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JinkoSolar Holding Co. Ltd. (JKS - Snapshot Report) reported fourth quarter 2013 results with adjusted earnings per American Depositary Share (“ADS”) of $1.28 (adjusted earnings of 32 cents per share) coming in ahead of the Zacks Consensus Estimate of 86 cents. The company reversed its year-ago adjusted loss per ADS of $5.06 (adjusted loss $1.26 per share) in the reported quarter. Each “ADS” represents four ordinary shares.

The results reflect a diversified customer base and improvement in operational efficiency in a rapidly changing solar power environment.

Full year adjusted earnings came in at $2.84 per ADS (adjusted earnings of 71 cents per share), beating the Zacks Consensus Estimate of $1.09. In 2012, loss per ADS was $10.23 (adjusted earnings of $2.56 per share).

Quarterly Performance

JinkoSolar’s revenues in the reported quarter were $361.4 million, beating the Zacks Consensus Estimate of $349.0 million. The top line increased 11.5% sequentially and showed a significant jump of 87.5% from the year-ago level. In 2013, total revenue of $1,169.3 million increased 47.6% year over year.

The increase was mainly driven by a boost in shipments, improving average selling prices (ASPs) of solar modules and the increase in electricity revenues from solar projects.

Gross profit in the quarter was $89.3 million that corresponded to a gross margin of 24.7%. This compares favorably with the gross margin of 22.3% in the third quarter 2013 and 3.8% in the fourth quarter 2012. The significant improvement in the gross margin was backed by improving solar module ASPs and higher gross margins from solar project electricity revenues. This was accompanied by continued cost reductions of polysilicon and auxiliary materials.

Total operating expenses in the quarter amounted to $46.0 million, up 44.1% sequentially but down 64.2% year over year. The sequential increase was due to the reversal of provisions for bad debts in the third quarter of 2013, an increase in research and development expenses, share-based compensation expenses and shipping and warranty costs arising from the surge in solar module shipments. However, the yearly improvement was attributable to significant non-cash charges in the fourth quarter of 2012.

Shipments

Total shipments in the fourth quarter of 2013 were 586.3 megawatts (“MW”). This represents a 13.0% increase from 518.9 MW in the third quarter of 2013 and a 94.2% jump from 301.9 MW in the fourth quarter of 2012. Of the total shipments, 533.3 MW were solar modules, 7.3 MW were silicon wafers and 45.7 MW were solar cells.

In 2013, total shipments stood at a record 1,933.1 MW, up 62.7% from the 2012 level. Of the total shipments, 1,765.1 MW were solar modules, 54.8 MW of silicon wafers and 113.2 MW of solar cells.

Financial Condition

JinkoSolar at the end of 2013 had cash and cash equivalents and restricted cash of $75.3 million, up from $67.4 million at the end of Dec 31, 2012.

As of Dec 31, 2013, total short-term borrowings that included the current portion of long-term bank borrowings were $326.2 million compared with $360.4 million at the end of Dec 31, 2012. Total long-term borrowings were $59.8 million compared with $26.8 million at 2012 end.

Guidance

JinkoSolar expects cell and module shipments in the range of 440 MW and 470 MW for the first quarter of 2014. For full year 2014, the company expects total solar module shipments in the range of 2.3 gigawatt (GW) to 2.5 GW and total project development scale to be above 400 MW.

Peer Comparisons

The largest U.S. solar panel manufacturer, First Solar Inc. (FSLR - Analyst Report), not only reported disappointing fourth quarter 2013 results but also came up with weak first quarter guidance. It reported fourth quarter earnings of 89 cents per share, which missed the Zacks Consensus Estimate by 11% and came in 56.4% lower than the year-ago earnings. Revenues also plunged 29% year over year to $768.4 million and fell short of the Zacks Consensus Estimate of $974 million.

SunPower Corp. (SPWR - Analyst Report) posted fourth-quarter 2013 adjusted earnings per share of 47 cents, comfortably surpassing the Zacks Consensus Estimate of 28 cents by 67.9%. Earnings in the reported quarter were also up almost 161.1% from the year-ago earnings of 18 cents. The fourth quarter results were backed by strong demand for its unique, cost effective, high efficiency products in utility, commercial and residential projects.

Our Take

Following six money-losing quarters, this was the third quarter of profit for JinkoSolar. The company has successfully broadened its geographic reach and expanded its downstream business, which has ensured net profitability for the entire year.

The company’s move into constructing big power projects and then selling the electricity has started to pay off. In 2013, 213 MW of solar photovoltaic (PV) projects were connected to China’s electricity grid. JinkoSolar expects to add an additional 400 MW this year. The company has a pipeline of projects totaling 700 MW in utility scale systems and 400 MW in distributed systems.

JinkoSolar’s string of large-scale solar PV supply orders from countries like Australia, South Africa and the U.K., effective project execution skills as well as favorable renewable policy adoption by the Chinese government have elevated its position in the market.

Its high-quality products at lower rates have attracted customers from around the globe. In addition, the company’s lofty backlog of domestic utility-scale projects along with a steady rebound in solar panel prices is expected to boost its margins. The 50% tax break on solar panel production by the Chinese government will unlock increased growth prospects for JinkoSolar Holdings.

Additionally, it has transformed its operations from a traditional manufacturer to a one-stop energy solution provider. Recently, the Chinese government increased its solar installation target for 2014 to 14 GW from 12 GW. This focus on renewable energy development in China will see heightened demand for both solar farms and distributed PV systems.

JinkoSolar presently holds a short-term Zacks Rank #1 (Strong Buy). Another attractive solar PV operator is Zacks Ranked #2 (Buy) SolarCity Corp. (SCTY - Snapshot Report).
 

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