Is JinkoSolar Worth Buying?selloff of late, due to the hint of a further devaluation of its currency. This has impacted stock markets across the world, with Dow Jones and S&P industrial average falling approximately 1.6% and 1.5% respectively. This has led to drop of more than 26% in the share price of JinkoSolar (JKS) in the New Year. However, this drop, in my opinion creates an opportunity to buy more of JKS.
For the third-quarter, JinkoSolar reported revenue of $637.6 million, an increase of nearly 53% as compared to revenue of $417.3 million in the same quarter last year. In fact, the company managed to grow its revenue by more than 24% sequentially and topped the analyst’s estimate of $561.28 million for the quarter.
This growth in JinkoSolar top line can be attributed to the continued momentum in its third-party shipments. It reported a record shipment of 1,134 megawatts with the third-party shipment of 1,064 megawatts, representing 21.1% growth from the second-quarter of 2015.
JinkoSolar shipments have increased at a good pace over the past 1 year. This growth in shipments is due to a large and diversified customer base. JinkoSolar delivered approximately 35% of its solar modules to China, 22% to the USA, around 8% to Chile, 7% to Thailand and South Africa, nearly 6% to Japan, 5% to Mexico, 3% to Turkey, and 2% to Netherlands and Australia.
The company has significantly improved its market share in the emerging markets and APAC offsetting the slowing demand in China. For instance, the module sale in the emerging markets was 9% in the second-quarter of 2015, which increased to 21% in the third-quarter.
More importantly, the company should benefit from the growing solar demand in the United States. As per Deutsche Bank, rooftop solar PV on residential is growing at a much faster rate than expected. In 2013, the United States had installed approximately 1GW on residential rooftops, slightly higher than total installed rooftop solar PV in Australia, with a fraction of the population. In fact, the report expects the US total PV installation including residential, commercial and utility to grow to 16GW in 2016 from 5GW in 2013.
The solar market looks pretty strong in the US for 2016 and that should drive JinkoSolar’s growth. Moreover, the company is strategically working with optimizer companies to better tap this strong growth by providing its customers with products that have higher yields and better performance.
Looking ahead, for the fourth-quarter the company expects its shipments to enter the range of 1.4 GW to 1.7 GW. This includes nearly 1.2 MW to 1.4 MW of module shipments to the third-party. This represents shipment growth of at least 24% over the third-quarter. This tremendous growth in its shipment should drive its top line performance this year.
More upside to consider
JinkoSolar is strategically streamlining its capacity to the growing demand. It has gradually increased its capacity of passivated emitter rear cell or PERC production line and expanded its new double-glass module production lines. This should help the company address the growing global demand in 2016. The company expects the global demand to grow in the range of 15% to 20% by next year to nearly 65 gigawatts. The company is exploiting this huge growth aggressively. For example, JinkoSolar has booked approximately 80% of its capacity for the first-quarter 2016 and over 50% for the entire year.
Reduction in costs are driving its margins
The enhancement in technology and efficiency in operation has allowed the company to lower its in-house costs significantly in the past twelve months. For instance, its total costs in the third-quarter 2015 came in at $0.41 per watt, a reduction of 2% sequentially and about 9% from 2014 levels. The graph below illustrates the continued focus on reducing in-house costs.
These reductions in costs have driven its gross margin to improve to 21.3% from 20.7% in Q2 and 20.3% in Q1 2015. This has positively impacted earnings per diluted share to grow by over 20% sequentially.
During the last two years, the industry has separated the weak from the strong, rationalized capacity to demand, stabilized prices and maintained gross margins that allow sustainable profitability. And JinkoSolar has emerged a strong player in this process.
JinkoSolar is aggressively increasing its market share across the world. It expects its shipments to grow significantly in 2016, indicating better topline growth. Moreover, it is expanding its capacity to better match the growing demand of solar across the world. This should help the company tap this growth effectively and drive value for its shareholders. Therefore, this drop in stock price is misleading and it only increases the potential upside that it is to come.
Published on Mar 24, 2016By Yaggyaseni Mittra