is around 36 year. So I think the company is implying market share gain in next year, right?

Speaker 2

Yes. It's kind of a go back Normal strategy, right? So in the last 2 years' time, we have got let's say, we got started by different regions different reasons. As of now, we have seen positively things go back start to go back to normal. That's why we are Expecting a kind of normal market share or normal stable supply from Jinko to U.

Speaker 2

S. Market. That's why we expect around 10% of our total shipment that goes to U. S. Market next year.

Speaker 8

So what is your expectation on U. S. Installation in 2024 then, Well,

Speaker 2

it depends. It's really we see a robust demand there. So it's really a question of whether the supply will be normal or it will be, let's say, strictly under the U. S. LPA inspection, Right.

Speaker 2

That will decide what could be the size of U. S. Market. It could be somewhere from 30 gigawatts to even up to 50 gigawatts. It really depends on the supply side.

Speaker 8

Thank you. Thank you. So my last question is basically the For the polysilicon supply correspondingly, because 12 gigawatt approximately, you still need quite a lot of polysilicon, Like probably around 20000 or 30000 tons. So have you logged in that supply already?

Speaker 6

Majority of our retail is mocks. And the overseas capacity is 100,000 Sorry, 10,000 metric tons, 100,000 metric tons, which can support, let's say, I think roughly 50 gigawatts, and we take 20% market share from the, let's say, the partly supply side, we are Confident and as well as some of the overseas capacity, we still have some Flexibility to increase the capacity. So we're thinking we can achieve that.

Speaker 8

Thanks a lot. So I've got a final question on Asia placement. So will that eventually lead to dilution of the U. S. Share

Speaker 6

Yes. Yes. It's probably maybe 7 10% to 9% dilution, it's not significant and the way we take the has 58% shareholding of this year. And If let's assume 10% of the maximum, maybe it should be lower. It's roughly 53%, right, 5% the difference

Speaker 8

is lower. Understood, understood. So thanks a lot

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Earnings Conference Call
JinkoSolar Q2 2023
00:00 / 00:00