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Quarterly Estimates

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I did an analysis on their revenue deducting each component and using average ASP quoted at $0.64, this means they sold combined wafer and cell at $0.18 per watt. So average selling price for Q1 sounds as an error in statement:

"Module average selling price increased during the first quarter to US$0.64. We expect ASP in 2014 to remain stabilized. Regions such as Europe and the U.S. have higher ASP to the European Commission's agreement for a minimum selling place for Chinese modules at 53 euro cents per watt and the USA due to the barrier set by tariffs. In emerging markets, we ended with US$0.64 per watt despite the lack of subsidies in most of the markets, while in China we reached US$0.60 per watt, thanks to our strong brand recognition."

200MW at 0.60 and 255MW Means everything else was At $0.67-0.68

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this means they sold combined wafer and cell at $0.18 per watt

 

My revenue breakdown:

Module 455.1 MW @ 0.64 $/W = $291.3m

Cell 34.0 MW @ 0.27 $/W = $9.2m

Wafer 92.1 MW @ $0.15 $/W = $13.8m

Electricity 50 GWh @ 0.156 $/kWh = $7.8m

Retainage $1.8m

 

Total = $323.9m

 

 

My guess is that wafer and cell sales is partially poor quality yield that they try to minimize loss on. They are not in the business of wafer and cell sales, but due to their general spot trading strategy they dump poor quality yield to cover some of the cost instead of just writing it off. That's the only explanation I can come up with for their low wafer and cell ASP. In the 20-F page 45 low cell ASP of $0.27 is seen for 2013 (but wafer ASP was higher than $0.15), so that their wafer and cell sales might not be normal product sales at normal ASP is confirmed there.

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Or the $0.64 is a bogus number. 200MW at 0.60 had to create yield of 0.67 to 0.68 on 255MW. Both wafer and cell are their own which are overproduction due to purchases of TWN cells. Suddenly JKS global ASPs are beating those of TSLs and CSIQ? I am having doubts, seeing the CEDR in particular.

I agree they sold 0.60 to China and perhaps 0.64 to emerging markets. What is really peculiar if I put $0.64 from global and use 0.60 at China, global blend becomes $0.622, using the same math as I have now wafer costs 0.22 and cell 0.31 which could explain selling in rush instead of holding to inventory.  At that ASP (0.622) GM is still 24.43%

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Or the $0.64 is a bogus number. 200MW at 0.60 had to create yield of 0.67 to 0.68 on 255MW. Both wafer and cell are their own which are over production to purchases of TWN cells. Suddenly JKS global sales are beating those of TSLs and CSIQ? I am having doubts.

 

Yes, their Japan, US and EU ASP would have to be between $0.68 and $0.69 to reach $0.64 average. Seems reasonable..?

 

Note that GADP is declared value of goods. Depending on delivery terms more or less expensive freight and insurance cost are applied on top of that. Considering that selling expenses were quite high for Jinko in Q1 expensive delivery terms (most extreme one would be DDP) might have been used in some cases to cause average shipping cost (and thus ASP) go up.

 

Dumping poor wafers and cells explain their high power rated panels, which in turn explain how their global ASP can be in line with peers. Not taking the poor quality wafer and cell discard cost as a panel production cost explains the extremely low panel production cost.

 

The low total ASP they had a year ago was due the high China portion in combination with a lot of the China volume sold at 5-10% retainage ($0.60 becomes $0.54 with 10% retainage).

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My revenue breakdown:

Module 455.1 MW @ 0.64 $/W = $291.3m

Cell 34.0 MW @ 0.27 $/W = $9.2m

Wafer 92.1 MW @ $0.15 $/W = $13.8m

Electricity 50 GWh @ 0.156 $/kWh = $7.8m

Retainage $1.8m

 

Total = $323.9m

 

Of course we agree on electricity revenue and module revenue, but your total of cell and wafer revenues is a bit more than mine. Does not seem to me your numbers add up to $323.9m. Could you explain?

 

Looked like you made some corrections, as they now appear in my quoted text.

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Of course we agree on electricity revenue and module revenue, but your total of cell and wafer revenues is a bit more than mine. Does not seem to me your numbers add up to $323.9m. Could you explain?

 

291.3 + 9.2 +13.8 +7.8 + 1.8 = 323.9

 

:)

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I think I saw 19.8 for wafer. I guess I must saw it wrong rather than you made a correction :)

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I made the first crack on the Q2 earning for JKS yesterday. Assuming ASP and cost remain stable, I see an EPS of around $1.10. Other assumptions include a $5M FX loss and a $3 tax charge. I did not include impact from fair value change of CBs.

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I think I saw 19.8 for wafer. I guess I must saw it wrong rather than you made a correction :)

I did make a correction, so nothing wrong with your eyes. :)

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I will continue to model JKS from CEDR as  GADP value blended with China's ASP. At the end of the day, if the same precised benchmarking is kept we can predict the future as close to reality as possible. I am not convinced their blend ASP was $0.64 per watt, but it is hard to argue with the company's statement. Having prices for wafer and cell deeply below market's is something I cannot explain with any particular logic. I do not share a view of sub-standard product, and it almost bizarre, that they would sell at negative margin, instead sitting on inventory. What is the reason for it?

Adding this really weird loss on the value of forward contracts, makes me really uneasy on their strategies, but for now market is willing to pay up and analysts seem to believe in JKS. This could be a bit of the trap as well.

CEDR should do some clarification quick, with GADP in particular.

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