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November 27, 2013Great Quarter for Jinko Solar
Jinko Solar (JKS) has shown one of the greatest stock prices increase amongst solar stocks in the last couple of years. The company has managed to decrease costs at a faster pace than everybody else that has led to its margins being the highest amongst the Chinese solar panel companies. The company has also managed to increase shipments by selling to different countries such as South Africa etc. Jinko Solar has also got support from Chinese government owned China Development Bank (CDB) which augurs well for its future growth as a system developer. Jinko Solar reported a 22% gross margin in its most recent quarter, which is almost 10 percentage points higher than other major solar panel companies such as Trina Solar (TSL) and Yingli Solar (YGE).
Jinko Solar is also turning its attention to the solar system development and installation side of the business. Most of the major solar energy players such as Canadian Solar, Trina Solar etc. have followed the footsteps of First Solar (FSLR) and Sunpower (SPWR) in becoming complete end to end solar energy providers. It will build solar farms using funds from CDB and in some cases retain the farms to sell the electricity. These farms provide a regular cash flow and decent IRRs (10-12%) in China. All major Chinese companies such as Goldpoly, Shungfeng, GCL etc. are looking at a gigawatt scale utility portfolios in China. Note Jinko Solar already earns good margins from its module business and is one of the few profitable solar panel companies now. All the others are making losses on their module business as the prices have not increased enough for modules to be profitable on the net margin level.
Read more about Jinko Solar Modules here.
Jinko Solar looks like it will survive and thrive in the post solar recession time period. The company is sporting high margins just like it was doing in the period before the recession. The company is also not expanding very aggressively, despite being booked till the 1st half of 2014 (from around 1.5 GW now to 2GW). The valuation is not as low as it was a year ago, with the stock shooting up by almost 600% in the one year. The company’s valuation is approaching that of the other Tier 1 vendors like Yingli and may surpass them, as the company does not have as much debt as Yingli.