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spk08: Hello, ladies and gentlemen, and thank you for standing by for Jinko Sola Holdings Co-Limited First Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I would now like to turn the meeting over to your host for today's call, to Ms. Ripple Chang, Jinko Sola's Investor Relations Manager. Please proceed, Ripple.
spk00: Thank you, Operator. Thank you, everyone, for joining us today for Jinko Solar's first quarter 2021 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 Jinko Solar are Mr. Li Xiande, Chairman of the Board of Directors and Chief Executive Officer of Jinko Solar Holding Company Limited, Mr. Jenner Miao, Chief Marketing Officer of Jinko Solar Company Limited, Mr. Pan Li, Chief Financial Officer of Jinko Solar Holding Company Limited, and Mr. Charlie Cao, Chief Financial Officer of Jinko Solar Company Limited. Mr. Li will discuss Jinko Solar's business operations and 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 Jinko Solar's public filings with the Securities and Exchange Commission. Jinko Solar does not assume any obligation to update any forward-looking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of Jinko Solar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Li.
spk06: In the first quarter of 2021, our treatments including wafer, cell, and module were 5.4 gigawatts. Total revenues were 1.21 billion U.S. dollars.
spk00: and growth margin was 17.1%. Prices of polysilicum and solar glass continued to increase quarter over quarter due to the shortages. On the other hand, microeconomic conditions continued to impact commodity prices, which further increased sequentially for several production materials, such as solar junction boxes and EVA. In the first quarter, we adopted a relatively flexible business strategy. and continued to reinforce the management and control of our supply chain, while accelerating manufacturing process improvements in order to ease pressure on cost.
spk06: The price of glass was twice as high as it was last year. Although the price of glass has greatly decreased in the second quarter, it has contributed to the cost of construction, but the rising cost of raw materials has led to the increase in the cost of construction. In addition, due to the double impact of the epidemic and the SARS-CoV-2, the effective operation of the second quarter of the world has decreased by more than a quarter.
spk00: The volatility in the supply chain caused by the imbalance between polysilicon supply and strong downstream demand continued in the second quarter, and the overhaul of some polysilicon manufacturing plants intensified the shortage even more. The price of polysilicon reached RMB 220 per kilogram recently, more than doubled compared with the end of last year. Although the price of solar glass declined significantly in the second quarter, it was far from being able to offset the increase in production costs caused by the rising price of polysilicon. In addition, due to the double impact of the pandemic and the Suez Canal incident, transportation capacity worldwide decreased Sequentially compared with the first quarter, the shortage of containers on some important routes remains problematic. The combination of many factors have caused module prices to increase, and the demand from downstream customers was affected in the short term.
spk06: In the face of these many challenges, we have maintained close communication with customers and students, and jointly designed solutions to meet the challenges. We have seen that a large number of customers It shows an understanding of the fluctuation of the red light economy and supply, as well as the interoperability of the main building price and project demand, as well as the elasticity of more or less. However, the continued rise in price inevitably affects the demand of the mid-range. We can see that the negative feedback from the mid-range has begun to indicate that the material price will continue to rise. The high return of the material price and the stability will lead to a rise in demand in the mid-range market. Due to the shortage of raw material in this year's industry chain, it is enough to support 160 GW of brick. It is enough to support 210 GW of brick next year. Therefore, we believe that the price of raw material, based on the current high position, continues to rise and does not have a foundation. The above and below have a fight and hope to reach a relative balance in the second half of this year. Considering that the number of shipments in the next few years may increase significantly, it will strengthen the stability of the supply of raw materials. Faced with so many challenges, we continue to maintain close communication with all our customers to work out feasible solutions.
spk00: The majority of our customers have a deep understanding of microeconomic and supply chain volatility and have more or less flexibility to accept higher module prices and lower IRRs. However, the continuous increase in module prices will inevitably affect demand. We notice that the lower demand has kept the price from rising further and the lowering and stabilization of the material prices should drive up downstream demand. On a positive note, Polysilicum output is sufficient to support 160 GW of installation this year and at least 210 GW of installations in 2022. Therefore, we believe that there is no basis for the continued rise of polysilicum prices. Based on the current high spot price, the upstream and downstream fluctuation is expected to stabilize in the second half of this year. Considering that the company's shipments may increase significantly, in the next few years. In order to enhance the stability of polycyclic material supply, the company has strategically invested in Inamogudia Shinto Energy recently. At the same time, we signed a strategic cooperation agreement with China Costco Shipping Corporation, which will help us provide customers with long-term, high-quality transportation solutions. We are currently one of the 60 key accounts of China Costco Shipping worldwide.
spk06: At the end of the day, we are committed to the market's judgment, and we have actively lowered the opening power of the main building. The current regulation and electronics can basically remain in a long-term state. On the business strategy, we use the structural advantages of integrated production to flexibly adjust the external sales of the current regulation and the main building, and keep a certain amount of production support for the line fire order to reduce the cost and greatly fluctuate the impact on profit.
spk00: At the end of the first quarter, we made a judgment call based on the prevailing market conditions and lowered the production volumes of modules, while monowafers and sales remained at full production levels. In terms of business strategy, we continued to leverage the advantages of our integrated capacity to adjust external sales of monowafers and modules and reserve a certain volume to support sport market orders. so as to reduce the impact of price volatility on our profit margin.
spk06: The challenges faced by the PV industry have accelerated technological advancement, such as wafer ceiling to save polysilicon consumption,
spk00: technology improvement to further increase module output, and the ramp-up of production automation to reduce cost and increase efficiency. Companies with advanced technologies can enjoy first-mover advantages and achieve relatively stable economic benefits despite rising material costs. Our wafer ceiling capabilities have reached industry-leading standards, and our smart factories are optimizing processes. and improving automation every day. This initiative will continuously contribute to our economic benefits and consolidate the advantages of our in-house manufacturing capabilities.
spk06: 金硅光伏主流电子技术正在从P型到N型过渡, 行业以外新一轮的技术变革, 对前沿技术的研发储备,金硅电子组件, We have completed the construction of a high-efficiency foldable battery technology platform. It is expected that in the coming years, mainstream, crystallized silicon,
spk00: sale technology has been gradually transitioning from P-type to N-type sales, and the industry is expected to usher in a new phase of technological upgrades. Cut-edge R&D in technologies are highly cooperative and innovative systems from wafer, sale, module to system, and the ability to quickly commercialize R&D results in mass production have propelled Jinko Solar to the top, and we continue to lead technology breakthroughs in the industry. We started to produce the 800 megawatt N-type top-com cell two years ago, and it has become the industry benchmark in terms of lab efficiency, mass production efficiency, and cost control. Meanwhile, we have just completed the construction of a highly efficiency-nominated perovskite sale technology platform, which is expected to reach an industry-leading conversion efficiency of over 30% within the year. In the short to medium term, we will invest more resources into technology development that will improve product competitiveness. We will also continue to expand our solar plus business, promote technical and process development, improvement to lower LCOE for all our global customers.
spk06: 产能扩张方面,考虑到今年的供应链和市场情况, 我们调整了硅片电子组件的扩展节奏。 到年底,三金硅片电子组件的产能预计分别达到30个GW, 24个GW和33个GW。 今年的资本开支将相应压缩来最大化着匹配今年的供应链情况。
spk00: In terms of capacity expansion, taking into account this year's supply chain and market conditions, we adjusted the expansion of wafers, cells, and modules accordingly. Our in-house production capacity of monowafers, cells, and modules are expected to reach 30 gigawatt, 24 gigawatt, and 33 gigawatt, respectively, by the end of 2021. CapEx will be reduced accordingly and in line with supply chain situation this year.
spk06: Before I hand over the question to Jenna, I would like to introduce the company's annual revenue. In 2021, the company's total revenue for the second quarter was between 5.1 to 5.3 GW. The total revenue for the components was between 4 to 4.2 GW. The sales revenue was between $1.2 billion to $1.2.5 billion. The profit was between 12% to 15%. In 2021, the total revenue for the whole year, including the battery components,
spk00: Before turning over to Jenner, I would like to go over our guidance for the second quarter of 2021. We expect total shipment to be in the range of 5.1 to 5.3 GW, including module shipment to be in the range of 4 to 4.2 GW for the second quarter of 2021. Total revenue for the second quarter is expected to be in the range of 1.2 billion U.S. dollars to 1.25 billion U.S. dollars. Growth margin for the second quarter is expected to be in the range of 12% to 15%. The full year 2021 shipment guidance, including waivers, sales, and modules, is unchanged and expected to be in the range of 25 gigawatt to 30 gigawatt.
spk04: Thank you, Ms. Lee. In the first quarter of 2021, Total shipments of modules reached 4.6 gigawatts, a new record for the first quarter. In addition, roughly 800 megawatts of cells and wafers were shipped to China market. From a regional perspective on module shipments, shipments to Europe and emerging markets both had significant growth sequentially and year over year, while shipments to the US market remained relatively stable. In the second quarter, as challenges in the supply chain intensified, We proactively adjusted our strategy for the order book and responded to supply chain volatility by fine-tuning the proportion of wafer, cell, and module shipments to maintain profitability. Faced with challenges in the material cost and transportation, our sales team kept close communication with clients to find mutually acceptable solutions. Based on their feedback, We know that many Chinese utility investors, including state-owned enterprises, have moderately lowered their expectations for yield. Overseas, demand for certain installations have seen stronger tolerance for higher module prices due to advantages in electricity prices or lower costs of the system construction. Meanwhile, some clients have accepted delays in module deliveries. Expectations for yield varies across different countries, project types, and scale. But overall, market demand remains optimistic. The imbalance in supply chain is expected to continue for some time. So we are keeping our order book and its execution at flexible and sustainable level. Our product structure continues to be optimized according to the demand. With flexible business model and relatively higher prices, the demand for distributed generation continues to grow in regions like Europe, Australia, Japan, US, where we can leverage our global brand awareness and reputation. Clients have been favorable towards our premium quality products, such as Untype and Tiger Pro products, which were specifically designed for residential, industrial, and commercial distributed generation facilities. In terms of annual shipments for 2021, geographical demand has been roughly divided into North America, Asia Pacific, both for 20% to 25%, while China, Europe, and the emerging market for 15% to 20%, respectively. This year, market demand has experienced a multiple challenges, such as continued delay caused by the resurgence of COVID-19 in Southeast Asia, rising cost of PV power station projects due to price hike in polysilicon, and buckle commodities, and extended delivery delays caused by logistic disruptions. We believe these challenges will be gradually resolved in time. Meanwhile, we are constantly improving our mechanism of dealing with risks. We are optimistic about the growth in global market demand over the next few years and remain fully confident about our ability to capture a larger global market share year over year by providing sophisticated products and services for our global clients. With that, I will turn it over to Pan.
spk05: Thank you, General. Despite increased cost of production materials and logistics, our major financial metrics such as gross margin, operating margin, and net margin all improved sequentially. This is due to the sequential increase in our ASP quarter-to-quarter and our continuous efforts to optimize our cost structure. Let me go into more details about this quarter now. The total revenue was $1.21 billion at 9% year-over-year if we exclude the impact from the disposal of overseas power plants in the first quarter last year. Gross margin was 17.1% compared with 16% in the fourth quarter last year and 19.5% in the first quarter last year. Total operating expenses in the first quarter was $184.6 million, a decrease of 15.8% compared with the fourth quarter last year. This sequential decrease was mainly attributed to a decrease in disposal and impairment loss on property, plant, and equipment. Excluding impairment loss, total operating expenses accounted for 13.8% percentage of total revenues in the first quarter this year compared with 14 in the fourth quarter last year. We're working with further control operating expenses with increasing revenues in the second half of the year. Total operating expenses as a percentage of the total revenues are expected to decrease further. Operating margin was 1.9 percentage in the first quarter this year compared with 0.8% in the fourth quarter last year. EBITDA was 1 to 3 million compared with 100 million in the fourth quarter last year. Net income was 33.7 million, and the non-GAAP net income was 7.5 million. Both increased sequentially compared with last quarter. Diluted earnings per 80s was 0.15. The impact from foreign exchange rates remain. We recorded a net exchange loss of 4.1 million in the first quarter this year. We will continue to hedge against the foreign exchange risk to mitigate the impact on operating results. In terms of transportation, as consumption demand in major economies in the world regains strength, The pandemic caused further delays and inefficiencies in port operations. As a result, we expect that the overall freight rate will not decline until the first quarter next year. In the face of the tough situation, we adopted CFR model for quoting and continue to foster deeper strategic partnerships with logistic companies. At the same time, As module power and the proportion of large-size module shipment continues to increase, container transportation is expected to improve efficiency and result in a drop in freight cost per watt. Moving to the balance sheet, at the end of the first quarter, our balance of cash equivalents were about $1 billion, compared with $1 at the end of the fourth quarter last year. Accounts receivable turnover days were 59 days compared with 50 days in the fourth quarter last year. Inventory turnover days were 126 days compared to 97 days in the fourth quarter last year. Total debt was $2.67 billion at the end of the first quarter, compared to $2.8 billion at the end of the fourth quarter last year, gradually improving quarter over quarter. Out of the total debt, $17 million was related to international solar projects. Net debt was $1.3 $59 billion compared with $1.56 billion at the end of the fourth quarter last year. In light of supply chain volatility and market conditions, we're reducing capital expenditures and expect total capex to be around $800 million for the year. This concludes our prepared remarks. We're now happy to take your questions. Operator, please proceed.
spk08: We will now begin the question and answer session. All the participants with questions to pose, please press 01 on your telephone keypad and you will be placed in the queue. To cancel the queue, please press 02. Once again, 01 on your telephone keypad now. First, we have Phillip Shen. Your question, please.
spk10: Hi, everyone. Thank you for taking my questions. Given the recent WRO in the U.S. on hosting, I was wondering if you can comment on how much hosting content do you guys have in your modules?
spk04: Hi, Phil. This is Jenna. Thanks for the question. Actually, you know, that's pretty latest development from the WRO side. We are still under internal investigation and the reviews about the whole process and the reactions based on the WRO. So we will keep everyone updated once we get anything. Thank you. Okay.
spk10: Thank you, Jenner. Is there something else? Sorry.
spk02: Okay.
spk10: Yeah, I have a few more. Thanks. As it relates to your guidance, I think the implied shipments for Q3 and 4 are roughly 17-ish gigawatts. What's the mix, you think, between Q3 and Q4? Is it evenly split, or do you think it's heavily or more weighted to Q4? And then also, if you can comment on the outlook for 2022, I know you gave global market growth. Do you expect your shipments to grow in line with that market growth?
spk04: So, yeah, that's a great question. Actually, you know, the second half is always peak season for solar, especially Q4 for China market. We are expecting a strong Q4 demand in China market as well. Regarding the portion-wise, I would like to remind that the total shipment numbers contains both modules and wafers, even small volumes of the cells. So regarding the detailed breakdowns between that, we will keep ourselves flexible enough to adjust to the market changes in Q4. But for me, I'm pretty confident that with a strong demand in Q4, we will deliver, let's say, solid performance for the whole year's shipment and the probabilities. Regarding 2022, the market itself is believed to continue to grow. And we, Ginkgo itself, we plan to grow organically as well. So, we will keep everyone posted. It's still very early to provide any detailed number yet.
spk10: Male Speaker 1 Okay, thanks. I noticed the technology details around the perovskite cell reaching over 30% efficiency. If you get that this year, that's great. That's incredible. Can you talk about when you think the perovskite cell could be commercially available? How stable is it now? And then I think on the last quarter you talked about the end type. capacity for 2021 being 800 megawatts do you still with the capacity expansion reduction do you continue to see 800 megawatts for 2021 and then how much do you see in 2022 for n-type thanks for for n-type I think we currently we stick to the a 900 megawatt we have and
spk04: Those products are super popular in the distribution market. We can enjoy a higher brand premium together with higher acceptance of the N-type products. For the future, we are closely following the development of the industrialization of the latest N-type cell technology, even some of the module technology to decide our Our roadmap right now is we cannot give a very detailed, you know, numbers or options on the table yet, but definitely we will be one of the early mover for the technology for sure.
spk10: Thank you. Great. And Jenner, did you address perovskite specifically? Do you think it could be commercial level 21?
spk04: For me, I think that will be even longer term. I think N-type definitely will be earlier than the other technologies to become mature and massive applied in this industry. But definitely, we are not only looking to one year or two. That's something we are looking for even three, five years' time. Definitely, we are investing in that.
spk10: Great. And in the Q1 quarter, you guys had, I think, about 800 megawatts of wafer and cell sales. Can you talk about the margins on those sales, especially wafer? What kind of margin did you have there? Was it similar to your peers there?
spk04: Let me look into the numbers, but as far as I can remember, it should be somewhere around 20 percent margins for wafer sites. The cell number is very small. The shipment is very small, so I don't have the margin yet.
spk10: Okay. Thank you, Jenner. I'll pass it on.
spk04: No problem. Thank you very much.
spk08: Thank you, Philip. Audio participants with questions to pose, please press 01 on your telephone keypad, and you'll be placed in the queue. Next up, we have Brian from Goldman Sachs. Brian, your question, please.
spk09: Hey, guys. Yeah, good evening. Thanks for taking the questions. I had a couple on the guidance. Maybe first off, a simple one. It's the last week of June. The quarter's almost closed here. Your revenue and shipment guidance seems pretty tight in terms of the range, but there's still 300 basis points between low and high end on gross margins for 2Q. Can you give us some clarity or sense of why there's still such a potential gap in what the gross margins end up, you know, the gross margins you realize for the quarter are going to be?
spk03: We, you know, in terms of guidance of the gross margin, it's really close to the end of quarter rate. you know, the ghost margin is still some impact from the, you know, the Polysilicon, the recent Polysilicon price, as well as the foreign exchange rate, you know, the RMB against US dollars. So we just gave a, you know, give a, you know, relatively, you know, wide range at 12% to 15%. But I think it's probable, you know, on the high end of the range.
spk09: Okay, fair enough. And then I think sticking with the gross margins, obviously polysilicon has been more volatile and seen much faster appreciation than people expected heading into the year. You and your peers, I think, generally were thinking Q1 could be the bottom for gross margins based on the guidance here. Clearly, Q2 is going to be lower. How should we be thinking about that in the context of gross margins for the rest of the year? Are we in this low-teens level until poly starts to go down meaningfully, or could we see another downtick into 3Q given inventory of high-cost poly still has some time frame that it needs to flush out of your cost structure?
spk03: We are observing the market price, including the module system, I'm going to hop up our dreams and the we we are expecting the stabilized the price of on a second so we think you know it's a you know we have the ability you know to to maintain a rainbow close margin here and it's a it's you know it it's a we hope it's better you know compared to the first half of the year because of the stabilization of pilot silicons as well as we continue to you know improve our production costs and to mitigate to mitigate the you know the cost pressures from pilot silicons and we will continue to maintain some flexibility in terms of the shipments of modules which is
spk09: Okay, fair enough. And then maybe two questions on the revenue portion of the guidance. You guys mentioned some projects are delaying or seeing some timing issues because of the high cost of panels, and you have been raising prices throughout the year. are you having to reprice any of these contracts, or are you seeing pricing back half for early 2022 deliveries starting to kind of go down again? Again, you have a view that polysilicon stabilizes, so are you reflecting that in maybe firmer or declining module prices as well moving through the year?
spk04: Yeah, thanks for the question. I think for that part, It's true that some of the projects or some of our clients' projects have to accept some of the delays because of the unexpected high price, not only module, actually, if you take the other factors into consideration as well. For example, the logistics, the labor cost, even the cost of the trackers, even sometimes inverters and so on. In general, everything goes up. That's why some of the project which has a very tight budget to the IRR or CAPEX has to delay or even recap somehow to adapt itself to the situation right now. For the next years, actually, we are expecting a pretty stable year because even when the Polysilicon price becomes as stable as of now, and also we are expecting more polysilicon capacity available for mid of 2022. But when we compare with the demand side, actually, we are expecting more demand coming up compared with the additional new polysilicon capacity. especially when so many projects and the demand get delayed into 2022, as well as the new project coming up online. So we are expecting a very promising year of 2022 as well. Hope that answers your question.
spk09: That's helpful. I guess maybe just to simplify the question, are you helping your customers at all with pricing, i.e., you raise prices to reflect the poly increases earlier in the year. Now that poly is maybe peaking and could start to go down, are you anticipating or are you quoting more aggressive pricing to keep these projects on track? On the module specifically, sorry.
spk04: It varies case by case. It won't be a general solution for everyone, but we are dealing with every customer case by case. We have all different kinds of business models to try to find a mutual solution for the customers to solve their problems, including all the methods you just talked about, but not only limited to that.
spk09: Okay, fair enough. Last one from me and I'll pass it on. You're maintaining the 25 to 30 gigawatt guidance. I know that shipment guidance for 2021 I know it includes the cells and the wafers as well as module shipment. I'm not sure if you spoke to this, but what's the module portion of the 25 to 30 gigawatts? Just trying to get a sense of how much is baked into second half growth here.
spk04: Right now, we are expecting a majority of it, but we don't have a budgeted number yet because we are totally flexible up to the market. For example, if the polysilicon market keeps stable and the market demand starts to pick up, definitely we are more than happy to ship everything in modules instead of vapor itself. But if the market itself continues to be volatile as it was in the last three or six months' time, we are forced or we have to be flexible to ship more wafers in order to adapt to the market risk.
spk09: Okay. Thanks a lot, guys. Appreciate it.
spk04: Thank you very much.
spk08: Thank you, Brian. Audio participants with questions to pose, please press 01 on your telephone keypad and you will be placed in the queue. Audio participants with questions to pose, please press 01 on your telephone keypad and you will be placed in the queue. To cancel the queue, please press 02. Audio participants with questions to pose, please press 01 on the telephone keypad, and you will be placed in the queue. Next, we have Reddy from Santana Capital. Your question, please.
spk02: Can you hear me?
spk01: Yes, please. Yes, my question is about the gross margin, and you had a very nice positive surprise on the gross margin in the first quarter. And I understand that part of it is because the way for business is higher margin. So is it fair to believe or think that you are now managing the business to improve gross income and to maximize gross income rather than just be maximizing revenues? And therefore, for the near term anyway, a better benchmark to evaluate progress is to be looking at gross income. And I noticed that the gross income number was higher than a year ago, despite obviously a decline in pricing, despite a substantial decline in module prices, your gross income year over year was higher. So that's my first question, that is gross income the better benchmark to evaluate progress?
spk04: Yeah, I think that's very encouraging comments for the company. I think for the company, strategy-wise, we're not only looking to one goal, to operate or to do our job. Actually, it will be a balance between different goals. Definitely, growth revenues and growth margins is a very important factor and the target for the company's management. But we have to also, you know, take care of the other factors such as, you know, market share, customers, you know, long-term partnership, as well as, you know, the revenues growth to make sure, you know, company is growing and, you know, in a sustainable way, right? So long story short, you know, it won't be a profit only or gross margin only, but definitely that's a, good angle to look into. Thank you.
spk01: And my second question is about the listing in the Chinese star market. Can you give us an update on that?
spk03: It's still in the preparation stage, but we expect to... and we will release the fields if we reach a significant milestone.
spk01: Can you give us a sense of what the timeline might be on that?
spk03: No, we are not in a position now to talk about the timetable, but just what I said, if we We expect to reach some milestone and we will release the news and if we reach that.
spk01: Thank you.
spk04: Thank you very much.
spk08: Thank you, Reddy. Next, we have Wailu Chen from RIS Capital. Your question, please.
spk07: Hi, management. Thank you for taking my call. My first question is regarding the whistle in June that many other module makers are cutting their production utilization rate again in June due to the high cost. Do you expect the utilization rate can rebound in July given there will be more new projects released?
spk03: So you are talking about the company-specific situation of the industry, you know, estimations. If you talk about, you know, I think the policy can still be in the high, relative highs, you know, and now it's stabilized. And if it's stabilized, it will be helpful, you know, for the industry, you know, the module makers to increase their estimations. you know, in the third quarter. But I think in the July, one I get probably, you know, information, this is really still low, you know, compared to the second quarter.
spk07: So when do you think the production rate can rebound for the sector?
spk03: Well, It has a good indication, right? If you look at the policy, the vapor sale price is stabilized, and the downstream players are willing to take relatively high larger price. I think it has high chance in the second half of the year, utilization rate will be better than in the first half of the year.
spk07: Thanks, and also want to ask if they're standing for the ASP cut for polysilicon or the wafer, are we seeing any potential for impalement loss for our inventory?
spk03: We don't expect that because, you know, first, when we call to the, you know, the module price, we estimate the potential up pressures from the cost perspective and the second one is you know because we are integrated in production so we have relatively low cost compared to the players which they don't have the model vapor capacities so we don't expect you know and the the inventory risk, you know, in recent states.
spk07: Thanks. And my next question is regarding our capacity expansion plan. We cut the plan for around, like, three gigawatts. Can you elaborate why we were so cautious on the expansion right now?
spk03: given the policy that is still very tight, the industry utilization, I mean, the model wafer utilization, you know, industry will not be 100%. And we, you know, make the capex investment relatively slowly to make sure we have relatively high utilizations. It doesn't mean we will not make the investment and some of the investment will be put, invested in early next year.
spk07: My last question is do we have any guidance for the operating profit margin because We're seeing some slight improvement in Q1, but still much lower than last year. So will you have any guidance on the OOP margin?
spk03: OOP margin, we don't give the guidance. But there is some specific matters in the first quarter. And regarding the long-off impoundment for the solar operating projects, international projects, And we don't expect to have the empowerment throughout the year. So the operating expenses, the rent, will be roughly 12% to 13%. Thanks. No further questions.
spk07: Thank you.
spk08: Thank you, Jen. Next, we have Reddy from Santana Capital. Your question, please.
spk01: My question is about the expectation for module prices in the second half of the year versus the first half. Obviously, many module companies have lowered their utilization rates because of the shrinkage in margins recently. The question is, As you have a standoff between customers and suppliers on modules, while the near-term utilization rate has come down because customers are unwilling to accept the prices that you want to charge them, is it fair to think that in the second half of the year, it's just as likely that customers will accept somewhat higher prices than what they are paying in the second quarter?
spk04: Thank you for the question. I think for the ASP or the market price, let's talk about it for a second. For the market price for the second half, we have seen firstly the stabilized polysilicon price. In the first half, the polysilicon raw material price jumped almost every day or every week, so it brings a huge uncertainty for the lower downstream, especially for the module market prices. sometimes we have to update our quotes of prices every week or even every two or three days' time. That brings huge uncertainty for the customer. For now, we have seen the stabilized polysilicon prices, and also the industry is not expecting any huge volatile polysilicon price in the near future as well. So we have seen a lot of customers start to take actions to build up their budget and the capex, even the construction schedule based on the current market prices. So that's why we are so confident about the second half demand will continue to be strong. and especially we have seen a strong China demand in Q4, which will become a very huge, important cornerstone for the global demand for the second half as well. Thank you.
spk01: Thank you.
spk08: Thank you, Reddy. I will now pass the call to Ms. Ripple?
spk00: Thank you, everyone, for joining us on the call today. Have a good night. Thank you.
spk08: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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