Sebastian Liu - IR Director Chen Kangping - CEO Cao Haiyun - CFO Gener Miao - VP Global Sales and Marketing.

Maheep Mandloi - Credit Suisse Justin Clare - Roth Capital Partners John Segrich - Luminous Brad Meikle - Coker & Palmer Institutional.

Good day and welcome to the JinkoSolar Third Quarter 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would now like to turn the conference over to Sebastian Liu. Please go ahead, sir..

Thank you, operator. Thank you everyone for joining us today for JinkoSolar’s third quarter 2017 earnings conference call. The Company’s results were released earlier today and available on the Company’s IR website at www.jinkosolar.com as well as on newswire services.

We have also provided supplemental presentation for today’s earnings call, which can also be found on IR’s website. On the call, today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Cao Haiyun, Chief Financial Officer; Mr. Gener Miao, VP Global Sales; and Mr. Sebastian Liu, IR Director. Mr.

Chen will discuss JinkoSolar’s business operations and the Company’s highlights, followed by Gener Miao who will talk about the sales and marketing and then Mr. Cao who will go through the financials. They will all be available to answer your questions during the Q&A session that follows.

Please note that today’s discussion will contain forward-looking statements made under the safe harbor provision of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today.

Further information regarding these and other risks is included in JinkoSolar’s public filing with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under applicable law. Now it is my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar. Mr.

Chen will speak in Mandarin and I will translate his comment into English. Please go-ahead Mr. Chen..

Thank you, Sebastian. Good morning and good evening to everyone, and thank you for joining us today. Margin shipment excited to high-end of our guidance during the quarter coming in 2,374 megawatts with the total revenue is $964.8 million, a decrease of 19% sequentially and an increase of 20.4% from the third quarter of 2016.

Gross margin rebounded to 12% from 10.5% of last quarter as a result of cost cutting measures and reducing the usage of OEM manufacturers.

Although, facing the challenge of rising material costs, our gross margin rate and net income from operation was increased in Q3; however, net profit decreased sequentially mainly because of the depreciation of the U.S. dollar and related exchange losses. Looking towards Q4, we say net profit have room to improve.

Demand in China remained strong during the quarter, the [indiscernible] market in China has been firmly supported by the DG market, which is expected to create over 20 gigawatts of demand this year with strong growth momentum carrying into Q4.

Turning to the U.S., after evaluating different remedy recommendations from the ITC, we are still awaiting for the final decision on the 201 petition. Regardless of what the final result is, we strongly believe in the U.S. solar market's long-term growth trajectory and we work hard the best solution accordingly.

Demand in European markets shown signs of an upturn as the effects of electricity parity sink in for more countries and regions. Look at the between low PPA prices and markets still remain stable this year have created some challenges in Indian market.

But this market is still growing fast and is gradually replacing Japan to become the third largest solar market. Demand in new emerging market continue to grow, the Australian, Jordanian, Egyptian, Mexican and Brazilian market are thriving. Demand in Saudi Arabia, the UAE, Argentina and other new markets also picking up quickly.

The sustainable long-term developments of the emerging markets has greatly improved as the solar system costs rapidly drops and regulators have more experience in promoting green energy and recognizing electricity options.

We will continue to strengthen our leading position in the various markets by expanding our service teams and enhancing our brand image. Looking into 2018 market, we're still optimistic that the global demand will be strong.

The Chinese market which account for almost 50% of the global demand this year is transitioning from utility dominating market to a DG driven market. The recent introduction of policy steps there favors DG projects and to make sure of this transition is smooth and could create more opportunities.

The global industry will face challenges in 2018 as it always does with the various tariffs, supply demand imbalance, capital expenses and expenditures. But the future of solar industry has never been brighter with grid parity of improving, the rapid developments of storage technology and in emergence of the era of energy Internet and smart energy.

For 2018, we already have good visibility into the first half with approximately half of our order book already filled. On the technology fronts, we are on track with the optimization of our mono wafer costs and upgrading diamond wire cutting to our multi-wafer production line, which are expected to be fully completed in next quarter.

We will also include black silicon sale capacity accordingly for more diamond wire costs multi-wafer output. Our tech team continues to make solid progress in developing half-cell and bifacial n-type cells technologies.

Our half-cell technologies a leading the industry especially in terms of combination to other high efficiency technologies and performers such as power output and reliability, we also made progress in developing new technologies such as Hydride Oxide Thin Film or HOTF, which makes 23.5% sales efficiency in lab and we plan to develop mass production lines based on it as a next stage.

Overall, we will continue to allocate resources towards innovating new and high efficiency solar technologies and strengthen our leading position in the market. Turning to manufacturing capacity, our internal wafer cell and market capacity reached 7 gigawatts, 4.5 gigawatts and 8 gigawatts respectively in end of third quarter.

We expect to reached 7.5 gigawatts and 8 gigawatts respectively by the end of the year, operates approximately 3.5 gigawatts were the mono wafer and approximately 2.5 gigawatts were the PERC Cells.

Looking into 2018, we plan to further increase mono wafer capacity as a market leader and we also evaluate options to increase our market capacity and PERC cell capacity depending on how the market evolves. We'll remain cautious about expanding our manufacturing capacity as I mentioned our flexibility.

Before turning the call over to Gener, I will quickly go over the guidance. Based on the current estimates, total market shipments will be in the range of 2.3 to 2.5 gigawatts for fourth quarter and we increased our full year guidance to 9.6 to 9.8 gigawatts quarterly. Thank you, Sebastian. With that, I will turn it over to Gener..

Thank you, Mr. Chen. I'm happy to report another great quarter of sales results in which we shipped a total of 2,374 megawatt of solar modules, which exceeded the high end of our guidance. As Mr. Chen just discussed, we remain optimistic about the global demand in 2018 which is already approximately 60% order visibility for the first half of next year.

2018 will still be competitive, but I'm confident that we are well prepared for it. First, let's look at our geographic distribution of our module shipment in this quarter. China is still our biggest market share which with approximately one-third of the total shipments. The new emerging markets came at the second and the next one is North America.

The Asia-Pacific, European and Indian market followed. China remained our largest market during the quarter where ASPs kept the stable following the June 30th cutoff. Although, it's hard to claim that Chinese market will be even stronger in 2018 which became largely on a number of factors and policies.

We expect overall Chinese demand in 2018 to remain solid as the market shifted from utility scale projects to DG projects and the poverty elevation project. The government is determent to make this transverse look and healthy.

For example, the issuance of distributed generation market treating pilot policy, if landed, could largely result the lack of power consumption of DG and issues of transmission charges to the grid, the two biggest problems in DG market.

We have been optimizing our sales teams and manufacturing capacities to meet the increasing strong demand from Chinese DG projects while maintaining the flexibilities to adjust in the future. Outside China, the U.S. ITC issued a straight remedy recommendation for the U.S. solar industry on October 31st.

We have taken an active role in meetings organized by industry associations and the feedback industry recommendations to the regulatory decision making entities, where at the same time have prepared for possible outcomes from Section 201. Demand in U.S.

next year especially in the first half may contract to some extent as some demand that was released earlier in this year. But we expect as the U.S. market will recover quickly and continue to develop sustainably generating an average of more than 10 gigawatt annual demand very soon.

In Europe, grid parity is generating a lot of opportunity for us, not only in France, but in other regions with good solar radiation levels and high electricity rate. We expect the demand will go back to back upwards channel over the next two to three years.

Turning to Asia-Pacific region, Australia is generating a lot of growth as more utilities sales projects are expected to become online over the next five years. At the same time, demand from Vietnam, Malaysia, Indonesia and other region is also increasing.

Demand and ASPs in Japan remained relatively stable during the quarter with 5 to 7 gigawatts total demand expected for the next year. India has gradually become the third largest PV market in the world.

Because of the gap between the market price and the effected price of PPA, lots of IPP are choosing to wait and see, resulting in potential delays in some demand there. We expect that India to become one of the main growth drivers for the global PV industry over the next two to three years as solar system costs continues to go down.

Gross momentum in emerging markets continues to increase significantly. Jordan, Egypt, Mexico and Brazil are expected to become gigawatt level market. Demand in Saudi Arabia, UAE, Argentina and other regions is also picking up quickly.

With the support of international financial institutions, more and more developing countries in Africa will also become further future growth drivers such as Ethiopia and Nigeria. We are really proud and happy to see solar energy become more and more affordable and begin to change people’s life.

ASPs during this quarter were stable compared with last quarter. We expect that module prices maintain stable in last quarter of 2017 while ASPs in the first quarter of 2018 may increase slightly depending more on the price trend from China market as well as the cost of raw materials.

In Q3, we continued to promote JinkoSolar’s brand by attending various high profile summits, industry conferences and customer engagement activities. In September, we were invited to speak at the 9th BRICS Summit hosted in Xiamen, China.

At the summit representing the global renewable energy sector, we provided the insight on how the BRICS nations can fulfill their Paris Climate Agreement commitments through further cooperation in trade and in renewable energy development.

Events like this are not just to promote our brand, but also allow us to shape the global conversation on sustainable development. All-in-all, in Q3, we attended 9 trade shows and participated in 27 conferences. We also hosted 8 customer events, 37 customer trainings and 41 co-marketing activities with key partners across the globe.

These activities further strengthened our leading position as one of the world’s strongest and mostly recognized solar brands. With that, I will turn it over to Charlie..

Thank you, Gener. I’d like to walk you through our Q3 financial results. Total solar module shipments were 2.4 gigawatts, down 18% sequentially and up 48% year-over-year. Total revenue was $965 million, down 19% sequentially and up 20% year-over-year. Gross margin was 12% compared to 10.5% in the second quarter and the 19.2% in Q3, 2016.

We continue to cut our blended cost to $0.335 per watt compared to $0.34 in the second quarter. The operating expenses represented 10.6% of total revenue compared to 9.5% in the second quarter and 11.1% in the third quarter of 2016. EBITDA was $36 million compared to $37 million in Q2 and $90 million in Q3, 2016.

Net income was $1.7 million, this translates into basic and diluted earnings of $0.04 per ADS, while GAAP net income was $3.9 million, this translates into non-GAAP basic and diluted earnings of $0.12 per ADS. Now let's move to our balance sheet.

By the end of Q3, cash and cash equivalents and restricted cash was $371 million compared to $280 million at the end of second quarter. Inventories were $788 million compared to $768 million at the end of Q2.

The total debt was $1.2 billion, compared to $1.1 million at the end of Q2 and net debt was $824 million compared to $786 million at the end of Q2. The company's working capital was $78 million compared to $57 million at the end of Q2. At this moment, we're happy to take your questions.

Operator?.

Thank you. [Operator Instructions] We will now take our first question from Mandeep Mandola from Credit Suisse. Please go ahead..

Hi, it's Mahdeep Mandloi from Credit Suisse. Thanks for taking the questions. Given, we already two-thirds into Q4 right now.

Can you talk about how Q4 gross margin is shaping up given your visibility in ASPs and costs globally? And then I have a follow-up?.

Mahdeep, we expect the gross margin to be stable. As talked by Gener, the ASP we're impacting the Q4 is quite stable. From the cost perspective, the polysilicon price is putting some pressures, but however we continue to cut our OEM volume as well as the improvement of in-house on certain cost.

And we are also benefiting from slightly down for the solar cell price. So, we expect the blended module cost in Q4 is stable compared to the Q3..

Could you talk about 2018 your expectations of how either ASP or cost should shape up in 2018? And just as a follow-up, on capacity expansions for next year.

When do you think you would have a better visibility and announce more capacity expansion for next year?.

Sure, I take the capacity and I think costs target question and Gener is going to answer shipment. For the capacity expansion, the evaluation is still in the process. The capacity expansion is depending on the market demand as well as the potential results of Section 201.

And in principle, we are going to continue to invest on the high-frequency capacities. At the same time, we are going to maintain some flexibility. And the for the cost target, we think, we are going to allot in Q4 next year. But we are expecting significant cost reduction in 2018.

From the multi wafer side, we are converting the diamond wire cutting technology from a high percent in the first quarter, which we hope to improve our multi wafer costs. For the mono wafer, we are ramping up very quickly and our target to be the mono wafer cost leaders in the first half year 2018. So I’ll turn back to Gener for the shipment..

Yes. So back to the market, we can see the 2018 market demand continues to be strong. And we have given the current visibility of 2018 orders, so we are pretty confident that 2018 will be another great year for the whole solar industry.

However, from the ASP side given the current key market policy uncertainties such as China feed-in tariff policy together with U.S. 201 and also the India antidumping, there are still some headwinds that are bringing up some uncertainties.

But we believe, well, it should be, bring more clarities in the next, let’s say, one to two months, which will further strengthen the confidence for the 2018 demand. And very, one up with market we have up with is booming is the emerging market.

As I mentioned previously, that loss of new PV market become gigawatt market in 2018, which are great news for the whole industry..

We will now take our next question from Philip Shen from Roth Capital Partners. Please go ahead..

Hi, everyone. This is Justin Clare. I am on for Phil today. Thanks for taking my question. So first off, in Q3, the margins improved sequentially to 12%.

I was just wondering, if you could give us a bit more detail on what drove the margin expansion and tell us what the mix of OEM shipments were in the quarter as well as the mix of mono PERC shipments?.

In terms of shipment mix by product, the mono PERC is roughly 18% of total shipments of 2.4 gigawatts. And for the improvement on gross margin is contributed by two parts. I think one is the, because of the OEM volume in the third quarter and the OEM is roughly 20% in third quarter, which is in Q2 I think 40%.

System wise, we continue to see improve our in house transition cost for both multi-wafer and multi-module -- the mono-module, which also make some contributions..

Okay, got it. And then just to take a better sense for.

Can you share what the gross margins are for or were for OEM shipments versus mono PERC shipments versus your multi-shipments in Q3?.

I think OEM, the gross margins lower than 4%. And for the mono PERC gross margin and you can calculate it from this perspective. In general, the mono PERC price is 10% to 30% higher than the multi and the cost is higher than for the mono PERC relative higher than 5%. So, you can do the calculation..

And then finally from me, I wanted to ask about the China market, you've highlighted the strength of China in Q3 including the rapid growth of the DG Segment.

Can you share what your overall expectation is for China demand in 2018? And then how big you think the DG segment could be?.

This is Gener. For China market, we believe it will continue to be the number one market not only for Jinko, but also for the whole solar industry. And this year people believe China market will or let's say will exceed 50 gigawatt, which is historical high numbers.

And for the 2018, at least from our side, we still believe it will be 40 plus gigawatt market, let's say around 45 gigawatt. And the potential DG projects are verified, given the great returns we have seen from the market also as well as government support for the DGs the quota allocation or non-GAAP allocation et cetera.

So, we believe that market will become very big. So you can imagine from Q3, if I remember it correctly the quarterly installation for DG is almost 7 to 8 gigawatt per quarter.

So, if we take that as a peak time -- let's say, it is potentially could be like the 30 gigawatt plus only for DG together with government's support of Poverty Elevation projects which will easily add up another 10 plus gigawatt. And also there are some top level programs et cetera.

So adding everything up together, you will see the 40 gigawatt plus number will be very easy to reach..

Yes, Gener's point at 40 to 45 gigawatt is a kind of minimum or conservative number, so become X factor definitely the DG project..

We will now take our next question from John Segrich from Luminous. Please go ahead..

I just wanted to confirm a couple of things that you said. You said that ASP was flat sequentially.

So does that mean 37.7 is the right compare that we should be using?.

Yes, that’s very close. The change is less than 1%, so..

Okay.

Would it be below that or above it just sort of clear?.

Almost the same..

Yes. I think it just takes the same..

And then I’m wondering every quarter in the past you guys have given specific breakouts of megawatts by geography. This quarter you’ve given just general comments.

Do you think you could walk through those with little more specificity for us for modeling purposes?.

I think from all point of view is we would like to help you, but given the current geography mix and the market competition, we prefer to disclose more conservative information.

But in general, we can comment that China takes approximately one-third and followed by other market such as emerging market also approximately, let’s say 25%-ish range and followed by North America and Asia-Pacific both at 20% of market. The rest will be the Europe..

And then just last one. You had a big jump and related party revenue sales.

Can you explain what they are and why that happened during the quarter?.

The related party now sales transaction is composed of two parts. One is the Abu Dhabi projects, the project’s total size is 1.2 gigawatts and we hold 20% equity. So from the accounting perspective, we need to record this module shipment as related parties because we hope to represent equity.

And another part is, I think roughly 100 megawatts shipments to Jinko Power. Jinko Power has been spring off from JinkoSolar back to last year, but because of the same controlling shareholders from the accounting perspective it seem as related party, but the transaction price is based on the market price..

Okay.

And so for the EBITDA of these sales then, is there some adjustment that comes through the income statement as well backing out your 20% ownership?.

You’re right. We account 100% shipment revenue and gross margin. But from the net income perspective, we will adjust 20% from that to be excluded. So from the net income perspective, we just record the 80%..

It’s the same methodology Canadian dollar [indiscernible]..

Yes. No, exactly.

And can you just remind us how much you invested in the Abu Dhabi?.

Total investment roughly, I think $50 million..

$50 million, okay.

And you intend to sell them the 1.2 gigawatts, right?.

Yes..

[Operator Instructions] We will now take our next question from Brad Meikle from Coker & Palmer Institutional. Please go ahead..

Could we just talk about free cash flow? Just thinking about the free cash flow, I think the firm's burned cash less than 12 years as a public company and is going to burn a couple of $100 million this year and next year and maybe free cash flow positive in 2019.

Can you talk a little bit about what your plan is for sustained free cash flows? I think stocks rate at a low multiple because of the market perception that you're really never going to be free cash flow positive.

So can you speak to what the plan is there?.

I think this year free cash flow level should be negative because now we are investing in the mono wafer in PERC capacity, and next year depending on our capacity expansion plans.

So this year we did have been once we reach free cash flow positive, but it's going to be depending on the market demand, our capacity expansion plan and a couple of things..

Yes, Brad, this year, Sebastian. So next year, we still -- it's too early to make a say invest our free cash flow will be negative, I think. So this is a let's try to say, we're trying our best to make a free cash flow. But we so far at we expect at current time we don't have stated plan to the cash flow plan..

Yes. I think from the perspective of having positive view on the view and I mean this year demand is coming 15 gigawatt above anyone thought it was going to be probably strong demand from China and pricing is higher in the second half. And there is still not a lot of free cash flows despite some positive developments.

So I guess that the question I think investors are asking is polysilicon prices have rebounding from 13 to 17 or 19 or so.

And at what point does the more balance supply demand environment translate to profitability and pricing power on a longer term basis? I mean do you think that the excessive margin in wafers we see internally will translate downstream at all or what's your view?.

I think you're right. I mean this year because of now the strong demand and the supply shortage for the polysilicon and not only polysilicon, some of our suppliers enjoying higher gross margins. And we believe it's not sustainable and looking to next year.

I think the profitability and even you're talking about cash flows we shift to the wafer sale and module metrics..

Okay, thank you. I guess last question is can you talk a little bit more about what you're seeing in emerging markets? Obviously, there is a lot of products in announcements.

And what do you think will translate into real new market next year?.

This is Gener. For emerging market, surprisingly, we have seen the Middle East region, let’s say, Africa together with Latin America as well as the Southeast Asia region has a lot of projects coming up online. Maybe you have seen a lot of announcement from Egypt, UAE, Saudi Arabic and Indonesia, especially Australia.

And together with Latin American countries like Mexico and Brazil, Argentina eventually, so those markets adding up together, I think it will take more than, let’s say 30%, close to 40% of the demand for the next two to three years time. So we value the emerging market demand will become a very important market for Jinko together with the industry..

[Operator Instructions] As there are no further questions in the queue, I would like to turn the call back to Sebastian Liu for any closing or additional remarks..

On behalf of the entire solar -- JinkoSolar’s management team, I want to thank you for joining us today. If you have any further questions or concerns, please feel free to contact us. Have a good day and good evening. Thank you. Good bye..

Thank you. That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect..