Jinko’s 1Q13 Financial Results Evaluation: Due to Market Diversification, the Shipment Quantity Hit Record High.

published: 2013-06-27 13:50 | editor: | category: Analysis
Jinko recently announced the 1Q13 financial results. Due to the rise in Asia market, the demand has continuously increased. In addition, Europe demand has also increased in 1Q13. While China faced traditional off-peak season in the first quarter, Jinko’s shipment quantity reached 338.6MW, which increased by 12% compared with that in 4Q12 and increased by 36% compared with that in 1Q12. It set a record high for the shipment quantity per quarter.
 
 
In terms of income statement, the sales revenue was USD$187.3M. As the company did not recognize such EPC revenue in 1Q13 led to a slight decrease in recognized revenue, which increased by 9.7% compared with that in 1Q12 because the increased shipment quantity can offset the impact caused by decreased ASP. The gross margin in 1Q12 was only 0.7%, however, it rose to 3.8% by 4Q12. The gross margin in 1Q13 increased to 12.7% due to the rise in ASP, returning demand, and emerging market’s higher price. This made Jinko the PV manufacturer in China with the highest gross margin while the net loss has shrunk to USD$20.8M. In terms of balance sheet, both the cash flow and total current asset increased this quarter, which improved the current ratio. However, it’s still needed to be cautious on Chinese PV manufacturers’ high proportion of liabilities.
 
 
Based on EnergyTrend’s understanding, Jinko followed last year’s strategic business plan to continuously work on emerging market’s development. The proportion of shipment shipping to traditional European market won’t be as high because it’s restricted by anti-dumping punitive tariff. In fact, the proportion of shipment shipping to Europe in the overall shipment is likely to drop below 20% in 2013. In order to diversify the market, the company will be active in 27 countries around the world. With the shipment shipped to Canada and Australia being increased, Jinko will be making their first important sales in Chile, Mexico, and Latin American countries. In addition, Jinko’s order visibility has been relatively high in regions outside of Europe with all the production lines being operated and the entire summer capacity being sold out.
 
In the Japanese market, there will be an explosive growth due to the government subsidy this year. The demand is likely to be large this year regardless of residential market, commercial roof-top market, or large scale projects. Jinko has started to strengthen the brand and exposure rate after the completion of their local sales offices in March. They have acquired larger orders, with some of the orders from bigger sized commercial roofs. It’s estimated that there will be larger scale projects in the next few quarters. Although it entered the Japanese market relatively late, Jinko’s shipment shipping to Japan is likely to account for 16% in the overall shipment, reaching 100MW and 150MW in the entire year. 
 
In China, the demand will also grow significantly after the traditional off-peak season in the first quarter. Jinko currently holds more than 300MW contract and it’s estimated to continuously increase in the third quarter. Jinko believes there’s no international risk to ship to China and it will be easier to reclaim the payment, thus they will increase the shipment to China with which account for 40% in the overall shipment. On the other hand, Jinko forecasts to come up with 200MW and 300MW power plant projects, which will mostly be focused in China too. The payment is more unique for Chinese market’s power plant projects, which is unnecessary to pay fully until the power plant has started to operate after one year and thus may lead to financial pressure.
 
Jinko has continuously received orders from other regions, such asSouth Africa, Chile, Mexico, and Brazil that will supply for some large public projects. In India, there will be more than 50MW shipment in the second quarter due to the previously signed contract. 
 
Due to the recent first-stage announcement on the anti-dumping tariff of 11.8%, Jinko believes the tariff will be shown on ASP without affecting the gross margin and the demand in the short run will still be strong. Although Jinko has reduced the harm by decreasing shipment to Europe, if the tariff significantly increases in August, the high tariff will be difficult to be entirely transferred to the price. In addition, if there’s no negotiation between Europe and China to improve the tariff, it will damage Chinese manufacturers’ gross margin and Jinko may have to negotiate the price with the clients by case in the future. Furthermore, as the anti-dumping result becomes clear, china might purpose anti-dumping and countervailing on polysilicon which might increase Chinese manufacturers’ cost. Jinko believes if the cost increases, the method to cope with it is to raise the module price as well. However, they wouldn’t just act on it unless the result is certain.
 
To look into 2013, the overall shipment is expected to fall between 1.2GW-1.5GW, which remains the same to what was expected last year. The capacity will be remained 1.2GW without any strategic expansion plans. When the demand can’t meet the supply, they will use OEM to work with other manufacturers. In terms of applications, they will lay special emphasis on residential market, commercial roofs, but also for large scale projects according to different regions. The company’s current business goal is to stay stable and continue diversify the market, hoping the demand in China, Japan, and other emerging markets as well as countries with higher ASP like Japan and South America can bring steady profit to Jinko.
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