JinkoSolar is the world s No. 1 in terms of shipments, but the stock price has fallen, and the solar

Visual China.

Text |BT Financial Data Intermedia, Author | jordan sauer

The ambitious Jinko has not stopped, and their module shipments for the full year of 2023 will soar to 70 to 75GW, and by the end of the year, the overseas comprehensive production capacity is expected to exceed 12GW. This is a victory for China's manufacturing power and a powerful declaration for the global green energy market.

When it comes to cost, JinkoSolar's cost of manufacturing solar modules in China is 50% lower than in Europe and 65% lower than in the United States. This huge cost advantage makes Jinko highly competitive in the global market. But even so, issues such as tariffs are still in some markets, such as the United States, putting a lot of pressure on Jinko.

The solar market is becoming increasingly competitive, and the number of solar modules is declining. Although the increased competitiveness of solar energy has led to the growth of demand for JinkoSolar, the pressure of the company has squeezed the company's profit margins. This is also reflected in the fact that JinkoSolar's performance has been unsatisfactory in the past few years.

On December 20, JinkoSolar's stock price continued to decline due to a slight weakness in the capital market, and finally reached 803 yuan**, a decline of 159%。It is worth mentioning that the intraday share price hit a low of 801 yuan, this price set a record low for the company's stock price. Looking back on the past year, JinkoSolar's stock price has accumulated **4118%, compared to a 13% decline in the CSI 300 index over the same period88%, it is clear that JinkoSolar's performance is lagging behind the overall market level.

The question now is, in the face of such headwinds, can JinkoSolar use its manufacturing strengths in China to find a way to break the game?Will they be able to stay ahead of the fierce global competition and achieve sustained profitable growth?

With the cost of solar production plummeting, utility-scale solar PV has become the most affordable option for power generation in many parts of the world. The solar market is becoming more competitive and expanding rapidly.

In 2022, solar PV generation increased by 270 TWh, a year-on-year increase of 26%. In the first half of 2023, PV installations soared by 153% in China, 102% in Germany, and 34% year-on-year in the US.

The dominance of China's photovoltaic industry is even more indisputable. In 2022, China's output of photovoltaic silicon materials, silicon wafers, cells, and modules hit record highs, reaching 8570,000 tons, 3713gw、330.6gw、294.7gw。China's domestic PV installed capacity has ranked first in the world for 10 consecutive years, with a cumulative installed capacity of more than 392GW. Entering 2023, China's photovoltaic industry will continue to make rapid progress, with rapid technological progress, and the scale of industrial manufacturing and installed capacity applications will grow by leaps and bounds.

According to the data of various institutions, by the end of 2023, the global production capacity of polysilicon, wafers, cells, and modules will exceed 800GW. If all the expansion announcements are basically realized on schedule, the production capacity of polysilicon and cells will exceed 1,100 GW, and the production capacity of silicon and modules will reach 900 GW. This will far exceed the module demand of 480GW and 550GW in 2023 and 2024.

According to CPIA data, China's production capacity in all links has accounted for more than 80% in the past two years.

In the context of global decarbonization, the demand for solar energy is expected to continue to rise. According to the International Energy Agency**, solar PV capacity is expected to surpass coal and become the world's largest energy source** by 2027, accounting for more than 20% of all electricity capacity. According to data from the China Photovoltaic Industry Association (CPIA), in the first half of the year, the output of the four major manufacturing links of polysilicon, silicon wafers, crystalline silicon cells and crystalline silicon modules all achieved a year-on-year increase of more than 60%.

However, in this wave of photovoltaic prosperity, hidden worries have gradually emerged. In the first half of the year, there were as many as 23 listed companies with revenues of more than 5 billion yuan in the photovoltaic industry chain, of which 16 companies' revenue increased by more than 20% year-on-year, and 9 companies' net profit doubled year-on-year. However, at the same time, the leap in production capacity of all links in the industrial chain, especially the polysilicon sector, has brought about a shift in the relationship between supply and demand, and in the first half of 2023, polysilicon has plummeted, and the price of downstream links has also dropped.

According to the latest report by Seia Wood Mackenzie Power & Renewables, the global average of solar modules from Q1 to Q3 2023 is 30%-40%. According to domestic data, polysilicon** has fallen by 80% since last year's high, and the average transaction price of mono-Si dense polysilicon has fallen to 6.%.570,000 tons;Wafers, cells, and modules** also fell sharply.

Behind the boom in the PV industry, a storm of polysilicon production capacity is brewing. According to the latest data, polysilicon production capacity will continue to be released in the coming period, however, due to the impact of the industry, the asset impairment losses accrued by many enterprises have increased significantly compared with the same period last year, exposing the risks behind the industry.

Lv Jinbiao, deputy director of the silicon industry expert group of the China Nonferrous Metals Industry Association, pointed out that there is no obvious surplus in the polysilicon market this year, and some new entrants have not increased production faster than expected. Total production is expected to be around 1.5 million tonnes (about 600GW) in 2023. However, the real challenge will emerge next year, especially in the first quarter, when the problem of overcapacity will become more severe.

The statistics from the Silicon Chapter reveal a more grim reality. By the end of 2023, polysilicon production capacity will reach a staggering 28520,000 tons. Among them, about 750,000 tons of new production capacity will be put into operation in the fourth quarter. Considering that this part of the production capacity will take time to ramp up, and assuming that there is no expansion in 2024, the annual polysilicon output will still reach 2302.5 million tons (equivalent to 920GW-1000GW).

More worryingly, polysilicon production in December 2023 may reach 200,000 tons. At the end of the year, all aspects of the enterprise need to clear the inventory, if the first quarter of next year encounters the demand off-season, the contradiction between supply and demand will be extremely acute. This may not only lead to further polysilicon production, but also lead to fierce competition and warfare among enterprises.

In this silicon storm, the challenges faced by PV companies are becoming more and more severe. In addition to facing the pressure of overcapacity, enterprises also need to deal with asset impairment losses caused by ***. How to maintain profitability in the fierce market competition has become a major problem for photovoltaic enterprises.

JinkoSolar is the only solar giant to achieve both revenue and profit growth, with strong growth momentum in the third quarter.

According to the third quarterly report, Jinko's quarterly shipments reached 22,597MW, a year-on-year increase of 1082%, with 21,384MW of solar module shipments and 1,213MW of cells and wafers. Revenues reached 43600 million US dollars, a year-on-year increase of 631%。At a time when the demand for solar energy is strong, JinkoSolar has successfully grasped the pulse of the market and achieved a leap in performance.

Despite the significant increase in modules in the third quarter, JinkoSolar's gross margin bucked the trend and rose to 193%, up from 156% and 157%。This is mainly due to the company's efficient operation and cost control capabilities. At the same time, adjusted net income attributable to ordinary shareholders reached 184.6 billion US dollars, a year-on-year increase of 2151%。EBITDA is 607.4 billion US dollars, a year-on-year increase of 1459%。This series of data fully demonstrates JinkoSolar's profitability and growth potential in a complex market environment.

Looking ahead, JinkoSolar's management expects module declines in Q4** but will be relatively stable next year. An oversupplied market environment can put pressure on older production lines for less productive products. However, JinkoSolar relies on the high efficiency of its mass-produced n-type modules – up to 256%, which has an advantage over the competition and is expected to gain more market share.

It is worth mentioning that JinkoSolar's n-type modules accounted for about 57% of shipments in the first nine months of 2023, continuing to lead the market average. Management expects n-type to account for 60% of total module shipments in 2023. This trend shows that n-type modules are becoming the mainstream of the market, and JinkoSolar's leading position in this field lays a solid foundation for its future growth.

Geographically, China accounted for about 40% of the company's third-quarter shipments. At the same time, the Inflation Reduction Act (IRA) is expected to increase demand in the United States, while inventories in Europe remain relatively high. In addition, the company is optimistic about the growing demand for solar energy in Saudi Arabia and the Middle East. These market dynamics provide more possibilities for JinkoSolar's global presence.

For the fourth quarter, management expects gross margin to decline sequentially due to the company's greater exposure to the China market. However, analysts believe that lowering interest rates will be beneficial to JinkoSolar. If interest rates fall, the demand for solar panels is likely to increase, which will help reduce the total cost of solar energy.

In terms of photovoltaic cell technology, as the conversion efficiency of PERC cells approaches the bottleneck, N-type cell technology represented by TOPCON, HJT, BC cells, etc. has become a promising technical direction for photovoltaic companies. JinkoSolar was the first to achieve large-scale mass production of TOPCON, which became the key to its sudden rise. Through the comparison of financial reports, it can be found that the dividends brought by TOPCON's expansion are becoming more and more prominent in the third quarter. Enterprises with N-type TOPCon products as their main business, such as Jinko and Junda, have achieved high performance, showing obvious profit advantages.

According to the analysis of industry experts, the decline of n-type photovoltaic modules** will increase the yield of end users, and then promote the continuous strengthening of the scale of new photovoltaic installations. At that time, the leading photovoltaic enterprises with n-type technology, capital and capacity advantages may benefit. At the same time, the supply and demand of n-type polysilicon have tightened, and the price gap between N-type and P-type polysilicon has widened. Compared with p-type polysilicon, N-type polysilicon has high purity and low metal impurity content, and the production capacity of n-type polysilicon will be the core competitive factor for polysilicon companies in the future.

JinkoSolar's self-developed 182N high-efficiency monocrystalline silicon cell (TOPCON) conversion efficiency has been tested and certified by the National Photovoltaic Industry Metrology and Testing Center for third-party testing, and the conversion efficiency of full-area cells has reached 2689%, setting a new record for the efficiency of large-area N-type monocrystalline passivated contact (TOPCON) cells of 182 and above. This lays the foundation for the next step of mass production efficiency improvement.

The company plans to launch a double-sided TOPCON next year, and the mass production efficiency is expected to reach 265% and hopes to gradually reach 27% to 27% in 2024-20255% mass production efficiency. Such an efficiency will definitely suppress all other technical routes and become the mainstream of mass production in the market.

On the track of the photovoltaic industry, JinkoSolar has won the attention of the market with its steady performance and innovation capabilities. However, this is despite the fact that as of December 17, its forward price-to-earnings ratio was only 28 times, and with a certain amount of debt tolerance, the true value of this company is not as simple as the numbers.

First of all, when we count its third quarter at the end of 22After $900 million in net debt, JinkoSolar's enterprise value multiple (EV EBITDA) rose to 653, which is obviously higher than its apparent price-to-earnings ratio, revealing that the company is not as "cheap" as it first looks. In addition, JinkoSolar, which is in the solar industry, struggled to sustain a premium valuation deal due to the lack of a deep moat.

While the market expects a possible reduction in interest rates next year, which will be a positive for the solar industry, the potential oversupply situation cannot be ignored. This challenge could further squeeze JinkoSolar's profit margins.

However, analysts also see bright spots for JinkoSolar. The company actively returns capital to shareholders through buybacks and dividend payments. In September this year, JinkoSolar announced for the first time a distribution of 1. per American Depositary** (ADR).A $5 dividend, a move that could strengthen the loyalty of its shareholders.

In addition, JinkoSolar's expansion in photovoltaic + energy storage business has also opened up new growth space for JinkoSolar. As a well-known brand in the solar industry, the company already has the inherent advantage of extending into the energy storage market. However, the energy storage business is still in its infancy, and whether JinkoSolar can seize the opportunity remains to be tested by the market.

The disconnect between JinkoSolar's share price and its profitability is a phenomenon to watch. This means that there are other factors besides fundamentals that affect the performance of the stock. These may include tariff increases on solar panels and lower profit margins due to surplus.

Overall, analysts believe JinkoSolar's valuation is attractive, but there are many uncertainties in the current market environment. Therefore, investors are advised to maintain a wait-and-see attitude towards the stock and at the same time incorporate it into a diversified ** portfolio to diversify risk.

Interestingly, despite the recent downturn in stock prices, northbound funds have increased their holdings of JinkoSolar in the past 2 days, estimated at 2,860460,000 yuan, showing a certain optimistic attitude. At present, Northbound Capital holds a total of 10.6 billion shares, with a total market value of 8500 million yuan, accounting for 3 of the outstanding shares43%。This move may mean that after a period of adjustment, JinkoSolar's fundamentals are still recognized by some institutional investors.

At a time when market sentiment is sluggish, the increase in northbound funds has undoubtedly brought a hint of warmth to JinkoSolar. But the continued share price** also reflects the market's concerns about the company. For investors, while remaining cautious in the face of such a situation, it is also necessary to pay close attention to the company's future performance and industry dynamics in order to make informed investment decisions at the right time.

After all, in this market full of challenges and opportunities, it remains to be seen whether JinkoSolar can achieve breakthroughs and growth.