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JinkoSolar (JKS)

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31 minutes ago, pg6solar said:

I guess I want to see how they are planning to ship 9.5GW to meet FY guidance considering CN developments, with 7GW in the second half. And with their claim of 80% already booked (mostly outside of CN), I'll believe it when I see it. Very skeptical right now. 

Skepticism is warranted. 80% booked is still needing 2.4GW to get signed.  If that was CSIQ or HQCL, that is 35-40% of their full year guidance. They need to ship 7.5GW in the second half. 

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From CC:

1. GMs for second half - "possible" 18%. Not clear if for Q3 or Q4 or both.

2. In house cost at .24-.25 by EOY with blended .01 more.

My take, analysts are not buying it based on their tone and questions.

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1 minute ago, pg6solar said:

From CC:

1. GMs for second half - "possible" 18%. Not clear if for Q3 or Q4 or both.

2. In house cost at .24-.25 by EOY with blended .01 more.

My take, analysts are not buying it based on their tone and questions.

I thought I heard over 15% margins potential

 

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IMO, 15% would be "stable" (as compared to 14.4% for Q1) as they said for Q2. Lets wait for transcript. Regardless what they say, analysts are not buying it. No clear explanation to Brian Lee's question on how are they going to fill the shipments guidance.

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Plus they have been extremely vague on how they plan to reduce non-poly cost significantly by year end considering they've been running flat for the last 4 quarters.  Analysts not buying that either...

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3 minutes ago, Klothilde said:

Plus they have been extremely vague on how they plan to reduce non-poly cost significantly by year end considering they've been running flat for the last 4 quarters.  Analysts not buying that either...

Yeah that $0.24 quote for year end production costs per watt should be striking fear into FSLR and the Series 6 that is not in production.

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8 minutes ago, pg6solar said:

IMO, 15% would be "stable" (as compared to 14.4% for Q1) as they said for Q2. Lets wait for transcript. Regardless what they say, analysts are not buying it. No clear explanation to Brian Lee's question on how are they going to fill the shipments guidance.

They indicated the second half China ASP dropped 15%. That places the ASP at around $0.31 blended based on a suggested $0.36 Q1 ASP. If they want 15% gross margins, then the blended costs would be in the $0.26 range. That is in line with their $0.02 cost reduction from Si and the $0.02-$0.03 savings on processing.

 

The major concern of the CN policy impacts was raised. That was the decline in their primary market for MW and where did they suddenly find the shipments outside of China to offset that lost market shipments. That question was not answered. If China was 35% of their 2018 guidance then that was 4.2GW. With the current CN policy changes, the CN market has shrunk by 35%. A 35% hit on their market share of CN is the losing of 1.5GW of demand in China that needs to be picked up in the rest of the world.

Most projects that are to be installed for panels this year in the second half should already have supply agreements in place. That will make finding those missing CN shipments for 2018 very hard to just pick up. It is doubtful that what falls off will be pushed into 2019 IMO.

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In the Q4 con call (three months ago) they indicated that China would be their largest market in 2018.  Today they said shipments into China would be less than 20% of total.  So they lowered China shipment guidance from an estimated 35-40% to 20% or down by 1.8-2.4GW.

"Philip Shen

...But in terms of your full-year outlook, can you give the geographic mix that you expect?...

Gener Miao

Sure, this is Gener. So for 2018, we are foreseeing the China market continue to become continues to be our number one market..."

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If (big IF) they hit their shipments and GMs (currently not really believable) guidance, stock should recover all losses suffered since 5/31. 

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2 hours ago, pg6solar said:

If (big IF) they hit their shipments and GMs (currently not really believable) guidance, stock should recover all losses suffered since 5/31. 

If(not so big IF)they fall short of guidance volumes, but ship max module capacity of 120% or nameplate  in each of the final 2 quarters and if (little IF) they can hit 15% + GM, they should recover back all that was lost since  Jan 1.

 

IF= BIG IF

If = not so big IF

if = little if.

 

 

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We were both wrong on GMs:

"Cao Haiyun

First, you're right. I think the policy put us at very good position to streamline the supply chain. And we are expecting a significant cost improvement starting from June this year. So regarding the gross margin, because we have very solid booking and we discussed and we have already received a lot of prepayments and we think the most of the booking bill will excludable. So, actually the gross margin we think in the second is quite stable quarter-by-quarter. But for the second half year we expect a moderate improvement for the gross margin. And its highly possible, gross margin will be over 13%."

 

They're full of it. 13%, after posting "disappointing" 14.4%, should be cheered?   
 

"Stable" should mean about 14% for Q2. "Moderate improvement" should mean 15%+, not just "over 13%".

 

 

 

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2 hours ago, pg6solar said:

We were both wrong on GMs:

"Cao Haiyun

First, you're right. I think the policy put us at very good position to streamline the supply chain. And we are expecting a significant cost improvement starting from June this year. So regarding the gross margin, because we have very solid booking and we discussed and we have already received a lot of prepayments and we think the most of the booking bill will excludable. So, actually the gross margin we think in the second is quite stable quarter-by-quarter. But for the second half year we expect a moderate improvement for the gross margin. And its highly possible, gross margin will be over 13%."

 

They're full of it. 13%, after posting "disappointing" 14.4%, should be cheered?   
 

"Stable" should mean about 14% for Q2. "Moderate improvement" should mean 15%+, not just "over 13%".

 

 

 

That is not the first time a voice to text translated script was wrong. Listen starting at 28:10 of the con call. The accented English to me clearly says over fifteen. If you  listen to the whole exchange, they acknowledge 14.4% GM in Q1 andthat Q2 would be stable. They suggest improvements in gross margins in Q3 due to lower upstream cost savings and from what I hear it is over 15 percent. That would be an increase confirming their prior suggestion of increasing margins.

https://edge.media-server.com/m6/p/upzzpj9r

 

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I realize that this GMs guidance of say 15% ( I heard 18%, but will accept 15% since won't re-listen to the call) is given after CN policy change, still their Q1 (and Q2) GMs are well behind of CSIQ's:

From CSIQ Q1CC:

"Shawn Qu

The manufacturing business is more or like stable in Q1, our manufacturing gross margin we’re seeing in high teens and in Q2 we also see that in the high teens level."

Above does not include projects (with projects, CSIQ's Q2 GMs were stated in low 20%s). So either CSIQ's manufacturing is suddenly much more efficient that Jinko's or one of them is BSing us.

 

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Let's remind ourselves that JKS has missed GM guidance horribly in the past.  For example two months into Q1 2017 they guided 12-15% GM for the quarter and it ended up being 11%:
http://forum.thecontrarianinvestor.com/index.php?threads/jinko-solar-jks.97/page-78#post-54204

So go tell your grandma you will be increasing GM in the second half hon.

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2 hours ago, Klothilde said:

Junkosolar skipping PV Japan this year:

 https://asia.nikkei.com/Business/Business-Trends/Japan-s-solar-panel-makers-suffer-as-power-plant-demand-fades

 Hmm...  I wonder where will they be shipping all those modules to ?

month long heatwave in UK.  floods in Japan.

No budget for more solar panels.

wtf

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On 6/26/2018 at 9:01 AM, Klothilde said:

Currently JKS' cost data suggests that the rate of process cost reduction (i.e. non-poly cost) of the CNs has slowed down significantly over the last several quarters to less than 5% yoy, which translates to an advantage for FSLR who is currently going supersonic in cost reduction with S6.  Yes, the CNs are currently seeing way lower input costs through cheaper upstream materials but this does not truly reflect process improvement.  It's pure desperation of wafer and cell makers who are forced to sell at cash or below to remain liquid.

 

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.

 

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%.

 

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. The CN companies have a path to further increase efficiencies by another 20% using new technologies that wiill be ramped in the next 1 to 2 years. These will drive the productin costs down to the $0.20 range to support the $0.24 ASP price range targets in 2020. Just in time for FSLR Series 6 mass scale ramps.

 

By the way some of the new technology that will be ramped chips away at some of FLSR benefits being better performance under higher temperatures and low light absorption.That 7% benefit making them more desirable for certain markets and a price premium per watt will decrease the premium.

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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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