Hello, thank you for standing by, and welcome to the Q1 2023 JinkoSolar Holding Company Limited Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Stella Wang. Please go ahead..

Thank you, operator. Thank you everyone for joining us today for JinkoSolar's first quarter 2023 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 a supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Li Xiande, Chairman of the Board of Directors, and Chief Executive Officer of JinkoSolar Holding Company Limited; Mr. Gener Miao, Chief Marketing Officer of JinkoSolar Company Limited; Mr.

Pan Li, Chief Financial Officer of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, Chief Financial Officer of JinkoSolar Company Limited. Mr. Li will discuss JinkoSolar's business operations and the company highlights followed by Mr. Miao, who will talk about the sales and marketing; and then Mr. Pan Li, 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 provisions of the U.S. Private Securities 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 this, and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission.

JinkoSolar does not assume any obligation to update any forward-looking statements, infect as required under the applicable law. It is now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holdings. Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li..

We are pleased that deliver year-over-year improvements in module shipments total revenues and gross margin. Let's polysilicon prices being volatile in the first quarter. We adjusted our supply chain strategy to effectively control our costs.

Meanwhile, the ratio of N-Type product statements approached nearly 50% of our total margin shipments just to their high efficiency and our strong global marketing network, which partly contributed to the improvement of our profitability. Gross margin was 17.3%, compared to this 15.1% in the first quarter of last year.

Our profitability in the first quarter remained under pressure from the margin costs in the U.S. market. We have proactively taken measures to address this. And we have sent those the efficiency of the customer's clearance and the size of our module shipments to the U.S. market gradually improve recently.

As we continue to make effective progress, we expect our shipments to the U.S. market to gradually increase in the coming quarters.

Recently, our majority-owned principals operating subsidiaries just think have successfully issued convertible bonds in the principal amount of RMB10 billion to strongly support the expansion of our high efficient and tight capacity. Growth in PV demand in the first quarter remains strong. Despite is uncertain factors.

The Chinese market brand is from all in prices of PV projects and delays in PV projects and from 2022. The new installations of PV reached 33.7 GWac, an increase of 154.8% year-over-year. As a result, the cumulative installations of a PV has to surpassed the debt of hydropower for the first time, making PV the second largest power source in China.

In addition, the export of solar cells and modules from China to overseas markets remains strong in the first quarter. Total overseas shipments of modules and cells reach the US$13.1 billion in the first quarter, an increase of a 50-employment rate year-over-year.

Since the second quarter, as pricing gains between different segments along the supply chain relatively stabilized. With the price of polysilicon started to decrease moderately and current model prices has been attractive for the economies of PV projects. With more production volumes gradually released during the year.

We believe polysilicon price declines will stimulate large market demand. The top manufacturers are expected to increase their market shares thanks to stronger supply chain management, market footprint, and the competitiveness of their R&D and products. We are optimistic about global market demand and opportunities brought by new technologies in 2023.

We will continue to invest in R&D and advanced N-Type capacity to enhance our N-Type leadership in terms of mass production capabilities, product performance, and cost while exploring the PV plus areas to proactively respond to competition.

The second phase of 11 GW TOPCon cell capacity in Jianshan has reached the full production and the average and mass produced the efficiency of 182mm N-Type TOPCon sales reached at 25.3%.

We have also further improved our N-Type ecology chain, constantly enhancing our all-around the competitive advantages of N-Type wafer-cell and modules, with improving supply chain management for key and auxiliary materials, iteration of core technologies, and process improvement.

As our technology, products performance, and cost are all improving continuously. We expect that to maintain our leading position in the industry. Recently, we were ranked in the highest or AAA category in Q1 edition of PB tags, module tag a bank ability report.

A recommendation by the industry of our advantages from outstanding manufacturing finance and the technology. By the end of the first quarter of accumulated N-Type module shipments extended to 16 GW, providing support for hundreds of projects globally in the past year.

In January this year, we launched the Second-Generation Tiger Neo panel family, the model efficiency of the upgraded Tiger Neo family of 445 Wp for 54-cell, 615 Wp for 72-cells and 635 Wp for 78-cells were up to 22.27%, 23.23%, and 22.72% respectively.

Meanwhile, we increased investments in energy storage business, furthering its development, and continuously provided our clients with high efficient, reliable, and safe solutions out of competitive costs related to clean energy transformation.

In conselleria, future compensation will be based on comprehensive strength, we are confident in our ability to further increase our competitiveness and profitability in a global market. With our continuously improved global industrial chain and according to the N-Type technology and products.

Before turning over to Gener, I would like to go over our guidance for the second quarter and a full year of 2023. By the end of this year, we expect to mass produce N-Type cell efficiencies to reach 25.8% and, high efficient N-Type cell capacity to account for over 70% of our total solar cell capacity.

We are confident we will achieve our modules and targets that at the beginning of the year was N-Type modules accounting for about 60% of total module shipments. We expect the model shipments to be in a range of a 16 GW to 18 GW for the second quarter of 2023..

Thank you. Total shipment in the first quarter reached about a 14.5 GW of which upon 9% on market shipments, that annual cost from a regional perspective, China and Europe accounted for over 60% of their total shipments. Shipments to China market increase in more than Q4 of a year-over-year basis.

Well, that's the Europe market rule all of our 50% year-over-year. In addition, in emerging markets like Latin America, and the Middle East, North Africa also made a remarkable contribution.

Recently, the industry, which very which has price has gradually return to a normal level, and the domestic utility-scale PV projects have shared started that invitation. The current module price is acceptable to clients, which can support them to achieve their predetermining the installation target at a stable order pace.

We expect as a decrease of industrial supply chain price will drive the growth of utility-scale PV demand, especially in China market. The European PV market has grasped the potential and the decrease in industrial turn prices are expected to further drive demand for distributed and the utility-scale power stations. The U.S.

market has been robust the demand and at some utility scale power stations demand may be delayed until 2023 due to price factors and the supply constraints, with an expected 40 GW EC of PV installed capacity in 2020, in U.S. by 2023.

Over the past year, we have continued to improve our risk management capabilities continuously improve our supply chain visibility system and maintain a close communication and coordination with customers, suppliers and other parties to jointly promote the efficiency of the customer claim is in us.

Based on the experience of supply chain construction and the marketing network layout. We are committed to meeting our customers delivering with outstanding products and services. Regarding the products. Pipeline, you achieved a shipment volume of near 60 GW in the first quarter, maintaining a competitive premium.

China, Europe emerging market has become the main contributors to shipments. At the same time, we observed that tiger new is accelerating this penetration in markets like Asia. Recently, we were awarded the price of our trade at number one market brand portfolio for 2022 by Taiwan.

Tiger Neo not only has waterborne advantages such as a high conversion efficiency, high power output, and by official factor, but also leads the industry in terms of degradation rates, temperature coefficient, and weak light performance. Meeting customers demand for householders.

With the release of N-type capacity, and continuous improvement of Tiger Neo product performance, Tiger Neo's penetration rates and a premium are expected to continue to lead the market.

In terms of business distribution market accounted for more than 40% in the first quarter considering the standard demand for existing scale power stations this year. We expected the proportion of distribution to be around 14% for the whole year.

In 2023, our total visibility exceeded 60% with the majority being overseas voters at the upper screen a raw material cost decreased. We expect the module market price to experience a slight decline. Our signing price will fluctuate within a reasonable range in line with market trends.

We will continue to focus on customer clearance is approaches to provide high quality products and services to our customers. At the same time, we will adjust our marketing strategy to be flexible according to market conditions. With that, I will turn the call over to Pan..

Thank you, Gener.

We're pleased to report the year-over-year increase of about 73% in our shipments in the first quarter with strong demand from global markets, in response to the polysilicon price decline for adjusting our procurement strategy and achieved significant year-over-year growth in key financial metrics including revenue, gross profit and operating margin.

Let me go into more details now. Total revenue was $3.4 billion an increase of 58% year-over-year. Gross margin was 17.3% compare the weights 14% in the fourth quarter and 15.1% in the first quarter of last year.

The sequential and a year-over-year increase are mainly due to the decrease in the cost of polysilicon and the increase in the shipment of N-type modules which have a premium compared with the P-type modules. Total operating expenses were $412 million down 21% sequentially and up 25% year-over-year.

The sequential decrease was mainly due to a decrease in shipping cost for solar modules, and a decrease in impairment loss on property, plant, and equipment. And the year-over-year increase was merely an attributed to an increasing loss of disposal on PPE and an increase in demurrage charges.

Total pricing expensive accounting for about 12% each of total revenues compared with 14% in the fourth quarter, and the 15% in the first quarter last year, improving year-over-year.

Operating margin was over 5% compared with 2% in the fourth quarter excluding the impact of the change in fair value of notes, a change in fair value of long-term investments, and our share-based compensation expenses.

Adjusted net income attribute to JinkoSolar Holding Company Limited, ordinary shareholders was over 121 million have over two times sequentially and at 1.5 times year-over-year.

Moving to the balance sheet, at the end of the first quarter, our cash and cash equivalents were about $1.5 billion down from $1.6 billion at the end of the fourth quarter and compared with $2.7 billion at the end of the first quarter of last year.

Total debt was about $4.4 million at the end of the first quarter, compared to $4 billion at the end of the fourth quarter last year. Net debt was about $2.9 billion, compared to $2.3 billion at the end of the fourth quarter of last year. And our total debt profile has improved. This concludes our prepared remarks.

We're now happy to take your questions. Operator, please proceed..

Yes, thank you. [Operator Instructions]. And the first question comes from Brian Lee with Goldman Sachs & Company. .

Hi, everyone. Thanks for taking my question. I guess first question I had was just around the ASP environment. I know you guys have seen some good margin expansion here quarter-on-quarter sounds like most of that was driven by the decline in polysilicon cost.

So, what's the status of that? How much more sort of leverage do you have to lower polysilicon costs relative to what you're shipping out and your employee base today? And then can you kind of give us a sense of what you expect module ASP trends to look like in 2Q.

And maybe the back half of the year we are hearing there's sort of double-digit declines in certain markets for solar panels. So, wondering where your pricing strategy kind of is trending for the next few quarters. Thanks. .

First of all, on the pricing slide. For the market price, some called stable in Q1 and Q2 mainly first half. So, I don't see, there's too much and I say different opinions across the industry about the first half of module price.

But for the second half module price, we have seen some different opinions about based on different expectation of a certain price. However, in our opinion, for a certain price, my standard going down step by step. We are not expecting significant freefall over the second half, but we are more expecting a stable stepping down quarter-over-quarter.

So, based on that the expectation, I think that's how we expect the market price will go for the rest of the year. And I hope that answer your question..

Maybe just I know you made some comments around the U.S. and market.

Can you give us related thoughts around shipping into the country? How are your navigating the UFLPA and then also any thoughts around manufacturing or expanding your manufacturing base domestically within the U.S.?.

So, for the U.S. market side, I think we are closely working with our higher achievements, some suppliers to make sure we can provide the documents [indiscernible] needed for the UFLPA.

We have successfully done that based on quite a lot of shipment in the last quarters, and we are expecting with more and more experience and we can ship or we can get more approved. So, based on what we are doing right now, at least, that's the expectations. And based on that we are planning to resume our shipment in U.S. market gradually.

And we hope we can get back to relatively stable or let's say, or make the situation under control in the next quarter, next two to three quarters..

Last question for me, I don't know if I might have missed it maybe didn't provide it but can we get what the CapEx was in the quarter, what the free cash flow was in the quarter? And then any thoughts on kind of the financing need and strategy for the rest of the year to cover the CapEx here? Thank you..

Hey, Brian, this is Charli and, we have the subsidiary, the JinkoSolar. We have completed the company convertible bonds, Chinese capital markets recently. Second, one is the CapEx, it's our range of $1.5 billion to $2 billion in R&D and the focus is to solidify our leading position in time.

The supply chain, including the wafer cell and module capacities. And we're expecting the performance. If you look at that Q1 performance is pretty good, we will continue to expects the expansion of the gross margin, our probabilities, and as operating cash flows last year, it's kind of, I think it's around RMB0.4 billion and continue to improve.

So, the financing is already there. And it's sufficiently enough to meet our needs for the CapEx..

[Operator Instructions]. And the next question comes from Philip Shen with ROTH MKM. .

Everyone, thanks for taking my questions. First one as a follow-up to Brian on the UFLPA question.

How many GW has been released thus far in the U.S.? And how many GE you have obtain total?.

I think we have significantly and starting from Q4 last year in our modules and on the UFLPA, I have started to go through their content and to our customers. And then we have I think achieve a significant amount of the module shipments. And for the detained, I don't think we have very, very small and tiny.

And most important thing is looking forward we think; the mechanism has already been there and we have just [indiscernible] very strong visibility capabilities. And we expect to in the quarter by quarter, our segments will improve gradually.

And hopefully, we think it's possible if you miss third quarter our shipments with U.S., they'll be and back to normal situations..

Great. Thanks. So, of the more than 60% of the order book visibility. Can you talk about how much of that or how much of that you expect to go to the U.S.? Thanks..

This year, the total volume, we are planning to send to U.S. will be around 5% across a whole year's shipment impact. Because, like Charlie saying, we are gradually resume our shipment plans and revenue recognition, but of course of the time consuming of the logistics and you have to appear, et cetera. So, the revenue side of it won't be too much.

That's why we say around maybe 5% to 25%..

So, 5% to 10% of the [indiscernible]?.

Yes..

Good, so thank you. And then our work suggests that the non-China module -- non-China poly modules that you have that can access the U.S. market is roughly 5 GW annually.

Does that sound right? And then is it the case that you can smoothly import modules that contain non-China poly now, so there's no issue there at all?.

That’s good question, Phil. Currently, we are planning with module our resources of polysilicon. I believe that we are trying to do, because if we rely on single resource of polysilicon to my significantly constrained capability of the supply for U.S. market. Personally, I still believe that might be a challenge for U.S. customers as well.

So that's what we are trying to do..

Okay, got it. And then shifting back to margins for a bit or two margins for a bit. Can you give us a sense for how do you expect margins to trend in Q2 and Q3? Especially given the ASP comments that you had earlier? Do you expect margin expansion in Q2 and Q3 perhaps the margins to compress a little bit with some risk to backup pricing? Thanks..

I think to the market wide when we have the top 10 to gradually improve. At least that's what we believe. Because beck to the new technology competitive the Tiger Neo, which is highly appreciated by the end market and it sees a create additional values to the customers.

So, based on the additional value sharing business models, we definitely have the confidence to gradually improve our gross margins..

One last question, as it relates to U.S. expansion, I think Brian asked the questions. Just want to check in to see if you can give a little more color on the timing of that. My guess is you have to wait for the domestic content rules to be out. And then what do you see for U.S.

module pricing trends? Do you think, maybe by the year between this year 2022 and 2025? Thanks..

[Operator Instructions].

Sorry. I think we missed the last question. I tend to briefly talk about it, then we can pick up the next quarter. Yes, regarding U.S. expansion, we have the competence and we have the time to do it.

But for sure, we are Stella Wang waiting for some more clarification on the policy side and/or approval on the policy side which we are closely following that. Hopefully, we can get some clarity it’s so, good to go in the next coming weeks or months. Thank you. Let's take the next one..

[Operator Instructions]. And the next question comes from Alan Lau with Jefferies..

Thanks a lot for taking my question. And congratulations for the really great results and the budget expansion. My first question is, would like to know, how much did the pot charges relate to the detainment in the U.S.

for has went down? And if there's going to be zero going forward then, how much would that contribute to the margin expansion?.

First quarter, we have roughly RMN300 million to RMN400 million. The demerits and the additional storage costs for the U.S. shipment situations. And it's roughly I think 2%, 1.5% to 2% gross margin impact. And we're expecting it to where automatically decrease to maybe 25% of the Q1 level.

So, it's going to turn to be witnessing at least 1% gross margin expansion..

So, another question is, would like to know, how much is the poly prices for the polysilicon purchase from whacker? Is it going down at the same pace as the polysilicon price in China or it's going down a bit slower?.

So, it's very confidential but it's just simply a market, right? The poly out of China, the main purpose is for the U.S. markets. And it's, no expands your capacity for the poly outside of China.

So, it's kind of already let's say, very short startup supply situations, and the prices is very sticky and the different situation in China to the poly is surprise sufficient and this was back to maybe some relatively oversupply situation first quarter this year. So, it's kind of different pricing, depending on different situations..

Understood, so, is it possible that if the U.S. customs accepted some of the wrong way polysilicon, then your shipment to the U.S.

will get even higher margins because you get you back to the cheaper political percept?.

I think it really depends on the market principles right sort of supply and demand electronically opposed there of non-China polysilicon short of supply and the end the market is very strong for definitely create a favorite market for the upstream players.

If we have additional process and supply approval back to date it will make the situation easier, but how far it will go depends on finally still the supply versus demand, so we'll see..

Thank you, that’s clear, and my last question is in relation to Southeast Asia or capacity expansion potential. So, what is the latest plan in terms of the Southeast Asia capacity expansion? Thank you..

Currently, we have a 7 GW integrated capacity. We have this plan to expand capacity in wellness. And it's possible in which to maybe 11 GW to 12 GW integrated capacity by the end of this year..

[Operator Instructions]. That does conclude our conference for today. Thank you for participating. You may now disconnect your lines..