Q3 2024 JinkoSolar Holding Co Ltd Earnings Call

October 30, 2024

Speaker Change: Hello ladies and gentlemen and thank you for standing by for Jinko Solar Holding Co. Ltd. 3rd quarter 2020 for earnings conference call. At this time all participants are in listen only mode. After management's prepared remarks there will be a question and art suggestion.

Speaker Change: As a reminder, today's conference call is being recorded.

Speaker Change: I would now like to turn the meeting over to your host for today's call, Miss Stella Wang, Jin Kursola's and Vista Relations. Please proceed Stella.

Stella Wang: Thank you all, Prater. Thank you everyone for joining us today for Tinko Solar's third quarter, 2024 earnings conference call. The company's results were released early today and available on our company's IR website at www.tinko Solar.com as well as on-use-wout services.

Stella Wang: We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website.

Stella Wang: Transcription by Trans-Expert at Fiverr.com

Speaker Change: On the call today from Zincosolar are Mr. Li Xiande, Chairman and CEO of Zincosolar Holding Company Limited, Mr. Gener Miao, CMO of Zincosolar Company Limited, Mr. Tang Li, CFO of Zincosolar Holding Company Limited, and Mr. Charlie Tsao, CFO of Zincosolar Company Limited. Mr. Li will discuss Zincosolar's business operations and company highlights.

Speaker Change: Followed by Mr. Miao, who will talk about sales and marketing, and then Mr. Pan Li, who will go through the financials. They will all be available to answer questions during the Q&A session that follows.

Speaker Change: Please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. private security solicitation

Speaker Change: Wang, Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: with the Securities and Exchange Commission. Sinclair Solar does not assume any obligation to update any forward-looking statements, except as required under the applicable law.

Speaker Change: It is now my pleasure to introduce Mr. Li, Chairman and CEO of Simple Solar Holding. Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Li.

Speaker Change: In the third quarter of the entire industry's profit-sharing pressure, we have achieved a relatively bright performance thanks to the energy-efficient Qualcomm technology, competitive products, globalized marketing and manufacturing processes, and other advantages. The price of China's four major markets in the four major markets continues to decline, and almost the entire industry chain is in a state of loss. We maintain a balance of operating efficiency, shipment and profit.

Xiande Li: Xiande Li, Unknown Executive

Xiande Li: Compared to China, the عل ley is stable after failure scoring, with APY receiving 3× higher than the previous two capabilities. We also steadily improve our technical advancements as well as our supply management and strengthen level-load costs. Mao's great profits increased by 15.7% for this quarter and net revenue is estimated at 3.2 million yuan. APY has increased significantly.

Xiande Li: While earnings were under pressure across the industry during the quarter, we achieved relatively outstanding results, leveraging our leading position in anti-top-down technology, competitive products, as well as global sales and manufacturing networks.

Xiande Li: In balance between supply and demand led to continuous price decline in the end market, causing loss to almost the whole industrial chain.

Xiande Li: As we worked to balance utilization rates, shipments, and profitability, prices in the third quarter were stable sequentially, and shipments to the U.S. market increased significantly quarter over quarter. We also continued to optimize our integrated costs.

Speaker Change: Significantly improved the sequential rate. In September 2024, China's Guanghu Xincheng Exhibition was 20.89 gigawatts, a 32.4% increase on average, and a 26.9% increase on average. This has changed the continuous weakening trend for the past two months.

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: In September, the newly added installation was 20.89 GW in China, up 32.4% year-over-year and 26.9% sequentially, reversing the sequential declining trend of the previous two months.

Speaker Change: Due to signal demand volatility in some overseas markets, module exports in September decreased sequentially. Demand was slightly weak while clearing outs of supply.

Speaker Change: were accelerated with profitability throughout the whole industrial chain and the pressure some companies with insufficient cash flow and the poor risk resistance have gone bankrupt.

Speaker Change: Reorganized of being acquired from time to time. During this month, the CPIA held a symposium aimed at encouraging manufacturers to adopt self-discipline in their pricing strategies and production volume management.

Speaker Change: CPIA also released a report calling on manufacturers to participate in bidding in rational manners.

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: We believe these matters may help eliminate uncompetitive capacity and accelerate the industry consolidation. We believe that with enhanced supervision of related departments, domestic prices will eventually return to reasonable levels.

Speaker Change: We have been working hard in different areas to improve the performance. Since the end of the third quarter, our N-type TPCOM battery has increased by nearly 26.2%. TPCOM is in the phase of rapid technological upgrade. We are very proud of TPCOM's technology.

Speaker Change: Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: In the third quarter, we further consolidated our competitiveness edges. By the end of this quarter, the mass-produced efficiency for our n-type top-con cells improved to approximately 26.2%.

Speaker Change: As Topcon is still in a stage of rapid technology and product upgrades, we have continued to invest in R&D and are gradually adopting certain new technologies into mass production based on market demand, investment, payback periods.

Speaker Change: to maintain a leading position in the industry.

Speaker Change: We continue to improve the level of smart manufacturing, lead the digital transformation in the light industry. Recently, we cooperated with Dahua Co., Ltd. to create a smart platform for transparent factory 360 and certified it for free through TOV.

Speaker Change: Wang, Xiande Li, Unknown Executive

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: in cooperation with Fahua Technology and it has been certified by TUV Inland.

Speaker Change: By integrating MES and QMS systems with some cutting-edge technologies such as Internet of Things, AI and big data analysis, the platform can improve real-time equipment monitoring in the vast majority of our production process.

Speaker Change: and ensure whole process management from warehousing of raw materials to warehousing of finished products.

Speaker Change: As one of the leading companies in the Indo-Pacific climate change, our goal is to keep up with global climate change. Recently, we participated in the New York Climate Summit in 2024 and published the first climate report of our company, the White Paper.

Speaker Change: We have not only improved the ESG supply chain management, but we have also completed the ESG audit of the third party ESG for most key suppliers, and removed the behavior of most suppliers.

Speaker Change: As one of the leading voices in the fight against climate change, Single Solar has always aligned its operations with global climate goals. Recently, we participated in the 2024 New York Climate Week, where we officially launched the English version of our first

Speaker Change: Climate White Paper. We have kept improving ESG management in our supply chain, and so far we have completed third-party ESG audits for most of our key suppliers, and the majority of our suppliers have signed our Code of Conduct.

Speaker Change: During the long-term period, the leading companies will have a more obvious advantage in terms of cost control, marketing layout, and cash flow management.

Speaker Change: According to the annual report, the continued investment in R&D and the diversification of overseas have further expanded the strong characteristics of the leading enterprises.

Speaker Change: We will continue to pay attention to the structure and profitability level of the balance of shipments and deliveries. We expect that the total shipments of 2024 will be between 90W and 100W.

Speaker Change: Among them, between 22.3GW and 32.3GW, we will continue to optimize the structure of the market and the level of cash flow, improve the operation and operation efficiency, and continue to improve the ability to see risks.

Speaker Change: As we navigate through cycles, the leading enterprises in our industry will emerge ahead thanks to their superior cost control, extensive sales network, and effective cash flow management.

Speaker Change: In the long term, they will continue to benefit from continuous investments in R&D and expansion of their global capabilities.

Speaker Change: We will focus more on balancing market structure and profits.

Speaker Change: We expect the model shimmers to be between 90 gigawatts to 100 gigawatts for four years.

Speaker Change: 2024 ... and 22.3 to 32.3 gigawatts for the fourth quarter. We will also continue to optimize our assets and the liability structure, as well as to turn over efficiency, further strengthening our resilience to risk.

Speaker Change: We maintained our global leading position in module shipment during both the third quarter and the first three quarters. This achievement is a testament to the trust of our global clients in our reliable, high-efficiency products and services.

Speaker Change: In the third quarter, around 60% of modules were shipped overseas, with Europe, North America and emerging markets all healthy.

Speaker Change: Distribution business accounted for approximately 37% of total shipment compared to approximately 45% in the second quarter.

Speaker Change: Thanks to continuous improvement in Tiger News product strength, Tiger News shipments accounted for nearly 90% of total shipments, a steady increase from 85% in the second quarter.

Speaker Change: In China, the ratio of Tiger牛 has grown to over 90%, while it increased to nearly 70% in North America.

Speaker Change: We once again talk to the PVTAC 2024-Q3 module tag tangibility report with a triple A reading and also received the highest bankability score in this industry.

Speaker Change: Recently, we launched the next-generation top-con technology solar panel named Tiger Neo 3.0.

Speaker Change: The Tiger NEO 3.0 product will be manufactured on the

Speaker Change: Also, in the largest, latest BNEF energy storage Tier 1 list in Q4 2024 ranking, Jinkou Energy has once again been recognized as a Tier 1 manufacturer by Bloomberg.

Speaker Change: for his outstanding performance in the energy storage sector.

Speaker Change: By the end of the quarter, our accumulated global shipments exceeded 280 GW. We helped our global clients achieve the grid parity with green and economic renewable energy solutions.

Speaker Change: Short-term cyclo-reliability in this industry shifts in the macro environment and the disturbance from international trade policy bring PV companies not only challenges but also opportunities.

Speaker Change: We always proactively seek opportunities from challenges in the market demand, balance market risk, and lead the industry development with more high efficiency and reliable products and services while maintaining a reasonable market share.

Speaker Change: Transcription by CastingWords

Speaker Change: Thank you, General. We are pleased to have achieved state-of-the-art improving financial results.

Speaker Change: with our leading position in anti-proc-con technology, competitive products, global marketing and manufacturing network, as well as our efforts to control costs and expenses.

Speaker Change: Keep financial metrics such as total revenue, gross margin, operating income and net income all increased sequentially.

Speaker Change: We will continue to improve the efficiency of our working capital, achieving sustainable growth in operating cash flow, and enhance our resilience to risk.

Speaker Change: Let me go into more details now.

Speaker Change: So the revenue was about 3.5 billion, up 2% sequentially, and down 23% year-over-year.

Speaker Change: The sequential increase was mainly due to the increase in module shipments. The year-over-year decrease was mainly due to the decrease in the average selling price of solar modules.

Speaker Change: Bruce Martin was 5.7% compared with 11.1%

Speaker Change: in the second quarter, and

Speaker Change: 19.3% in the third quarter of last year.

Speaker Change: The sequential increase was mainly due to the increase in the average selling price of modules, and the year-over-year decrease was mainly due to the decrease in ASP of modules.

Speaker Change: 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Speaker Change: Total operating expenses

Speaker Change: for 539 Millions down about 1% sequentially and up.

Speaker Change: 20% year over year.

Speaker Change: The year-over-year increase was mainly due to the increase in shipping costs as the shipments of solar modules increased, and an increase in impairment of long-lived assets.

Speaker Change: Operating expenses accounted for

Speaker Change: 15.4% of total revenues in the third quarter.

Speaker Change: compared to

Speaker Change: 15.9% in the second quarter this year and about 10% in the third quarter last year.

Speaker Change: Net income attribute to our ordinary shareholders.

Speaker Change: for 3.2 million in the third quarter, excluding impact of a change in fair value of the convertible note.

Speaker Change: and Long-Term Investments in Solar Supply Chain Companies.

Speaker Change: Share-based compensation expenses and impairment of the capacity utilization, which was strategically adjusted by the company.

Speaker Change: The Adjusted Net Income Attribute to Our Ordinary Shareholders

Speaker Change: Transcription by CastingWords

Speaker Change: was 14.8 million.

Speaker Change: Moving to the balance sheet.

Speaker Change: At the end of the third quarter, our cash and cash equivalent were about $3.2 billion compared with about $2 billion in the second quarter.

Speaker Change: Thank you.

Speaker Change: They asked us over days, over 90 days, compared with...

Speaker Change: 89 days in the second quarter this year and inventory turnover days was 66 days compared with 82 days in the second quarter this year as a result of improved operating efficiency.

Speaker Change: At the end of the third quarter, total debt was 5.23 billion compared to 3.86 billion in the second quarter this year.

Speaker Change: Net Debt

Speaker Change: was $2.05 billion compared to $1.95 billion in the second quarter this year.

Speaker Change: This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.

Speaker Change: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question.

Speaker Change: Transcription by CastingWords

Speaker Change: Your first question comes from Philip Shen with Roth Capital Partners. Please go ahead.

Speaker Change: Transcription by ESO. Translation by —

Philip Shen: Hi everyone, thanks for taking my questions. First one is on the volume...

Philip Shen: in Q3, can you confirm what it was? And then, sorry if I missed it. And then can you also provide the megawatts you expect to ship into the US in Q4? Thanks.

Speaker Change: Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: Our Q3 shipment to US is roughly 15-18% of total shipment.

Speaker Change: So I think you can figure out the detail numbers. Q4, we forecast that the number will be lower because of seasonality issues and the market turbulence. So, but however, when we look into the whole year, it should fit in or fall into our expectations, which is roughly 5% to 10% of the total shipments, or the total number should...

Speaker Change: within the expectation.

Speaker Change: Can you share what it might be for 2025 as well?

Speaker Change: With the risk of, you know, with this volume in the U.S. and the ADCBD decision coming, how, like, what's your confidence level in...

Speaker Change: whether or not it will be retroactive and also won't be a high

Speaker Change: Number, how are you guys managing that risk? Thanks.

Speaker Change: Transcription by ESO. Translation by —

Speaker Change: Yeah, so from our perspective, we still take the U.S. market as a long-term market, so no matter how the policy or tariff changes, we're always trying to figure out the solutions to survive and compete in the U.S. market.

Speaker Change: So, regarding 2025, we still have not decided a final number yet because of the upcoming election and also there will be the numbers of ADCVD announced pretty soon. So we think we will figure out the numbers after that when we see more certainties.

Speaker Change: So we will talk maybe soon regarding that topic. Regarding the retroactive risk, we still believe, we heard about the petitioner's request on this issue.

Speaker Change: I think it's CBDs, so we are still evaluating the risk and waiting for the final decision.

Speaker Change: Regarding the ADs, since we are in the sample list, we are cooperating with our lawyers to try to not trigger the retractive risk. So we are doing our best to avoid the unnecessary risks.

Speaker Change: Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: Transcription by ESO. Translation by —

Speaker Change: Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced.

Speaker Change: Your next question comes from Rajiv Shudra with Samsara Capital. Please go ahead.

Speaker Change: Yes, good morning and congratulations on a good quarter.

Rajiv Shudra: I have a few questions. The first question is on your average selling prices in the third quarter were obviously higher than they were in the second quarter. And the reason was

Rajiv Shudra: the increased shipment to the United States. If the shipments to the U.S. are going to go down in Q4 as a percentage, should we expect a pretty significant decline in ASPs quarter over quarter in the double-digit range?

Xiande Li: Mr. Lee,

Speaker Change: And so we think it's kind of moderate and downward.

Speaker Change: in terms of the fight in your force quarter

Speaker Change: It's just so cool.

Speaker Change: So, I guess another way of asking the question is, what is your expectation for ASPs in China in the fourth quarter relative to the third quarter, and also in Europe, again, 2-4 versus 2-3?

Speaker Change: Yes, if you look at the index, the Infolink, a lot of independent charting publishers, the trend is quite similar. But now, the CPIA, China Postal Boutique Industry Association is leading the policy studies.

Speaker Change: and try to, I think, you know...

Speaker Change: and we think the price has already reached to the bottom and hopefully, you know, we think the price will be...

Speaker Change: Stabilize and help the industry to go to a relatively disciplined approach.

Speaker Change: Transcription by CastingWords

Speaker Change: So, I guess the question is, if prices stay stable from here in China and Europe for the rest of the year, are they still down relative to the third quarter?

Speaker Change: Oh, I got a question. Because of the mix of different regions, right? We have lower shipments in the U.S., which is, you know, our regions in the fourth quarter. So the blended ASP should be a little bit lower.

Speaker Change: Right.

Speaker Change: Okay, moving on to the EBITDA number for the third quarter, can you tell me what the depreciation number was in Q3 and also can you confirm if EBITDA in Q3 was in excess of $400 million?

Speaker Change: Transcription by CastingWords

Speaker Change: We have discussed the detail numbers and differentiation per quarter, roughly US$70 million, so you can do the calculations.

Speaker Change: Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: Charlie, can you repeat the depreciation in the third quarter?

Speaker Change: Thank you.

Speaker Change: 78 million

Speaker Change: On 4 July, Xiande Li, Governor of the Northern University in Hebei Province,

Speaker Change: That was beautiful.

Speaker Change: Yes.

Speaker Change: Okay and next question is on on storage. Can you give us an update on the storage business and are you likely to hit a hundred million dollars in revenues this year?

Speaker Change: Are you still smaller than that?

Speaker Change: Hi Rajeev, I don't think it's the right time to discuss the detailed numbers. We are still trying our best to grow the storage business into an ambitious goal. We think we will share the positive or good news with all the investors once it's ready. But for us, it's still an early stage business. We think it's not the right time to discuss the numbers.

Speaker Change: And finally, on shipping costs, can you give us an idea of what the trend line in shipping costs was in the third quarter and what you expect in Q4 and beyond? I'm talking about shipping costs per unit, per watt.

Speaker Change: Yes, in the first half of the year, the logistic cost is relatively higher, particularly the political tensions in the Middle East.

Speaker Change: is.

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: Also, a final question is on the GNA expenses.

Speaker Change: Last year, in the fourth quarter, the GNA expenses were over 200 million.

Speaker Change: Should we expect, and we saw a sharp increase from the third quarter, should we expect a similar trend in the fourth quarter this year?

Speaker Change: of the State Council.

Speaker Change: Throughout this year, we continue to train the operating expenses, including T&A expenses.

Speaker Change: So looking to Q4 versus Q3, we are expecting the operating expenses will be lower, Q4 versus Q3.

Speaker Change: I see. Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: Once again, if you wish to ask a question, please press star 1 on your telephone.

Speaker Change: Transcription by ESO. Translation by —

Speaker Change: Your next question comes from Brian Lee with Goldman Sachs & Co. Please go ahead.

Brian Lee: Hey everyone, thanks for taking the questions. Just a couple of housekeeping ones. Did you give us the free cash flow number in the quarter and also the CapEx number in the quarter? And I had a follow-up.

Speaker Change: For the full year, you know, we estimate, you know, I don't have the exact numbers, you know, for the third quarter, but the full year, 2024, the capex will be around 9 billion RMB. Operating cash flow is roughly...

Speaker Change: Five pennies, so net operating cash flow, you know, the free cash flow is negative, the four pennies RMB.

Speaker Change: Okay, that's helpful. And then, can you give us an update on the latest status of your Frankfurt listing efforts and also maybe a little bit of color around?

Speaker Change: Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Err...

Speaker Change: You know, the GDR, you know, the GDR, you know, we, we just announced it.

Speaker Change: It's roughly total is 4.5 billion RMB, and roughly the dilution will be 5% or 6% depending on the, you know, the issuance, the price.

Speaker Change: But the timetable is still in an early stage in the preparations and we expect

Speaker Change: Chairman of the GDR, and we'll be roughly completing the second quarter of next year.

Speaker Change: And we have this course is the majority is for the

Speaker Change: Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: And the main part will be the use for the...

Speaker Change: Wang, Xiande Li, Gener Miao, Mengmeng Li, Unknown Executive

Speaker Change: [inaudible]

Speaker Change: Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: All right. Thanks a lot. Best of luck with it. Appreciate it.

Speaker Change: Thank you.

Speaker Change: Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced.

Speaker Change: The next question comes from Mohamed Ahmed.

Speaker Change: Emerit's Development Bank. Please go ahead.

Speaker Change: Yeah, so my question is, how much of your business is from the utility segment and from the rooftop solar segment? And another question is that your diluted EPS is 0.57 per ADS, how it is calculated?

Speaker Change: and the basic shares are 52 million, but the difference in basic and diluted ETFs is huge, 1.45 versus 0.57.

Speaker Change: You. And in terms of the... OK.

Speaker Change: at the global meeting.

Speaker Change: 63% is utility.

Speaker Change: Okay, okay.

Speaker Change: Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. We will now pause momentarily to allow questions to be registered.

Speaker Change: Transcription by ESO. Translation by —

Speaker Change: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Speaker Change: Transcription by ESO. Translation by —

Speaker Change: Director, Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: Xiande Li, Mengmeng Li, Mengmeng Li, Unknown Executive Xiande Li, Mengmeng Li, Unknown Executive

Speaker Change: translator on mobile t.v. Translator on mobile t.v.

Speaker Change: Zhao Qishan, Wang Yijin, Xiande Li, Yun Mengmeng Huang Xingyang, Meng Mengmeng, Zheng Linglong

Speaker Change: thanks for watching time to say goodbye

Speaker Change: Xiande Li, Mengmeng Li, Mengmeng Li, Unknown Executive Xiande Li, Mengmeng Li, Unknown Executive

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