Jinko Solar(JKS) got its start in 2006 as a supplier of recovered silicon materials. It is now a vertically integrated solar manufacturer and seller of solar wafers, cells, and modules. The company touts its fast growth and low-cost advantage from its Chinese operations. (See profile for more details).
JKS debuted on the American stock market in mid-May of this year at its IPO price of $11. This occurred just months after the company withdrew its previous IPO plans. With a steep correction underway in the general market, JKS quickly plunged 23% in 4 days. At the time, it was easy to dismiss this event as another busted IPO. However, the company came to market as a profitable entity with a viable business model. By the time JKS had a chance to remind investors and traders of its attractive financials in mid-August, the stock had already more than doubled from its poor start. On Wednesday, JKS completed a recovery from a one-day drop of 11% earlier this month to set fresh highs. The stock has now almost tripled from its IPO. (Click chart for a larger view).
The incredible run in JKS continues with fresh all-time highs
(Click for larger view)
The earnings announced on August 16 certainly got the market’s attention. Average trading volume has more than doubled since then(tripling during a brief steep correction) and the stock has increased another 50%. During August’s earnings, JKS raised Q3 and FY10 revenue guidance above analyst consensus expectations: $145-155M vs. $117M Q3 consensus and $500-525M vs. $419MFY10 consensus. For the quarter, JKS reported a 64% year-over-year increase in revenue to $133M “…primarily due to increased global demand for solar products and a significant increase in the shipments of solarmodules attributable to the Company’s enhanced sales and marketing campaigns.”
Gross profit increased at an even faster 87% year-over-year rate to$36M. Net income was $27M. However, almost a third of the gross came from shifts in foreign exchange:
“The Company entered into foreign currency forward contracts with local banks to hedge its exposure to foreign currency risks. In the second quarter of 2010, the Company recorded a gain ofRMB74.6 million (US$11.0 million) from a change in the fair value of forwarding contract derivatives resulting from the depreciation of the Euro and U.S. dollar against Renminbi.”
The yuan’s future appreciation will depend as much on political dynamics as market adjustments, but JKS did not discuss the sustainability of the profits from this derivative activity. For reference, a year ago, JKS lost money on its derivative contracts during a quarter in which it reported a loss in net income.
Another concern is a large amount of relative debt. Total debt is$188M but cash levels are only $59M. Total debt to equity is a whopping80. (See Yahoo! finance for details). While total assets are $259M, it seems likely that JKS will soon take advantage of its strong stock price to raise additional capital.
Regardless the uptrend in the stock remains strong and valuations are probably low enough to encourage more buying absent any negative newsflow (forward P/E is 7.9, price-to-sales is 1.8, and price-to-book is2.8). The recovery from a swift and steep correction to today’s fresh post-IPO highs is an encouraging technical signal. JKS’s strong stock performance places it in good company with this year’s other strong performers in the solar industry (for a brief review of these see “A ‘Stealth Rally’ In Solar Stocks” and “A ‘Stealth Rally’ In Solar Stocks, Part Two“).
Be careful out there!
Full disclosure: no positions
Three months ago, Jinko Solar (JKS) withdrew plans for an IPO due to poor market conditions. The IPO market has certainly improved, but I don’t see any improvement in market conditions. That didn’t stop the company from going ahead and opening for trading today on the NYSE with shares pricing at $11 which was at the low end of the expected range. Shares aren’t doing much today, down just a bit at $10.90. Perhaps they see the market getting worse and wanted to raise cash before the IPO market dries up again. The stock trades under the ticker JKS and we’ll begin covering any news and add it to the solar tracking table soon.
Financially, Jinko has struggled as much as any other solar company has at least according to what they provided in the prospectus regarding their 2008/2009 results. Revenues declined 42% year over year, but the company managed to squeeze out a small profit. I’ll have more on their 2010 results next week and take a closer look.
At the end of last year, they had a production capacity of 300MW for ingots and wafers, 150MW for solar cells, and 150MW for modules, and did around $150 million in revenues in 2009, so certainly one of the smallest publicly traded China solar names.
Jinko Solar (JKS) is surging nearly 10% in pre-market trading and may break out of a cup with handle base this morning after the company posted strong Q4 earnings results. The company smashed analyst estimates posted an EPS of $2.36(vs the analyst estimate for $1.56) on revenues of $267.7 million (vs the estimate for just $228 million). Product shipments came in at a record 162.6MW exceeding previous guidance of 130 – 140MW.
CEO Kangping Chen commented on the quarter: “We are dedicated to improving product quality and advancing our R&D program while lowering manufacturing costs and increasing our solar cell efficiencies, and we expect additional efficiencies via our relationship withInnovalight. Our improvements in technology and operating efficiency as well as increased economies of scale have resulted in reductions in unit manufacturing costs. We are proud to have emerged as one of only a few vertically integrated PV manufacturers with high quality and lower cost product offerings.”
Looking ahead, Jinko expects shipments to come in around 155 – 160MWthis quarter with revenues in the range of $280 – $290 million. That’swell ahead of the analyst estimate for $232 million this quarter. For the full year, solar module shipments are expected to reach nearly 1GWwith total revenues in the range of $1.4 – $1.5 billion. That’s also significantly ahead of the analyst estimate of $979 million.
JinkoSolar Holding Co. Ltd, a fast-growing, vertically-integrated solar power product manufacturer with low-cost operations based in China, announced that the company’s solar panels are now under warranty withPowerGuard Speciality Insurance Services, a firm specializing in unique insurance and risk management solutions for the wind and solar energy industries. Renowned insurance broker Marsh facilitated the agreement.
Conceived and underwritten by PowerGuard, the policy offers back-to-back coverage through a five-year limited product warranty, as well as a tiered performance guarantee spanning 25 years, namely, a 10-year warranty for90 percent power performance and an additional 15-year warranty for 80percent performance for the solar panels sold by the company and covered by this policy.
Backed by PowerGuard’s extensive network of insurance providers, the terms of the warranty are non-cancellable, providing coverage even in the event of a module provider’s insolvency or bankruptcy.
A client of Marsh China, JinkoSolar is among the pioneering China-based solar companies to implement PowerGuard’sinsurance solution.
Kangping Chen, CEO of JinkoSolar, said: “PowerGuard’s coverage provides our customers with an additional layer of economic security in the event of an unforeseen change in solar module performance. Additionally, offering an insurance option from a respected third party will better facilitate the financing of projects incorporating Jinko modules.”
Larry Liu, senior VP and Technology Practice Leader of Marsh China, said: “This solution is an important way that solar panel producers can provide a greater degree of business certainty and allows developers of solar parks to finance photovoltaic installations more easily and with increased flexibility. The solar panel manufacturing sector in Asia continues to grow rapidly, with China leading the way in terms of manufacturing output.”
MikeMcMullen, managing principal of PowerGuard, said, “The expansion of new energy production offers new business opportunities for industrial insurers. PowerGuard is proud to see that our unique and innovative risk-transfer product has been adopted by leading solar module manufacturers around the world. PowerGuard will continue to support the development of the global renewable energy industry.”
Chinese solar maker Jinko Solar (NYSE: JKS) promised to clean up its toxic waste only after protestors stormed its factory.
500 Chinese protestors broke into Jinko’s factory, ransacking offices and overturning vehicles after toxic waste released into a river killed large numbers of fish.
According to China’s state media agency, the factory’s waste disposal facilities have failed pollution tests since April, and authorities had previously ordered the company to suspend operations.
In response to the protests, the company apologized for improper storage of waste, which contained fluoride, saying it “will take all necessary steps to ensure that it is in compliance with all environmental rules and regulations. Any deficiencies in environmental protection uncovered will be immediately remedied.”
A company spokesperson said, “We cannot shirk responsibility for the legal consequences which have come from management slips.”
The local Environmental Protection Department fined Jinko 470,000 yuan ($75,625). Reports from China suggest that authorities have begun to apply previously lax environmental standards more strictly as demonstrations in several areas of the country have received widespread attention.
While solar offers a clean energy alternative to fossil fuels, the production of silicon for solar panels is far from clean and uses lots of energy.
Solar manufacturers in the US and elsewhere have long complained that lax environmental standards, as well as state subsidies and low wages, give Chinese companies an unfair competitive advantage for sales of solar panels.
In the US, manufacturers Evergreen Solar, SpectraWatt and Solyndra recently declared bankruptcy, saying they couldn’t compete with inexpensive Chinese panels.
Speaking at China’s Low Carbon Technology Innovation Forum in December, Hu Chuli, director of the Institute for Industrial and Technical Economic Studies, pointed out that while China accounts for more than 40% of the world’s silicon production, 95% of that production is earmarked for export.
In other words, China protects the environment of other countries while relying on fossil fuels within its own borders.
Pollution has become one of the country’s biggest problems, as citizen backlash rises against its lax laws regarding industrialization.
Read more about citizen protests against toxic chemicals in China:
JinkoSolar a San Francisco 49ers sponsor today announced the completion of its phase I environment safety upgrade at its facility in Haining City west of Shanghai in the Zhejiang Province of China. Zhejiang Jinko Co., Ltd. a wholly-owned subsidiary of JinkoSolar, conducted a thorough investigation of its temporary waste storage unit adjacent to the manufacturing facility with an independent Chinese Environmental Agency as an immediate response to concerns after fluoride was discharged into a nearby waterway due to unforeseen extreme weather conditions. Fluoride is a highly water-soluble component and the small amount released from the Zhejiang site diluted within days. The Huffington Post reported in mid-September, “Police detained at least 20 people after hundreds of villagers protested last week, some storming the factory compound and overturning vehicles. Authorities said the factory had failed to address earlier environmental complaints and that the protests followed mass fish deaths in late August due to runoff from heavy rains.“
“The company‘s management team has very high standards and remains strongly committed to corporate social responsibility,” said Arturo Herrero, Chief Marketing Officer of JinkoSolar. “JinkoSolar is dedicated to serving the local community through generous contributions to local primary schools in China and solar electrification projects in Sudan and Tanzania,” added Herrero.
JinkoSolar says it has taken necessary steps to establish appropriate protocols and prevention plans for extreme weather conditions and now imposes regulations that are stricter than the industry standard. Jinko is a member of the PV Cycle Association and a recipient of the Cleantech Driver Award from the Deutsche Cleantech Institut.
JinkoSolar (NYSE: JKS) is the latest company to benefit from the Chinese government’s efforts to prop up its domestic solar industry.
The company has entered into a strategic agreement for $1 billion in financing over the next five years from the Guangdong Branch of China Development Bank (CDB).
The financing is a boon to the company, but even more importantly, many observers see it as China’s first step toward picking “winners and losers” in its domestic solar industry.
Jinko plans to use the funds to expand overseas operations, building solar farms particularly in Germany, Italy, and Spain.
Xiande Li, Chairman of JinkoSolar, has this to say about the agreement:
“The agreement with CDB will provide numerous advantages to us, including a long-term, stable source of capital and a complete set of financial services and it will have a far-reaching impact as it demonstrates the confidence with which a leading PV enterprise and strong and respectable financial institution set upon changing the global renewable energy market. We have the confidence to become a premium client of CDB and we will surely make good use of this platform to create a steady stream of high-quality PV projects and excellent return on investment not only in Europe but in global markets.”
JinkoSolar is the eighth-largest panel maker by volume, according to Bloomberg New Energy Finance. The company has manufacturing plants in Jiangxi and Zhejiang Provinces in China, and sales and marketing offices in China, Germany, Italy, France, Switzerland, Australia, Singapore, Canada, and the US.
Its vertically integrated business model supports an annual production capacity of 1.2 gigawatts (GW) of polysilicon and wafers, solar cells, and modules.
China Picking Winners/ Losers
Many Chinese solar makers are struggling in the cutthroat pricing environment – created by their own domestic industry – that has resulted in the demise of many solar companies from the US and Europe. Prices have fallen an estimated 19% this year, and some cuts have been as steep as 30%.
The Chinese government is selectively investing in some of its biggest players including LDK Solar and Suntech Power. Besides financing, it’s subsidizing solar production at about $0.06 for each kilowatt-hour and is making it cheaper for solar projects to connect to the domestic grid.
These actions are triggering a dramatic expansion of China’s solar capacity this year, with almost 2.71 GW commissioned – a 415% increase over the same period last year.
Even though JinkoSolar isn’t as big as other companies that have received financing, it apparently has a relatively strong long-term plan, reports Bloomberg.
“We believe they chose Jinko because we have a healthy balance sheet and strong business development management in the downstream sector,” Li told Bloomberg. “The survivors will be the players who have the advantage in terms of technology, cost, and branding. The biggest may not survive.”
Ongoing troubles at LDK Solar lend truth to that statement. This once world’s biggest solar wafer maker entered polysilicon production, which squeezed cash from its main business. That business never gained traction and is shut down. LDK got $3 billion in loans from China’s banks and is effectively in bankruptcy.
The company kept plowing money into diversifying its business lines and into acquiring companies in Germany, which too have failed.
This quarter, LDK reported a huge loss of $136.9 million, but that was half the loss of the second quarter – and laid off another 2,500 employees. LDK has cut almost half its employees over the past year.
Will the government bail LDK out? With its huge debt burden, there’s no other way the company can survive. Many believe the situation will be settled early next year.
Suntech Power, the world’s largest panel manufacturer, got an emergency loan of almost $32 million in September.
Even though it’s reeling from a bad bond investment, the company just signed an agreement to supply 100 megawatts of panels for two of the first projects under South Africa’s Renewable Energy Independent Power Producer Program. The initiative has a goal of installing 1.45 GW of solar PV in the country by the end of 2014, with 8.2 GW in capacity targeted by 2030.
China-based Jinko Solar withdrew its IPO plans earlier this year due to “poor market conditions.” Jinko manufactures silicon solar wafers, cells, and modules and had hoped to raise $100 million.
Late last week, the firm managed to go public on the NYSE, raising approximately $64million in its maiden offering. Here’s a link to the prospectus. The company’s 5.84 million American depository shares sold for $11 per share — at the low end of the$11-$13 range. Jinko had raised more than $30 million in venture funding from CIVC, Shenzhen Capital, Pitango Venture Capital, et al. in2008.
Obviously, investors are a bit jittery about the solar industry in an environment where slim margins exist for commodity-level wafers and modules — and where soon-to-be curtailed German subsidies might impact demand while the world waits for the U.S. and other markets to take off.
Jinko had sales of $80.4 million in the first quarter, a 20 percent drop from the fourth quarter of last year. Margins grew to 24 percent, from 16 percent in the fourth quarter. Jinkomanaged to make $12.5 million in profit in 2009.
The vertically integrated firm has solar cell and module manufacturing capacities of about 200 megawatts with intentions to grow that capacity to 500megawatts by year-end. This makes Jinko the smaller of the vertically-integrated China-based solar firms like Yingli or Suntech. Jinko has more than 400 customers and a deep relationship with troubled feedstock aspirant Hoku. The prospectus is full of risk statements regardingHoku’s performance.
If a relatively profitable solar firm has such tepid results — what are the prospects for an IPO aspirant like Solyndra?
A Chinese solar panel company has apologized for a devastating toxic spill at one of its manufacturing plants in August and vowed to clean up the pollution after four days of protests outside its headquarters. According to reports, solid waste contaminated with high levels of fluoride leaked from a plant owned by JinkoSolar Holding Company in Haining, located about 80 miles southwest of Shanghai, and was swept into a nearby river by heavy rains on Aug. 26. Residents say the pollution caused a massive fish kill in the river, and that pigs whose sties were washed with river water also died. Following a four-day protest that at times became violent, a JinkoSolar spokesman admitted that the incident occurred and vowed “appropriate” steps to clean up the contamination. “We cannot shirk responsibility for the legal consequences which have come from management slips,” the spokesman, Jing Zhaohui, told a news conference. The public demonstrations in response to the spill are the latest example of growing public outrage over pollution and the Chinese government’s inability to contain it. Last month, thousands of demonstrators forced the closure of a paraxylene plant in northeastern China’s Dalian.