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JinkoSolar (JKS)

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19 hours ago, SCSolar said:

Regarding the ASP drops for upstream supplies,  if you track the 2 past major oversupplies there is only a slight bounce back in ASP  of 15% or so. Then a period of relative stability. The most recent was the crash to the lower $0.50's down to the low low $0.30s appx 1.5 to 2 years ago. This happened relatively quick before CN demand drove up the price to the upper $0.30's where it stood for the last year. The $0.31-$0.32 was more or less cash cost less depreciation. Remember Poly back then was also bottomed at $12/KG back then as well.

 

You should expect this cycle to act similar but the recovery to be slightly different due to the CN policy change designed  to drive the ASP to $0.25. 

The drop in the upstream materials has been way more severe this time around, so I expect a faster rebound (though limited in amplitude).  During the slump two years ago multi wafers bottomed out at 11.5 cts aproximately, which left GCL still with a small gross profit.  Currently multi wafers sell for slightly above 6 cents, which leaves GCL with a GM worse than -30% (production cost of 9-9.5 cts/w).  Thus imho the pressure for a price correction upwards is higher right now.  And if you read some price snapshots it sounds like multi wafer inventories are already largely digested and prices are slowly trending up again.

What does not make economic sense to me is to assume wafers will stay at this low level (implying currently -30% GM for GCL) while module manufacturers like JKS will reap more than 20% GM.  The pain of this downturn will be spread evenly throughout the value chain imho because there's overcapacity at each step of the value chain.  Prices for mono-PERC modules were held high temporaryly by the 6/30 China deadline but that support is now gone.

19 hours ago, SCSolar said:

As for the past YOY cost cutting, you need to recognize that the company was shifting from a pure Poly module manufacturer to a mono manufacturer. Those cost reductions include what is now 30% production and climbing of mono that was a 8-10% higher production cost with what was claimed as a 12%+/- higher ASP.

The reductions were also during a materials price hike on most materials. Eventually there is a re-balancing of those input cost margins. The Si Cost of it when Diamond wire and new Tech is in place is going to drop the SI from $0.075 to $0.4. That alone is a permanent 10% savings. The SI cost will have room to drop even further in the next 2 years that will impact the cost to manufacture a module by another 5-10%.



In Q1 they were at a total cost of 31 cts (6.5 poly, 24.5 non-poly).  In Q4 I see them around 26.5 cts (4.5 poly, 22 non-poly) by going 100% in-house and saving a penny on non-poly (going down from 23 to 22 cts).  This ain't too far away from their guidance which was 25-26 cts on a blended basis at the end of the year.  Going forward I see 5% yoy cost reduction given that poly is already at rock bottom. 

19 hours ago, SCSolar said:

What is clear is that the CN mfg cost are approaching $0.25 or less. This will be a permanent price range that the upstream suppliers will lower costs to be profitable.

I see GCL currently around 25 cts but only for poly (10 cts wafer, 5 cts cell conversion, 10 cts module conversion).  Mono-PERC would be 2-3 cts above.  Going forward 5% yoy reduction.  Jmho.  Regarding the wafer prices as discussed in the first step I see supply shrinking (2nd tiers running out of cash) and prices rebounding at least to GCL cost levels around 9.5 cts.

On a big picture level I think the new China policy is a clear signal to the industry that the state will no longer subsidize losses and jump in to bail out every crying baby.  The age of permanent losses is over and GCL will not incur -30% GM for too long.

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1 hour ago, SCSolar said:

Q2 presentation is out.

 

2794MW shipped

12% margins

$915M in revenue

$0.40 in EPS

No change in shipment guidance.

Blended cost $0.323 (includes shipping and warranty)

 

http://ir.jinkosolar.com/static-files/49fa91d8-2213-4530-b826-46d25d1cd398

ER out with more details

 

https://finance.yahoo.com/news/jinkosolar-holding-co-ltd-sponsored-100000028.html

 

Notes: Guidance is 2.8-3GW for Q3.  If they meet high end Q3 shipments, that means Q4 will have to ship 3700MW to meet low end guidance.

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Why did they tell us margin would remain stable in Q2?  Why?

From Q1 con call:
"...So, actually the gross margin we think in the second quarter is quite stable quarter-by-quarter. But for the second half year we expect a moderate improvement for the gross margin..."

 

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JKS' "explanation" of why GMs fell is total BS. They reported Q1 in mid June. They did not know that GMs will fall from 14% to 12% with two weeks left in Q2? Who will believe their H2 guidance of 15+% GMs with even more OEM? 

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So first they blamed OEM for drop in GMs in Q2, now they are crediting OEM (due to falling component prices) as a defense of their Q1 comments regarding 15% GMs for H2. Time will tell.

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About two weeks ago JKS to CSIQ delta intraday was about .20 cents, then JKS ran up to over $2 in just over a week. In PM now delta is back to about .20 cents (I have now idea what CSIQ will report tomorrow, nor market's reaction to it).

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28 minutes ago, pg6solar said:

JKS' "explanation" of why GMs fell is total BS. They reported Q1 in mid June. They did not know that GMs will fall from 14% to 12% with two weeks left in Q2? Who will believe their H2 guidance of 15+% GMs with even more OEM? 

They are repeat offenders when it comes to guiding badly.  During their Q4 2016 con call (two months into Q1 2017) they guided 12-15% GM in Q1 and it ended up being 11%.

I think they know they can get away with anything when it comes to guidance.  No chance in hell there will ever be a raid at their CN headquarters to check their forecast tools and emails.

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Just check the calendar. Jinko reported Q1 on June 26th! Shame on them. "Go private" or not, they are no longer to be trusted. There's only one left for now and hopefully Qu will keep his word. Then the true king - FSLR - will be the only one US listed.

While I hope CSIQ can report close to 20-22% Q2 GMs guided, their Q1 call was in mid May or two weeks prior to CN policy shift, so unlike JKS, they have a valid reason should they come under, which most likely they will unless they sell more plants (which based on releases is unlikely). How market will look at it is anyone's guess.

Edited by pg6solar

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17 minutes ago, pg6solar said:

Just check the calendar. Jinko reported Q1 on June 26th! Shame on them. "Go private" or not, they are no longer to be trusted. There's only one left for now and hopefully Qu will keep his word. Then the true king - FSLR - will be the only one US listed.

There goes my 20% pre ER earnings gains. Gone in 60 seconds. 

 

The con call became defensive.

Suggestions that they are no longer giving cost guidance. 

Suggestions that Q4 guidance is unusually high and may not be met.

Serious questions on how they could be so wrong on margins and how they can be trusted for the second half.

Defending long term pricing but then acknowledging they are market price competitive.

Dodging going private  potentials as not currently planning.

 

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Surprised by the 17% thrashing today. They still earned 40 cents for the quarter and are maintaining full year guidance. Margins will improve rest of year. This trading is very short sited. I do not own any JKS stock but man, this is ridiculous.

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2 minutes ago, singular said:

Surprised by the 17% thrashing today. They still earned 40 cents for the quarter and are maintaining full year guidance. Margins will improve rest of year. This trading is very short sited. I do not own any JKS stock but man, this is ridiculous.

My view is 2 main issues that are glaring.

1: Q4 Guidance has to be HUGE and far exceeding their best quarters shipment ever and up to 30% increase over Q3 guidance

2: Serious concerns on margins with the ASP falling and their current cost structure and decision not to give any information on future cost structures.

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5 hours ago, pg6solar said:

So first they blamed OEM for drop in GMs in Q2, now they are crediting OEM (due to falling component prices) as a defense of their Q1 comments regarding 15% GMs for H2. Time will tell.

Their wafer conversion cost must be running at 5-6 cts/w, which means they currently produce wafers for 10-11 cts/w.  Halting their wafer operations entirely and switching to external wafers, which currently only cost 7 cts/w, may provide them with humongous cost savings for a little while (as long as wafers trade so cheaply).  They may have pulled this trick to spice up Q3 margins, who knows.

 

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