JinkoSolar Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 29, 2024

There are 10 speakers on the call.

Operator

Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holdings Co. Ltd. First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session.

Operator

As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host for today's call, Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella.

Speaker 1

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's Q1 2024 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 used biotechnology 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

Zhengde, Chairman and CEO of Zincosolar Holdings Company Limited Mr. Zheren Myung, CMO of Zincosolar Company Limited Mr. Pan Di, CFO of Xingco Solar Holdings Company Limited and Mr. Charlie Cao, CFO of Xingco Solar Company Limited. Mr.

Speaker 1

Li will discuss XinkoSolar's business operations and the company highlights, followed by Mr. Miao, who will talk about the sales and the marketing and then Mr. Pan Li, who will go through the financials. We will 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 Jinco Solar's public filings with the Securities and Exchange Commission.

Speaker 1

Nichol Solar 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 Zanda, 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 happy to announce that thanks to our advantages of anti top com technology, competitive products, global marketing and manufacturing layout of module shipments grew 53.3 percent year over year to nearly 20 gigawatts in the Q1 ranking 1st in the industry. The proportion of N type shipments increased to nearly 80% in the Q1 from approximately 70% in the Q4 last year maintaining our leading position in the industry. Module prices continued to fall in the 1st quarter, while the industry average utilization rates declined sharply.

Speaker 1

We maintained our leading utilization rates at high level. Over 70% of modules were shipped to overseas markets in the Q1, while proportion of shipments to Europe and the U. S. Significantly increased sequentially. Gross margin was 11.9%, flat sequentially.

Speaker 1

Net income was US84.4 million dollars up 19.8 times sequentially. Adjusted net income was $65,100,000 up 1.6 percent sequentially. Newly added installations in China reached 45.7 gigawatts in the Q1, an increase of 35.9% year over year. Module exports totaled 61.7 gigawatts, an increase of over 20% year over year. The PV industry remains one of the few sectors maintaining a higher growth rate and we expect the global PV demand to grow approximately 25% to 30% in 2024.

Speaker 1

Coming into the Q2, polysilicon prices continued to decline as supply exceeds demand. On the other hand, macroeconomic conditions pushed commodity prices higher, while increasing market demand drove prices of some materials such as glass and fuel higher. All those factors combined to keep resist module prices relatively stable at a low level. In the short term, the profitability of integrated solar companies is expected to come under pressure. Yet, this distinction in operating capabilities performance of different companies will have larger difference.

Speaker 1

We expect that overall production capacity in our industry will shrink with the elimination of weaker players that lack market competitiveness, sustainable production capabilities and the ability to regularly upgrade and iterate technology. Facing various external challenges, we will focus on enhancing our competitiveness and we are confident to maintain relative advantages compared to our 1st tier peers. In the Q1, fiscal is a challenging a changing market environment, we flexibly adjusted our sales strategies to better balance shipments and profitability. Leveraging our global footprint and competitive products, our order book visibility for 2,034 currently exceeds 70%. There's continued pressure along the industrial chain.

Speaker 1

We continue to deploy new technologies to improve the mass produced efficiency of top console and module output while reducing costs through initiatives such as optimization of supply chain and production process. We are also accelerating the clearing out of our P type capacity. Our N type capacity is expected to exceed 90% of total capacity by the end of 2024 and we expect our advanced capacity structure to continue to lead the industry. As a company with the largest overseas integrated capacity in the industry, we continuously work to expand the global industry chain. Our 1 gigawatt N type module capacity in the U.

Speaker 1

S. Has started production and another 1 gigawatt is expected to start production in the Q2 this year. This is our advantage of global operation and long accumulated experience in risk management. We are confident to respond to changes in international trade and continue to provide premium products and services to our global clients. According to the latest predictions by the International Energy Agency, IEA, solar PV and wind will account for 95% of global renewable expansion benefiting from lower generation costs than both fossil and non fossil fuel alternatives.

Speaker 1

By 2028, the share of wind and solar PV in global electricity generation will double to 25%. Solar PV still has enormous growth potential. Meanwhile, declining cost of solar plus storage will continue to improve the economics of investing into PV storage projects and stimulate demand growth for storage projects. We are bullish that solar plus storage will become the major model for future growth in electricity generation and we are confident to continue to lead the industry with advanced technologies and premium high Before turning over to Jenna, I would like to go over our guidance for the Q2 and the full year of 2024. By the end of 2024, we expect mass produced N type cell efficiency to reach 26.5%.

Speaker 1

We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 120, 110 and 130 gigawatts respectively by the end of 2024. We expect module shipments to be between 24 to 26 gigawatts for the Q2 of 2024 and between 101 110 gigawatts for the full year 2024 with N type modules accounting for nearly 90% of total module shipments.

Speaker 2

Thank you, Ms. Lin. Total shipments were 21.9 gigawatts in the Q1, with module shipments accounted for over 100%, ranking 1st in the industry again. And with the stress of market prices in the Q1, we flat footed adjusted our geographic mix Over 70% of modules were shifted to overseas markets, especially to Asia Pacific and the emerging markets. Shipments for the U.

Speaker 2

S. Were relatively stable sufficiently, while shipments to Europe increased nearly 20%, evidence of future consumer tree reduction. On the demand side, the general trend for global loan coverage transformation was unchanged despite problems related to installation and the selection in some regions and the policy issues in others. We continue to expect a relatively rapid growth in global demand in the anticipated growth. Our extensive sales network and the deep pace rooted local customer service infrastructure will help us to respond to market shifts and adjust the flexibility and timely rate, constantly satisfying client demand for more reliable, low carbon and compliant TV products.

Speaker 2

Looking forward to the full year, we expect that the proportion of shipments to Europe and the U. S. To further increase compared to last year. Shifts of competitive high efficiency N type Tiger Neo modules accounted for nearly 80% overall. But far exceeding the industry average as the value of Tiger Neo is increasingly recognized by customers.

Speaker 2

In the European and Emerging Markets, the Tiger Niel penetration rates exceed 90% in terms of segment demand from distribution markets in China, Europe and Asia Pacific was strong during the Q1. Closely following the market trend, we raised the ratio of distribution to approximately 50% in the quarter. We focus very strongly on building our brand recognition records and outstanding brand is key to gaining the long term target of our clients. Recently, we were recognized as the Tier 1 Energy Storage Provider by Bloomberg and New Energy Finance due to our outstanding products and the capabilities in energy storage, reflecting our commitment to providing safe and reliable energy storage solutions and recognition by customers for timely delivery and effective deployment capabilities. Besides, we received the AAA rating once again in the 2024 Q1 release of PV Tech Module Tech Packability Report, which demonstrates our leadership in manufacturing activity, reliable quality market share leadership, some financial performance and technology innovation.

Speaker 2

With that, I will turn the call over to Ted.

Speaker 3

Thank you, Junger. We are pleased to report that our solar module shipment increased by about 53 percentage in the Q1. While solar module price declined, we enhanced to control over cost and expenses. Gross profit margin were flat and adjusted net income slightly improved sequentially. At the same time, thanks to our efforts in debt management, our net debt improved sequentially, leveraging our advantages in N type technology and global sales and manufacturing network, we're very confident in our growth prospect and will continue to improve the efficiency of our working capital, achieving sustainable growth in operating cash flow and enhance our resilience to risks.

Speaker 3

Let me go into more details now. Total revenue was $3,200,000,000 down sequentially and slightly down year over year. The sequential decrease was mainly attributed to the decrease in the shipments of solar modules, and the year over year decrease was mainly attributed to the decrease in average selling price of solar modules. Gross margin was 11.9 percentage compared with 12.5percentage in the Q4 last year. The decreases were mainly due to the decrease in average selling price of modules.

Speaker 3

Total operating expenses were $426,000,000 down 18 percentage sequentially. The sequential decrease was mainly due to the decrease in the shipments of solar modules and the lower expense in relation to the settlement of a dispute with 1 of our customers. Total operating expenses accounted for 13 percentage of total revenues compared with 11% in the Q4 and 12% in the Q1 of 2023. Net income attributable to JinkoSolar Holdings ordinary shareholders was about $84,400,000 up nearly 20x sequentially. Excluding the impact from a change in fair value of the note, a change in fair value of long term investments and the share based compensation expenses, adjusted net income was about $65,000,000 slightly up sequentially.

Speaker 3

Moving to the balance sheet. At the end of the first quarter, our cash and cash equivalents were CNY2.44 billion compared with CNY2.69 $1,000,000,000 in the Q4 of 'twenty three, slightly improved from 1.48 billion dollars in the Q1 of 'twenty three. AR turnover days were 100 days compared with 76 days in the 4th quarter 95 days in the Q1 of last year. Inventory turnover days were 89 days compared with 57 days in the 4th quarter and 100 days in the Q1 of last year. At the end of the Q1, total debt was $3,660,000,000 compared to 4 point $38,000,000,000 in the Q4 of 'twenty three.

Speaker 3

Net debt was $1,220,000,000 compared to RMB1.63 billion in the Q4 of 'twenty three, a continuous improvement in our debt structure. This concludes our prepared remarks. We're now happy to take your questions. Operator, please

Speaker 4

proceed. Thank

Operator

The first question comes from Brian Lee. Please go ahead.

Speaker 5

Hey, everyone. Thanks for taking the questions. Appreciate it. I know you guys are not in the practice of providing specific margin and ASP guidance anymore. But just given kind of the fluctuations in the pricing environment, can you give us a sense pricing was down, it seems like kind of down to like the lowtomidteens here ASP per watt if we back out the wafer and the cell revenue in the quarter.

Speaker 5

Should we expect more ASP degradation in modules embedded in the 2Q guide? And then, what sort of the margin cadence you expect off the result here in Q1? Should we expect 2Q to be up, down, flat and then maybe back half views as well if there's more of a recovery there?

Speaker 6

Hey, Brian, this is Charlie. Yes, back to your questions. The module price is down in the recent three quarters, and that's a fact. And we have different ratings, different arrangement, long term versus short term. If you are talking about Q2, the ASP, on average, it's down a little bit.

Speaker 6

But the most important thing is we are improving the cost and try our best. At the same time, we are adopting the relatively new technology materials. And on top of that, we are ramping up this year, our focus is the Sanxing Shoper Factories. We're expecting to be fully operational in the second half year. And for the gross margin and probabilities, we strongly believe in the first half year, this year, it's reaching to

Speaker 2

the bottom.

Speaker 6

And for quarter by quarter, we expect the gross margin relatively stable for the Q2 versus Q1. And for the second half year, and we expect more shipments, particularly in the United States as well as the European markets. And on top of that, we are in a very good position for the Middle East market, and it helps the gross margin. And so that's in addition, we the industry is suffering the very face compensations, particularly for price. But we are expecting the capacities for the Tier 2, Tier 3 and even the capacity which are not able to be technology competitive will be phased out throughout this year.

Speaker 6

This may help the overall supply versus demand situations, particularly in the second half year.

Speaker 5

Okay. That's helpful. So if I summarize, I guess, it sounds like ASP is down a little bit more into 2Q and then margin stable in 2Q off the 1Q level. Are you actually seeing quoting activity or what's the outlook for pricing? I know you said shipment volumes and mix improve in the back half, but how about like for like ASPs?

Speaker 5

Are you actually seeing you said 70% of your 24% is already covered in backlog. It sounds like. What's the pricing dynamic you're seeing in the second half versus Q1 and Q2 where pricing is still going down?

Speaker 2

Yes. For the pricing, Brad, for the pricing, we believe it will continue to follow the market, which we believe is already reaching the drop bottom, right, compared to the market prices versus the industry, even the leading cost structures is most of the peers or the industry players are under the water right now. So that's why we believe the pricing price is reaching the bottom. However, when we look into the improvement of the cost structure wise, it definitely does not go so fast as the price falls in the last 5, 6, even 8 months' time. That's why the market wise C2O struggle at the beginning of the year, but we believe once the cost structure start to improve to reach the level of the ASPs and match the level of ASPs, we believe the company or even the whole industry, at least the leading competitive ones will keep their margin as healthy as possible.

Speaker 2

Hope that answers your question.

Speaker 5

Yes, absolutely. Very helpful. And then maybe last one for me and I'll jump back in the queue. You also mentioned back half of the year, it sounds like you're positive on U. S.

Speaker 5

Volume trends growing for you. I know this is pretty fresh, The inception of this ADCVD potential investigation that was petitioned last week by some of the U. S. Suppliers. I know in the fall last year, you guys were deemed to not have been one of the companies dumping or countervailing.

Speaker 5

And so you weren't subject to any duties. It sounds like this petition is opening that entire case back up potentially. So what are your thoughts on the latest trade policy update here given what happened last week? And then do you anticipate any or are you seeing any customer feedback right now that suggests there's more uncertainty for you as you move through the next few quarters, just kind of how are you navigating it? Thank you.

Speaker 2

Well, it's still early to see what could be the result of this upcoming ADCVD petitions. But definitely from Jinko's perspective, we still prefer as a fair trade word, which could benefit not only the Jinko itself, but also the whole industry where we can drive that's what the whole industry has been doing in the last even 2 decades, right, to driving the LCOE of the PV energy more and more competitive, which can help the whole world become greener and more environmental friendly and less covered footprint. With tariff or the current geopolitical issue, definitely it is a big challenge. It increased a lot of cost. But as a company side, we have no choice but try our best to adapt towards the market or what the government wants.

Speaker 2

So that's why we are working very hard with our lawyers, with our customers, trying to find out the best solution in the U. S. Market. But right now, honestly speaking, it's still too early to see what could be the current cost for that right now. So we will we might need another, let's say, 3, even 6 months to see what could be the, let's say, upside and downside of that.

Speaker 2

Thank you.

Speaker 5

Okay. Fair enough. Last one housekeeping for Charlie. I promise I'll pass it on after this. Charlie, what was D and A in the quarter?

Speaker 5

What was CapEx in the quarter? And then also could you tell us what the percent of sales in the U. S. This quarter was and what U. S.

Speaker 5

ASP range was dollar per watt or cents per watt in the quarter? Thank you.

Speaker 6

The U. S. Shipment roughly 8%, 8% of total Q1 shipments. That's the shipment. And the revenue percentage will be higher because the price is low versus dramatically higher, right, if you look at the average market price.

Speaker 6

And for the total CapEx, you are always shy about it. Last year, we spent roughly RMB200 1,000,000,000 on the capacity expansion. And this year, we'll be 50% lower, lower than RMB 10,000,000,000. And last year, we delivered RMB 25,000,000 operating cash flow. And this year, we our target is operating cash flow will be over larger than the RMB10 1,000,000,000.

Speaker 6

So that's but for Q1, the CapEx is roughly $3,000,000,000 and the operating cash was $1,500,000,000

Operator

Okay. The next question comes from Philip Sheehan with Roth MKM. Please go ahead.

Speaker 7

Hi, everyone. Thank you for taking my questions. First one is a follow-up on Brian's question regarding Southeast Asia, AD CBD tariffs that could be coming later this year. So I was wondering if you could talk about, how you plan on managing the retroactive tariff risk. So I think you guys talked about increasing your shipments to the U.

Speaker 7

S. Market or certainly having a high mix to the U. S. Through 2024. Can you share how much of your shipment volume in 2024 could go to the U.

Speaker 7

S? And then how do you plan on managing that retroactive risk that could be as early as May or July? Thanks.

Speaker 2

Yes. Firstly, for the volume wise, we still stick to our previous plan that we are not intentionally increase or decrease our shipments to U. S. Because of the recent ADCVD petitions. So that's already within our even within the plan of this year.

Speaker 2

So it is definitely because you know what's happened in the last few years in U. S. To JinkoS. So that's why this year's total shipment numbers or the ratio of the U. S.

Speaker 2

Market definitely will be higher than last year. That's why we're just saying that. And for this counter risk retroactive, so number wise, we don't have mature solutions right now. That's why we are still as I just answered Brian's question, we are still talking to the lawyers and the customer to see what could be the best solutions. Right now, at least I'm not aware of any good solutions on it.

Speaker 7

Got it. And how thank you, Gener. How are your contracts structured? Meaning, oftentimes there's a change of law provision that may put the risk on to the customer. But does it cover tariffs?

Speaker 7

And so do you have the provisions in all your U. S. Contracts so that the risk is on the customer? Or in this case, do you believe that the risk of retroactive tariffs may fall into your camp? Thanks.

Speaker 2

I don't think we can disclose the details of the contract, but definitely customer feel the risk as well. So even there are some leverage which give the path, the cash risk to the customer end. But definitely the customer side has just basic economics of the project financings, right. If it does is go beyond certain threshold, definitely the project will not happen or as planned. That's why we have to go through all those details with our customers, with their lawyers and even their financing providers to find out the best mutual solution for all parties.

Speaker 2

It's not that easy to take a one case one solution for all.

Speaker 7

Okay. Thank you, Gener. One last question on the U. S. Market.

Speaker 7

What do you think is the amount of channel inventory in the U. S? We've seen a lot of shipments to the tune of 5 gigawatts a month coming to the U. S. Over the past year.

Speaker 7

Do you think there's as much as a year and a half of module inventory in the U. S? Or do you think it's much lower? Can you help us understand what you see? Thanks.

Speaker 2

We have read the notes saying that there is, let's say, oversupply in U. S. Market, even some players either downstream or upstream try to get more modules before just not AD, 3 d, but that's the anti circ, right, so before anti circ. We heard we read the notes, but from our end, we have not been able to verify that directly from the customers or from some of our peers right now. But definitely if we look into the numbers available in the market or some market analyst report, we have seen a massive might not support that big number.

Speaker 2

Definitely we have the same question. Yes. Okay. So, might not support that big number. Definitely, we have the same question as you have right now.

Speaker 7

Okay. Thanks, Shneur. Last question here for me on the fire that you guys disclosed over the weekend. Can you talk about the impact? Shaanxi is supposedly a key part of your margin, right?

Speaker 7

So you did say that there would be an impact in 2024. Can you quantify in any way when you think that facility could come back online? How destructive was the fire? Thanks.

Speaker 6

Philip, the new battery still is being evaluated. But essentially, you should probably remember, this year, we do 2 phases. Phase 1 is 14 gigawatts, Phase 2 is 14 gig another 14 gigawatts. And the second phase, Phase II, will stick to our original plan and are expected to start operation in Q3 for the Phase 2 and for the operational in early Q4 this year. But we are talking about the Phase 1.

Speaker 6

Phase 1, the file has the impact on the cell capacity, the 14 gigawatts. And we expect the cell capacity will be fully operational by the end of this year. And this is our original plan is by the end of the middle year. So it's going to have some kind of impact 2 quarters roughly and estimated and 3 to 5 gigawatts. So the impact is not significant.

Speaker 6

It's very not significant impact for the sale. And so for the operational side, we have adjust our productions throughout the global facilities to minimize the impact to our customers. And for the cost side and the impact of the operation, we think it's not significant. However, for the losses of the file is still evaluating, but the equipment is fully get the insurance from the big insurance companies in China and we're working on it.

Speaker 7

Got it. Thank you very much for the color. I'll pass it on.

Speaker 6

Thank you.

Operator

Next question comes from Wade Wu with Jefferies. Please go ahead.

Speaker 8

Hello? Sir, can you hear me?

Operator

Hi. Yes, your line is now

Speaker 8

Yes, this is Alan from Jefferies. So thanks management for taking my question. So first of all, we'd like to ask a follow-up the question from Philip on the basically how many or what is the percentage of the contracts you have signed? At least have the language that is passing through the potential liability of the delays in ADCVD. The background of this question is because some of the peers suffered a lot last year when they have procured a high priced polysilicon and then later on, when they failed to deliver the shipment, they even have to pay penalties as per those contracts.

Speaker 8

So I wonder if those language is already there. And it's only a matter of working with your clients to solve the problem. And is there any potential liability in delivering the obligations? Yes.

Speaker 2

So again, I don't think we can disclose that level of detail, But definitely we are case by case working with customers on this AD2PD risks as we always do, right. So we've got a lot of support from the customers regarding what has happened in the U. S. Market in the last 2 years' time. So definitely we appreciate the support and we are carrying that love for the future long term partnership with most of our customers.

Speaker 2

That's why we never want to end up with a lost lost solution. So even there's a risk that we definitely go ahead with the customer to look into the solutions together. That's why we can maintain our leadership in many markets, right.

Speaker 8

Okay, understood. So the next question is regarding to some of the appears to be one off income in this quarter. So like the other income is actually has surged quarter by quarter. So wonder if that's related to a disposal of our disposal gain in our Xinjiang capacity. And how much of that is related to that?

Speaker 6

In Q1, we have completed transaction to sell 100% of equity of our Xinjiang facilities. And we realized, I think, roughly $800,000,000 to $900,000,000 dollars net income impact.

Speaker 8

Understood. So also I recall in the transaction there's further performance, how to say, kind of like a performance guarantee in the next couple of years? Has that fact been factored into this $800,000,000 to $900,000,000 or that is completely separated?

Speaker 6

We didn't record that, the performance kind of the performance of engaging or variable considerations from the sale of the equity. So we did not account on the bulk. We just recorded the fixed portion for the transaction.

Speaker 8

Understood. So I think another thing that is quite, I would say, quite impressive compared to a lot of your peers is that you actually do not have any impairment on assets. So wonder if you think you will have any impairment risk going forward in this year or because you have a super majority of your capacities are top corner ready, so you do not foresee any risk going forward from here?

Speaker 6

Yes, you're right. And we have very small PERC capacities and we accelerated depreciation over 5 years throughout the last 2 years and the net book value is not significant.

Speaker 8

That's impressive. And also you have mentioned the cash flow in the Q1 was actually positive. So wonder if the company has taken initiative to improve the cash flow quarter over quarter? Because that's just one of the concerns of investors as to the operating cash flow.

Speaker 6

The increasing fee is still our focus, operational increasing fees and minimize the production lead time, logistic delivery time, cash conversion cycles. And the Shaanxi Super Factory we are building is one of the key considerations improves the whole cycle conversion and improves the cash flow, minimize the working capital, warehouse cost and the logistics timing.

Speaker 8

Thanks a lot. Finally, on the buyback, wonder if the company has any guidance on the pace of the buyback because I've noticed that there's a lot of announcement around that. But wonder if you would provide any guidance on that? And would there be any blackout in buyback after the end of quarter and before the announcement of the results?

Speaker 6

Our plan is, for the enterprise, the shareholder return is roughly US200 $1,000,000 this year. And you can see, we released news, we have spent roughly US105 million dollars to repurchase back the ADS. And on top of that, which is subject to the Board approval, we plan to declare dividend roughly US70 $1,000,000 to US80 $1,000,000 So together, our plan, preliminary plan this year's shareholder return is roughly US200 $1,000,000

Operator

The next question comes from Rajeev Choudhary with Intrinsic Edge. Please go ahead.

Speaker 9

Good morning and congratulations on a strong performance in a very tough first quarter for the industry. My first question is about the gross margin. It seems like your cost per watt for modules were down roughly 10% from the Q4 to the Q1. And my question is, number 1, can you give us an idea of how you were able to achieve such a dramatic decline in cost per watt given that the polysilicon costs were down as well, but not as significant? And then I have a follow-up on the gross margin as well.

Speaker 6

Yes. So a combination of our supply chain, our R and D teams, new technology and improve the lower the consumptions of the materials. And we upgraded the top down capacity, adopting the LECO technology and significantly improve our sales efficiencies while cut out a lot of the consumptions of the shaver paste. And so a lot of efforts we are doing that. And we have internally, we have very solid target for the cost reductions.

Speaker 6

And step by step, where we think with quarter by quarter, the cost will be relatively improvement will be relatively quicker. But again, but now the industry situation is module price is kind of dropped a lot. We expect it to be stabilized and the cost takes time. And we will try our best to improve the cost structure.

Speaker 9

So Charlie, is it fair to think that in the coming quarters, Q2, Q3 and Q4, with all the improvements that you are making, that we can expect costs to improve by 1% to 2% every quarter?

Speaker 6

It depends. Some of things most of things we can control, but some of the things we are out of control. If you look at the shaver, the commodity price is up a lot in these amounts. But we're trying to minimize the impact. But if you look at quarter by quarter throughout the year, it's definitely the end of this year, the cost will be lower the cost as of today.

Speaker 3

Right.

Speaker 9

But assuming that the material costs don't change, is the 2% per quarter on a sequential basis a reasonable assumption to make in terms of how you are reducing the costs?

Speaker 6

Yes. We have internally even bigger targets and the 2% each quarter if I show you the material cost is the same. But overall cost, depending on a lot of things. And I think overall, it's going to be improved. But again, we think in the next 2 quarters, the cost improvement were not so significant.

Speaker 6

And because we have done a lot of things and that's the commodity price now looks at to be keep at a very high level. And considering that, we don't believe the overall cost will be dramatically lower, but it's lower slightly lower in the trend in the next 2 quarters.

Speaker 9

So combined with the fact that ASPs well that he'll be selling more product in the United States by the Q4. And so it's possible that ASPs are actually up somewhat sequentially from Q3 to Q4 and your costs are coming down by, let's say, even 2% quarter over quarter. It looks like you should be able to get the gross margin to be in the 16%, 17% kind of range by the Q4. Is that reasonable?

Speaker 6

It's difficult to estimate. But we think the one of the key things with the capacity some of the capacity phase out in the second half year, we think the price will be come to a relatively rational level. On top of that, we have Shaanxi Shoper factory. We have more shipments in the U. S.

Speaker 6

And some are premium market. It helps our margin even some level of recovery, but it depends on a lot of things. We think what we are now doing is we do internal things and we do what we can control.

Speaker 9

I see. Okay. My next question is on market share. Your market share in 2023 was in excess of 15%, closer to 16% for the year as a whole. And in the Q1, it's already in the 17% kind of range.

Speaker 9

Do you think that as the capacity comes offline as for the rest of the year that your market share will continue to increase, especially if you hit the 110 gigawatt kind of number for the year?

Speaker 2

Well, we never take market share as our target, right? So that's why we it's harder to say. And also because of the different definitions, there are different ways to calculate it, right? It's difficult to really define, let's say, fair, well accepted market share definition. But anyway, we appreciate your calculations on these numbers.

Speaker 2

Based on my perception, I think it's roughly around 17%, 18% of market share is where how we are looking at ourselves today. Whether that number could go up or go down, it depends on the competition, it depends on the whole industry, it depends on our peer strategy as well. So that's why it's difficult to say that right now, but definitely we are doing our best to make sure we deliver the good results from the financial statement wise. Meanwhile, we are doing our best to serve our customers in the long term to keep the long term partnership momentum.

Speaker 3

Thank you.

Speaker 9

Is the market share that you have combined with the brand name that you are developing as well, is that giving you a price premium or an increasing price premium relative to other brands?

Speaker 2

Definitely, we believe our brands give us a lot of strength and the market acceptance or awareness for sure. But how whether it creates a market premium, it depends on what numbers you are comparing with, right? If you compare with the novelties in the market, definitely it's a brand sell worth quite a lot. But if you compare it with the top 2 or top 3, the definition or the acceptance of the customers across the different top brand might not be that much as people imagine. So and also the brand premium in the different market sector in different country will vary a lot as well.

Speaker 9

I see. A question on the N type products, what do you think the industry's shipments of N type products will be in 2024?

Speaker 2

Roughly, we believe the market will finish the transition from P type to N type by end of this year. So technically, it might start from, let's say, roughly 35% to 40% range until year end 90%, even 95% range. That's what we believe.

Speaker 9

So you think the other the competitors will also get up to the 90% range by the end of the year?

Speaker 2

I mean the whole industry, right? So someone might take action faster, someone may be slower. But as an industry, we believe that the whole industry will lose

Speaker 9

like. Now you have been ahead in terms of getting your cost of N type down and now your N type costs are comparable to P type. What kind of margin premium does that give you over Tier 2 and Tier 3 companies who are behind the cost curve relative to you guys?

Speaker 2

So let's take this as the last question. Thank you for your question, Sohrab. We believe if you look into some third party intel, for example, there's like a PV infolink, right. So if you compare the P type, N type of price, the gap is roughly US1 dollars per 1 piece. So if you can roughly calculate how much it will reflect in the margin wise, right?

Speaker 2

So it's roughly like 9%, 10% of the margin difference, right? That's the way we are looking into it.

Speaker 9

I see. Okay. Just one last question.

Operator

Okay. The last question comes from Leo Ho with Daiwa Capital Markets. Please go ahead.

Speaker 4

Okay. Thanks, management. Just a question on the ADCVD situation. I just wonder for our U. S.

Speaker 4

Capacity, are we using like our own solar cell from Southeast Asia? And we've been hearing some industry feedback suggesting that probably there may be the cancellation of the Wafer Plus 3 rules, which means that we cannot use solar cell from Southeast Asia anymore. So do you have any view on that? Thank you.

Speaker 2

I'm not quite sure what policies you are referring to, but based on the Jinko situation, we are fully vertical integrated in outside China, means polysilicon ingotwafercell module are now all from non China sources, right. So that's what we have built in the last 2 years' time under the U. S. LPA. So that gives us a lot of advantage and trust in the U.

Speaker 2

S. Market.

Speaker 4

Okay. Just one more question, if I may. I would like to ask about the EU situation. Aside from, I think, publicly announced situation regarding Longxi and Shanghai Electric, are we hearing any like troubles regarding Chinese players exporting to Europe? Especially we've been hearing some weird news suggesting that probably there's one of major module maker with its new headquarters being raised.

Speaker 4

I'm not sure if you guys are hearing the same situation. Thank you.

Speaker 2

Not just not something I'm aware of right now. So if I have anything, I'll definitely let you know.

Speaker 4

Okay. Thanks so much.

Operator

Thank you. This concludes the conference call. Please disconnect your line.

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Earnings Conference Call
JinkoSolar Q1 2024
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