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spk08: Hello, ladies and gentlemen, and thank you for standing by for JNCO Solar's Holding Companies Limited's fourth quarter 2022 earnings conference call. At this time, all participants are in a 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, Ms. Stella Wang, JNCO Solar's investor relations. Please go ahead, Ms. Stella.
spk01: Thank you, Operator. Thank you, everyone, for joining us today for Zinco Solar Sports Quarter 2022 Earnings Conference Call. The company's results were released earlier today and available on the company's IR website at www.zincosolar.com, as well as on your device 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 Zinco Solar, Mr. Li Xiande, Chairman of the Board of Directors and the Chief Executive Officer of Zinco Solar Holding Company Limited, Mr. Janet Miao, Chief Marketing Officer of Zinco Solar Company Limited, Mr. Pan Li, Chief Financial Officer of Zinco Solar Holding Company Limited, and Mr. Charlie Cao, Chief Financial Officer of Zinco Solar Company Limited. Mr. Li will discuss Zinco Solar's business operations and company highlights. followed by Mr. Miao, who will talk about the sales and the marketing, and then Mr. Pan Li, who will go through the financials. You will all be available to answer 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 Zinco Solar's public filings with the Securities and Exchange Commission. Zinco 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 Jiendo, Chairman and CEO of Zinco Solar Holdings. Mr. Li will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Li.
spk10: We are very happy to hand over a free copy of the 2022 2022 Q4. In 2022, in the context of the constant rise in raw material costs, we have never stopped reducing the cost of parts through technological improvement and process improvement. Partly to deal with the pressure of the increase in raw material costs on profit, the cost-effective N-type products have a total supply of more than 10GW,
spk01: We closed our challenge in 2022 with satisfactory results as we delivered strong operational and financial performance in the fourth quarter. Leveraging our outstanding global slide chain management and marketing network, Our total shipments and total revenue increased significantly year over year. At the end of 2022, we became the first in the industry to have delivered a total of 130 gigawatt solar modules. Throughout the year, as raw material costs continued to rise, we continued to optimize our cost structure through technical advancement and manufacturing process improvements. which partially relieved the pressure on our profitability. Announcements of high-efficiency premium N-type modules exceeded 10 gigawatts, further optimizing our product mix and gradually improving our profitability. Net income was approximately US$102.9 million, up 29.1% sequentially and nearly tripling year-over-year.
spk10: In 2022, the cost of raw materials increased The economic uncertainty of the pandemic has led to many challenges, and there is no way to address the growth of the demand for energy in 2022. In the context of the energy crisis caused by the EU-China conflict, the traditional energy price has been rapidly increased. Energy efficiency and economy are still an issue that helps countries achieve energy growth. In 2022, the global demand for energy will be 320 GW. Throughout 2022, the increase in demand for solar products did not slow down despite compounded challenges.
spk01: such as the surge in raw material costs, pandemic disruption, and macroeconomic uncertainties. In particular, the energy crisis caused by the Russia-Ukraine conflict has caused the prices of traditional energy to rise quickly, and PV remains the optimum solution for countries to achieve energy transformation because of its low carbon footprint and economic advantage. Global PV demand in 2022 was approximately 320 to 330 gigawatts DC, up about 50% year-over-year. Even in the more price-sensitive Chinese market, newly added installations grow 59.3% year-over-year to reach 87.4 gigawatts AC, approximately 105 gigawatts DC, and distributed installations grow nearly 75% year-over-year.
spk10: We have confidence in the improvement of the global industrial chain of construction and engine products.
spk01: At the end of December, the cost of a seasonal imbalance between polysilicon supply and demand combined with inventory adjustments across the supply chain, prices of polysilicon wafers, cells, and modules were adjusted to varying degrees, and this volatility led to some downstream customers' false orders. Since February, polysilicon prices have rebounded, and pricing gains between the upstream and downstream of the solar industrial chain have, to some extent, impacted market sentiment. With polysilicon supply sufficient to support module demand throughout the whole year 2023, we believe the short-term rise in polysilicon prices will not last, and instead, a decline in polysilicon prices will drive down module prices and improve the economics of PV projects. Global PV demand is expected to continue to grow in 2023. We are confident that we will further improve our competitiveness and profitability in the global market with our well-developed global industrial chain and the advantage of our N-type products.
spk10: From the perspective of 4G, we continue to improve the smart management under the fluctuation of industrial chains. Flexible adjustment, opening and opening. 4G's output is much better than 2G, 8G, Watt, Com's electronic production capacity in 4G. The battery of 3G, 2G, 11G, Watt, Com's battery has successfully reached the output in November. It is expected to reach the output in March this year. With 35GW of battery, it is expected to reach the output.
spk01: During the fourth quarter, as the industrial chain remained volatile, we continued to enhance operation management, including strategically controlling inventories and flexibly adjusting production scheduling and volumes. The second phase of 8 gigawatt top-con cell capacity in Hefei reached full production in the fourth quarter, and the second phase of 11 gigawatt top-con cell capacity in Dianshan is expected to reach full production in March 2023. Since our 35 gigawatts of TopCom cell capacity is gradually reaching full production in the coming quarters, our integrated capacity structure continues to rise, driving blended costs lower.
spk10: In December, we announced that TopCom's battery experiment efficiency reached 26.4%, and it increased to 26.1% in October. We are confident that we will continue to maintain the world's leading advantages in product production efficiency, production capacity, and technology level.
spk01: In December, the lab efficiency of our N-type top-concel set a new record with maximum conversion efficiency of 26.4%, improving on our previous record of 26.1% set in October. At the end of 2022, the mass-produced efficiency of our top-concel capacity that has reached the full production reached 25.1%, and our integrated cost of N-type almost on par with T-type. We are confident we will maintain our leading position in terms of R&D, mass-produce efficiency, and production capacity.
spk10: Since the end of 2020, Jingke has become the world's largest N-type product, with more than 10 billion components. Jingke has become the best choice for customers around the world with its extensive sales layout and excellent N-type products. As more and more industry players plan to build N-type products, It proved that the engine path that Jingke chose first was a big one. In 2021, the effective supply of Engine.com will reach 120 to 130 GW, which is about 30% of the total demand in the entire industry. With our early-stage mass production and market promotion experience, Jingke's engine supply will further improve the average yield of the engine market share in the long-term industry in 2021.
spk01: At the end of 2022, we became the first module manufacturer in the world to ship over 10 gigawatts of N-type products. We are already a preferred supplier for global clients thanks to our well-established global marketing footprint and the technological advantage of our N-type products. With more and more industry players building up N-type capacity, our strategy to embrace and the lead N-type technology is now becoming an industry trend. Effective supply of N-type TopCon modules in the whole industry is expected to reach 120 to 130 gigawatts in 2023, accounting for about 30% of the total PV demand. Leveraging our accumulated experience in mass production and marketing, We expect our proportion of anti-persimmons in 2023 to further increase with penetration of anti-products far exceeding the industry average.
spk10: At the end of 2023, we will work hard to achieve 25.8% of the energy efficiency. We look forward to the growth space of the mineral market in the medium term and continue to invest in the technology and cost competitiveness of the energy industry. As of 2023, the production capacity of 3G, high-efficiency electronics, and components will reach 75GW, 75GW, and 90GW. In 2023, the first component output will be 11GW to 13GW. In 2023, the global component output will be 60GW to 70GW. As of 2023, our engine output will increase by about 60%.
spk01: By the end of 2023, mass production efficiency of TopCon sales is expected to reach 75.8%. We are optimistic on the growth potential for the PV market in the mid and long term, and will continue to invest in N-type capacity, which is now competitive in terms of technology and cost. By the end of 2023, we expect our annual production capacity for modern wafers, solar cells, and solar modules to reach 75, 75, and 90 gigawatts, respectively. We expect module measurements to be in the range of 11 to 13 gigawatts for the first quarter of 2023, and 60 to 70 gigawatts for the full year 2023. We will continue to maintain our leading position in n-type modules through technology integration, improvement in mass production capability, and cost optimization.
spk12: We are pleased to announce that we have achieved a historically high shipment on quarterly and annually basis. Thanks to our technology advantage and the extensive global marketing network, the total shipment in fourth quarter of 2022 has approached to 16.8 gigawatts where the module shipment was accounted for 95%, with a 78% increase year over year. The total annual module shipments were 44.5 gigawatts, doubled year over year. Regarding our regional markets, the shipments in China and Europe markets were the top two highest in 2022, accounted for more than 65% of the total amount. In terms of absolute numbers, The annual module shipments year-over-year growth in China was more than triple. The annual module shipments to Europe were double, and our growth in emerging markets was nearly doubled as well. In China market, due to COVID and cost concerns mainly brought by upstream supply, some projects that have not been connected to the grid last year have been delayed to 2023. Considering the cost from supply chain is dropping towards a more reasonable level, we expect our installations will increase in 2023. Europe will continue to expand PV installations due to energy crisis and increasing electricity costs. As for U.S. market, with the policy incentives brought by IRA and third-party institutions' high expectations of U.S. market demand, we believe the project pipeline is sufficient there. In addition, we have seen the energy transformation accelerating in Latin America, Asia Pacific, Middle East, and more and more regions and countries in the world, bringing more opportunities. In 2023, we will continue to pursue our global expansion strategy with Europe and China markets continue to be our major ones, where the shipment would be accounted for over 50% of total amounts. and the shipments to the U.S. market were expected to recover gradually. Our shipment structure continues to optimize. The distribution generation business accounted for over 50% for the full year, improved compared to 2021. In terms of the products, our competitive N-type Tiger Neo module shipments were around 7 gigawatts, with the premium remained within reasonable range. Until the year end of 2022, we have become the first module manufacturer in the world shipped over 10 gigawatts N-type modules. We expect our proportion of N-type module shipments in 2023 to further increase to about 60%, which could further strengthen our leading position in N-type technology in the industry. Moreover, the global clean energy transition has started a new growth cycle for solar plus energy storage businesses. So far, we have already signed a framework agreement and a distribution agreement with multiple power developers and distributors around the world. In 2023, we will continue to expand the investment on cultivating our storage business to bring our clients safer and more sustainable solar plus storage system solutions. In terms of price and orders, our order book visibility in 2023 has already achieved over 50%. with oversea orders has the major contributor. Proportion of the high efficient and high premium N-type Tiger Neo will be significantly higher than 2022. All this will keep our product competitive in this industry. By working through various challenges, a PV enterprise can grow up to be more resilient. Under this background, We, Jinko Solar, are also continuously enhancing our capacities to handle risks and strengthen our marketing network and the client relationship. We are committed to provide more reliable and high-quality products and services to our clients, bringing them more economic value, and this will also help us to further improve our global market share. With that, I will turn the call to Pat.
spk09: Thank you, Jenner. We are pleased to have achieved strong fourth quarter results based on our solid operation and management strategy. Against the backdrop of strong demand in the global market, both solar shipments and total revenues increased significantly year-on-year. Shipments of N-type modules, which have premium and cost advantages, more than doubled sequentially in the fourth quarter. partially contributing to our improved profitability. In addition, we continue to enhance control over our operating expenses. Total operating expenses accounted for about 12% of total revenues in the fourth quarter, a significant decrease from over 15% last quarter. Operating margin was more than nine times higher sequentially. increased into 2.1% from 0.3% last quarter. As the 35 gigawatt cell capacity put into production in 2022 reaches full production in the coming quarters, our integrated capacity structure is expected to improve further. As shipments of our competitive anti-products increase, We hope to gradually improve our profitability. Let me go into more details now. Total revenues was $4.4 billion, an increase of about 56% sequentially and 85% year-over-year. Gross margin was 14.1% compared with 15.7% in the third quarter this year. and 16.1% in the fourth quarter last year. The sequential and year-over-year decreases were mainly due to an increase in the cost of solar module raw materials. Total operating expenses were $526 million, up 21% sequentially and up 68% year-over-year. The increases were mainly attributed to an increase in shipping costs for solar modules and an increase in impairment loss on property, plant, and equipment. Net income attribute to the Jinko Solar Holdings ordinary shareholders was about $103 million in the fourth quarter. Excluding the impacts from a change in fair value of the notes, long-term investments, and the share-based compensation expenses, Adjusted net income was $45 million, up 33% year-over-year. Now I'll brief you on our 2022 full-year financial results. Total module shipments were 44.5 gigawatts, doubled year-over-year, and total revenues where $12 billion also doubled. For the full year of 2022, gross profit was $1.8 billion, an increase of 85% year-on-year. Gross margin was 14.8% compared to 16.3% last year. The decrease was mainly attributed to an increase in the cost of solar module raw materials. Total printing expenses were $1.7 billion, increased year over year. The increase was mainly attributed to an increase in the shipping cost for solar modules, an increase in impairment loss and disposal of PPE, and increase in share-based compensation expenses. Net income attribute to the Jinko Solar Holdings ordinary shareholders was about $96 million in the fourth quarter, excluding the impacts from the change in fair value of the notes, long-term investments, and the share-based compensation expenses. Adjusting net income was $208 million at 1.7 times year-over-year. Moving to the balance sheet, At the end of the fourth quarter, our cash and cash equivalents were 1.6 billion U.S. dollars compared with 2.1 billion at the end of third quarter and 1.4 billion at the end of the fourth quarter last year. Air turnover days were 73 days in the fourth quarter compared with 69 days in the third quarter this year. Inventory turnover days were reduced to 59 days in the fourth quarter, compared to 117 days in the third quarter. Total debt was about $4 billion, and net debt was $2.3 billion at the end of 2022. This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.
spk08: Thank you. If you wish to ask a question, please press star then 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star then 2. If you're on a speakerphone, please pick up the handset to ask your question. And we'll pause momentarily to assemble our roster.
spk04: The first question will come from Brian Lee with Goldman Sachs and Company.
spk08: Please go ahead.
spk05: Hi, everyone. This is Miguel on for Brian. My first question was just on the capacity expectations for 2023. You're guiding to the very strong growth in capacity for the year. What are your CapEx requirements for 2023 to support this growth?
spk04: Yeah, here we go.
spk12: I think we are in the middle of a calculation right now. I think our team will follow up with you after the call for the further detail of CapEx numbers.
spk05: Okay, thanks. I appreciate that. And then my follow-up question was just on margins during the fourth quarter. Given the overall decline in the market prices for polysilicon that was observed in the fourth quarter, could you just give more color on what drove the lower quarter-on-quarter gross margins, and then what are your expectations for polysilicon prices, and then also on margins through the first quarter of 23 and through the rest of the year? Thanks.
spk12: Yeah, for the polysilicon, I think overall we are observing oversupply of polysilicon in the long run. So we believe the recent turbulence is just the start of the market trend. But in general, we believe the polysilicon will go back to the market-based pricing. So that's what we believe in the long term. In short term, for sure, because of the different seasonalities and the behavior of, let's say, top players in the polysilicon industry, we still believe there might be some short-term challenge or turbulence. That's what we see. For the margin-wise, we still believe with more and more capacity online, especially the anti-based high-end capacity online, with the premium and competitive cost structure we have, the margin will gradually improve quarter by quarter if there's no big surprises in the market. Hope that answers your question.
spk05: Yeah, if I could just squeeze in a follow-up on that. Just on the 4Q margins, I guess, were you able to realize any of the lower market prices for polysilicon that we saw in the fourth quarter? I guess, what drove the, specifically in the fourth quarter, what drove the lower gross margins? Thanks.
spk12: I think if you look into financial figures, I see the The turbulence happened in the polysilicon prices in early Q1 this year will not be helpful for the Q4 margins. And if you look into the Q1 margins, we have to look into the overall polysilicon cost instead of short-term, let's say, one week or two weeks low price of polysilicon. So in my opinion, you know, So that will not significantly change the margin expectations. Again, we will gradually improve the margins, but most of them is due to our internal, let's say, management improvement and the cost structure improvement instead of polysilicon turbulence. Because, you know, you have to think about the polysilicon inventory numbers, right? So that number is very important. important impact factor to the cost of the policy.
spk04: Okay, understood. Thanks. I'll pass it on. No problem.
spk08: The next question will come from Philip Shin with Roth MKM. Please go ahead.
spk06: Hey, guys. Thanks for taking my questions. First, I'd like to address the U.S. market. the USLPA situation. So I was wondering if you could share how things are improving. So specifically, have you ramped up manufacturing in Southeast Asia for fresh shipments to the US? When do you expect those new shipments to reach the US? And what is the utilization of the Southeast Asia capacity set aside for the US? Thanks.
spk12: Phil, thanks for the question. For the US market, especially regarding the UFLPA inspections, let's say we have seen the light at the end of the tunnel, and we see the improvement, the efficiencies, the turnover dates, et cetera, it's gradually improving. While the official CBP officials are becoming more and more professional in that perspective. We have seen the hopes, but it's still not 100% smooth transactional, let's say, custom clearance yet. But we are hoping that could happen soon. So regarding the question of the Southeast Asia factories of Shinko, and our factory is at high utilization rates, not only because of U.S. market, I think mainly thanks to other markets who also have a strong demand for capacities or productions outside China. So our capacity is up and running almost in full speed even by end of last year. So we are hoping to allocate more capacity and the shipments to U.S. once all the you know, all the customer clearance is back to our normal status, which we believe could happen soon.
spk06: Thanks, Jenner. So when you say soon, are we talking about a couple months or are we talking about maybe six to nine months?
spk12: Well, my perspective, I hope it could happen tomorrow, but it's not something I can handle or I can decide, so we are working closely with CBP officers to make it happen as soon as possible.
spk06: Okay, thanks. And then you mentioned you're at almost 100% utilization in your Southeast Asia facilities serving other countries. Can you share which countries those might be and how they might be impacted once the U.S. market opens up for you, which markets would decline, if you will. Thanks.
spk12: One of the important sources, there are many names on the list, but one of the big markets is the Indian market. You know that the Indian market has strong demand as well. While they have a high tariff against Chinese products, they have a strong appetite for the Southeast Asia products.
spk06: Got it. That makes sense. And then shifting to your comment that the order book visibility in 23 has already achieved over 50% in large part from international markets. Can you talk to us about what your current contracting activity looks like for the U.S.? Are you taking new orders yet, or do you have to get through – remind us how much backlog you have to get through before – backlog created by the trade situation before you can maybe take new orders?
spk12: Based on what we have right now, we are not capable to take new orders because we have lots of backlogs, which is big enough for the factory running under the current status of the CBP approval rates. However, we have a faith that everything will get better because once the approval rates and efficiency back to normal, I think we are hoping to allocate more capacities to U.S. market, which will help us to solve the backlog pipelines and the commitments to our clients and starting to pick up new orders. So that is, you know, chicken and egg question. It's really difficult to give the expectation of timeline, but we are working hard on it.
spk06: Thank you. That all makes sense. One last question on the U.S. As it relates to pricing in the U.S., Can you talk about how you expect panel pricing to trend through the – not just this year, but also in the future years? I know you're not contracting fresh, but I know you guys probably are very much in touch with your customers. With the ramp-up of IRA manufacturing capacity in the U.S., how much do you think panel prices decline as we get through 2024, 5, 6, 7? but you also have the other forces of UFLPA and other trade actions. So what's your view on module pricing in the coming years in the U.S.?
spk12: Well, Phil, you know that we are not picking new deals at the current stage in the U.S. market, so I'm not in the right position to discuss fair market numbers, but I think I can confirm there are many rumors in the market that, you know, U.S. market price is big enough or, let's say, high enough for many, let's say, middle, small-sized suppliers who have not suffered or experienced the US LPVA inspections. So we believe there are big room to correct the right market price in the future. given the UFLPA inspection complexity of the UFLPA, and also, you know, the IRAs bring additional, you know, returns to both the investor side and the manufacturer side.
spk06: Okay. Thanks for taking all the questions. I'll pass it on. No problem. Thank you, Phil.
spk08: Again, if you have a question, please press star, then 1. Our next question will come from Rajiv, Chaudhry with SunSera Capital. Please go ahead, sir. Yes, good morning.
spk02: I have a few questions. The first question is on the cost of polysilicon. You mentioned that was the primary reason why gross margin went down from Q3 to Q1. I'm wondering if you can give us an idea of what your polysilicon cost was, the cost embedded in the Q4 earnings result versus Q3. Either in Remnambi or in terms of the percentage increase from Q3 to Q1?
spk04: That's my first question. Sorry, Q3 to Q4.
spk11: Hey, Rajiv, we are talking about the policy that can apply to the cost components, right?
spk02: Yes, yes. If you can give us more granularity on how much it went up from Q3 to Q4 and what the gross margin might have been if the polyethylene cost had been flat, for example. You know, that would give us an idea of how the cost numbers are playing out.
spk11: Yeah, I think, you know, our training is likely, you know, it's like the public, you know, the polyethylene compliance system. from the public, like the PV InfoLink or other public or available on my site. And, you know, if you look at the trend of the polysilicon, it's reached to a peak, you know, going from October to November. And in December, because of destock and the China rush, you know, the end of the rush and the polysilicon, is done dramatically, but because of the production instruments, the positive impact is going to be reflected in the first quarter. So it's really, you know, the pilot reached a peak from the cost perspective in Q4, and I think, you know, it's roughly I think 10% to 15% quarter-by-quarter increase if you look at the trade.
spk02: Okay. So you are saying that or you're implying that to ship product modules in November, December, you had to buy poly in October, November when the prices were very high. And so the benefit of the lower price of poly in December is to the extent that you are going to get a benefit will be felt much more in Q1 because that's when that product gets shipped out. So 10% to 15% increase in the cost of poly from Q3 to Q4 would mean that the gross margin would have gone up from Q3 to Q4 if the cost of poly had stayed flat.
spk11: You're right, you're right. If the policy comprises this assumption is stable, and I think the growth margin is up, Q4 versus Q3, and the policy is significant up, and drive down the growth margin in Q4. But I think the most important for the company business is we are doing investment in time. starting in the beginning of 2022, and we reached to 35 gigawatts N-type capacity by the end of last year. And with more N-type shimmons and polysilicon, now the supply is sufficient. It's on the downward trend. And we have significant self-water pipelines in Kyoto. and we think we are in a good position to drive the company's growth, including the revenue growth margin, net profitability.
spk02: So would you say that from here onwards, if the price of polysilicon continues to come down, whether it comes down slowly or rapidly, we don't know, but if it keeps on coming down every quarter, that we should expect improvement in gross margin on a steady basis, quarter by quarter?
spk11: Yes. Year basis, 2023, we are optimistic on our probabilities. It's not only the polysilicon. Our is improving a lot. We have good products. We have very strong R&D teams, and we have branding, global sales and marketing, and we have very solid supply chain teams and drive up the overall performance.
spk02: Can you also talk about the capacity that you had for wafers, cells, and modules at the end of 2022?
spk11: I think we disclosed in the presentations, right, and the 65, 55, 70 gigawatts by the end of last year, and we continue to expand our end-time capacity, and the total capacity will reach to, I think, 75, 75, 90 gigawatts by the end of this year. Right.
spk02: Can you also talk about the trends that we should expect in operating expenses in 2023 versus the fourth quarter of 2022? For example, you should incur less costs or no costs related to the product coming out of Xinjiang, and you should also incur less shipping costs. So should we be expecting 100 to 200 basis point improvement in operating expenses in 2023 versus the fourth quarter?
spk11: Hey, Rajiv, I think, sorry, Rajiv, I think, you know, the operating expenses, you know, in the US cap is composed of a lot of key components. One of the most important is the which is going to improve a lot. The global economy, the impact to the shipping logistics is not so significant, and we expect the shipping costs will improve a lot. On top of that, our U.S., the U.S. ALPA, improve step-by-step, and we have incurred significant unexpected storage costs for the shipment to the U.S. market. And that will expect a significant improvement, as well as we, you know, even in our management teams, you know, internal meetings, we are expecting our overall, you know, let's say the labor efficiencies will expect to increase to 30%. And so that's going to be, I think, you know, with the expansion 60 to 70 gigawatts versus 45 gigawatts, roughly a 50% increase on the top line. And shipment cost improvement and the efficiency continue to We expect the operating expenses will be downward trends, quarter over quarter.
spk02: Also, can you talk a little bit about what trend you see in the G&A in the general and administrative expenses? They went up a lot in 2022 compared to 2021. What sort of growth do you see in those expenses going forward?
spk11: We have, you know, some obsolete, you know, let's say one-off items like, you know, we dispose obsolete, you know, equipment and for the small size, you know, the equipment to produce small size modules and we granted stock options. We have one-off stock options face compensation expenses. So that is the key reasons, you know, for the GMA expenses increase year-over-year.
spk08: Thank you, Charlie.
spk11: Welcome, welcome.
spk08: Again, if you have a question, please press star, then 1. Our next question will come from Alan Lau with Jefferies. Please go ahead.
spk07: Thanks a lot for taking my question. So I would like to ask again about the 4Q results. Because the A share results actually show a very strong quarter-over-quarter earnings growth, almost doubled, whereas at the U.S. level, the adjusted net income actually declined. how should we reconcile the difference between these two, and is there any further share-based expenses in there, or just what is the difference between the two levels?
spk11: First, you know, the A-share accounting is under the PRC gap, and the U.S. is under the U.S. gap, and the consolidation base is different. The U.S. entity... hold only 58% of the equity of the eight-year. Under that, you know, under U.S. GAF, and we have, for the 2022, we have significant difference on the income tax expenses relating to the deferred tax asset because, you know, because of the U.S. FLAPA, we have significant loss. on the overseas entities. And on the US cap, we did not recognize the cumulative losses under the deferred tax assets. And under the PRC gap from the beginning, we did not recognize. So there's a significant difference on the income tax expenses. Additionally, we have some difference on the accounting for the welfare benefits for the employees and based on the different, you know, accounting policies. And under US GAAP, we have separate items like the change in value, fair value convertible bonds. And for the long-term equity investment, we put for the ecosystem investment, we record it under the fair value gains and the adjusted income including, you know, that two items as well. So back to your question, I think that it's one of, you know, income tax accounting difference for the Q4 as there are some, you know, employee benefits, you know, welfare accounting.
spk07: Understood. So there's quite a significant increase in the tax. And also, I would like to ask another relative detail question on the ethics gain, because the company has made significant ethics gain in 3Q, and actually R&P has depreciated in 4Q, but seems there's an ethics loss. So is it because of the hedging issue, or why is that?
spk11: So what are you talking about? So which line items on the...
spk07: For the foreign exchange loss.
spk11: Okay. For the 2022 overall, I think we did very good on the foreign exchange heads. On the net basis, we recognized, I think, the net gain. And there are some fluctuations quarter by quarter, and I think Q4. The net gain is relatively smaller versus Q3 because RMB depreciated a lot, you know, Q3 last year.
spk07: Understood. Thank you. And switching the topic to this technology, so what would you expect the unit net profit or the ASP premium of TOPCON versus PERC and coming into first queue because the shipment percentage is higher and the n-type shipment should have even higher contribution to the net profit. So, can you share with us?
spk11: The premium is roughly 1.5, you know, cents, US cents. And, you know, our efficiency is pretty good, you know, leading the industries and we, you know, the products provides, you know, additional values to the customers. We think it's, you know, the 1 to 1.5 US cents premium is, you know, reasonable, you know, the price and mechanism.
spk07: So, is it fair to say the accounting issues will not exist going forward and we have decline in freight costs, quality of living costs, and also the ASP premium is also high, then we should expect a strong first quarter in terms of the gross margin?
spk11: Yeah, we expect the gross margin expansion in the first quarter. And, you know, we have more integrated levels and the percentage I expect to reach to, you know, 50%. and the polysilicon is in the downward trend. And so it's, you're right, I would expect it in the first half of the year to close the margins in the expansion stage.
spk07: Thank you. I think my last question is, what is Jinko Solar's plan in the U.S.? Because it has 400 megawatt already, and some of the Chinese peers have already started construction for expansion it. So what are the plans for Jinko Solar for now in the U.S.?
spk11: We are doing a very solid analysis, evaluation for expansion in the U.S., and we're optimistic because the IRA is going to be, I think it's a very attractive scheme, and as well as the U.S. market is growing. is expected, you know, strong demand. So we are in the final evaluation stage, but we have already 400 megawatts in capacity, and if we expand, we will expand very quickly.
spk07: Thanks a lot. Thanks a lot, Charlie, for replying to my question. Thank you. You're welcome.
spk08: The next question will come from Irma with Citigroup. Please go ahead.
spk03: Thank you, Benjamin, for taking up my call. So I have two follow-up questions regarding on the untyped product capacity. So my first question is about the current, what is the current unit product cost level of your untyped TopCon modules compared to the PERC ones? And what is the target level by end of this year? And my second question is about the capacity. So, how many new N-type capacity that you would like to build this year? And so, adding, in addition to the 35 gigawatts by end of 2022. Yeah. That's my question.
spk11: Thanks. In terms of, you know, the N-type, you know, N-type modules integrated past versus the, you know, P-type, and we have reached to the let's say the same cost for the N-type versus the P-type by the end of last year. And this year, because of the polysilicon in downward trend, which will, you know, some have some negative impact, but we continue to improve the efficiencies and implement new process materials and we expect we will maintain the same cost structure by the end of this year for the N type versus the P type. The N type, by the end of last year we have certified the N type and the sale capacity. And by the end of this year, we will have, I think, 55 gigawatts in top-down jail capacity. So expansion is from 30 to 55 jail capacity. OK, thank you.
spk08: This concludes our question and answer session as well as our conference call for today. Thank you for your participation. You may now disconnect.
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