Why I Just Pulled the Trigger on Jinko Solar $JKS

I first wrote about Jinko Solar just over two months ago. At the time, JKS (a small capChinese solar panel manufacturer) was trading near $30/sh and had a P/Eof 4.5 after posting phenomenal earnings.

JKS reportedextraordinarily good results again yesterday. Earnings were $2.1/sh(beating estimates by $0.57/sh and quadrupling the year ago earnings inwhat is traditionally a slow quarter for solar) bringing the trailingfour quarters of earnings to almost $8/sh. [It earned $4.5 of that inthe past 2 quarters.] JKS also raised guidance for sales (slightly) andconfirmed margins for FY11.

Yet today shares of JKS trade for only $26/sh, putting the (trailing) P/E at just 3.25!

That is so crazy cheap, I sold my entire SunPower position and bought Jinko Solar today.

For comparison…JKS earned more (per share/adr) than FSLR in the pastyear, yet FSLR trades for ~$135/sh, almost $110 more per share (and ohFSLR earnings are expected to fall vs q1 2010). Meanwhile JKS is growing earnings by leaps and bounds (earnings were up 4x yr/yr in Q1).

Normally high growth stocks get a premium multiple, my quote service showsNetflix trading at $230/sh supported by only $3/sh of earnings in 2010for a P/E of 68. FY11 earnings are estimated at ~$4.50, bringing theforward P/E down to ~50. Now I don’t expect a Netflix like multiple forJinko, but I do see ample opportunity for some multiple expansion.

A significant number of JKS shares are being shorted (~3.8 M as of4/15/11) out of a public float of ~11 M, and a total share count of~23M. So if JKS begins to trade up, it could rise quickly.

Finally any day now Italy will announce its new FIT policy, which could bring a "relief rally" to the entire solar sector which has suffered many weeks of uncertainty due to pending changes.




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