JinkoSolar Holding Co Ltd DR

Thank you for standing by and welcome to the third quarter 2023 JNCO Solar Holding Company Limited Earnings Conference Call. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press star followed by the number 1 on your telephone keypad. Please note this conference is being recorded. I would now like to hand the conference over to Stella Wong of Investor Relations. Please go ahead.

Thank you, operator. Thank you, everyone, for joining us today for Ginkgo Solar's third quarter 2023 earnings conference call. The company's results were released earlier today and available on the company's IR website at www.ginkgosolar.com. as well as on new wireless services. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IELTS website. On the call today from Zinco Solar are Mr. Li Xiangde, Chairman of the Board of Directors and the CEO of Zinco Solar Holding Company Limited, Mr. Jenna 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 the Zinco Solar Spaces 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. 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. 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. Lee Hsien-de, Chairman and CEO of Zinco Solar Holdings. Mr. Lee will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Lee.

We are very pleased to overcome the challenges brought by market fluctuations with the advantage of global operation and integrated production of N-type top-com technology. We have achieved a significant growth in the total production volume, gross profit and net profit. The total production volume is 21.4 GW, which has increased by 107.9% in the same ratio. The material cost of the transducer has decreased by 20%. The production volume of N-type products with high efficiency has increased by 60%. The production volume of the U.S. market has increased by 10%. It has contributed to an increase in three-week profit. The three-week profit is 19.3%. Compared to last year's same period, it is 15.7%. The net profit is 1.814 billion US dollars. The net profit is 1.846 billion US dollars. The net profit is 1.846 billion US dollars. The net profit is 1.814 billion US dollars.

We are pleased that we were able to overcome the challenges with this due to market volatility and deliver a strong third quarter. We did so by leveraging our advantages in N-type TopCon technology, extensive global operation network, and advanced integrated capacity structures. And our module measurements, gross margin, and net income all increased significantly year over year. Total module measurements were approximately 21.4 gigawatts, an increase of 107.9% year over year. Polysilicon costs decreased sequentially. High-efficient N-type products that command a premium account for over 60% of total module measurements. And a model similar to the U.S. markets recorded sequential growth in the third quarter, all contributing to improve the profitability. Year over year, our net income increased by 140.7% to U.S. dollars, 181.4 million. And adjusted net income increased by 215.1% to U.S. dollars, 184.6 million. Diluted earnings per ordinary share increased by 188.7% to U.S. dollars, 0.63 dollars, and growth margin increased from 15.7% to 19.3%.

128.9GW, exceeding nearly 50% of last year's total capacity. As one of China's new export businesses, the supply chain has become a new function to drive China's economic growth and to promote global energy transformation and share power. At the same time, the change in supply and demand has led to a certain fluctuation in the development of the global supply market due to the changes in competition, technology, and supply and demand, as well as high interest rates, geopolitical risks, and other factors. The participants of the industry have raised higher requirements. We believe that the advantages of the recovery industry facing a full competition and leading enterprises will be even greater in such a market. As of the end of the third quarter, Jinko Energy has become the first industry to achieve a global exclusive harvest of more than 190W of recovery enterprises. The product has been sold to more than 190 countries and regions. Our global sales, operation and management capabilities, in addition to the continuous accumulation and continuous innovation of development, Since the third quarter, price declines in the supply chain have stimulated end market demand. For the first nine months, newly added installations of PV in the domestic market reached 128.9 gigawatts.

nearly 50% more than the four-year installations in 2022. As one of the new three products to boost China's export, solar has become a new driving force for China's economy and also contributes to global energy transition. Meanwhile, intensified competition brought by changes in supply and demand, accelerated technical iteration, high interest rates in some regions, and geopolitical tensions caused some volatility in the global PV market, which tested all industry players. We believe that we, as the industry leader, will become even stronger as the competition intensifies. At the end of the third quarter, we became the first module manufacturer in the world to have delivered a total of 190 gigawatts solar modules, covering over 190 countries and regions. Our capabilities in globalized sales, operations, and management, added by continuous R&D accumulation and innovation, help us build an all-round competition barrier. We are confident in our ability to navigate through the volatility cycle, achieve healthy and sustainable profitability, and increase our shareholders' value.

As of the end of the third quarter, N-type top-com's long-term efficiency has reached 25.6%. N-type components have the same type of P-type components with a height of 25 to 35 watts. This is due to the higher efficiency of N-type components for initial investment costs and higher power generation value for customers. The demand for N-type products in the global market continues to grow. N-type products are still strong in comparison to P-type products.

By the end of the third quarter, the mass-produced efficiency of N-type cell reached 25.6%, and the N-type module power output was 25 to 30 Wp higher than similar P-type modules. Demand for these products continued to increase globally as the LCOE is lower. N-type modules still returned a premium over similar P-type modules, and the premium continued to exceed the market's average.

截止3G度末,我们的N型电池产能已经超过55GW, 预计到年底N型电池产能将达到70GW左右。 有竞争力的产能结构领先行业, 山西超级一体化基地已开工建设1G和2G合计28GW的 At the end of the third quarter, we already had over 55 gigawatts of N-type cell production capacity. And by the end of this year, N-type cell production capacity is expected to reach about 70 gigawatts.

a competitive capacity structure leading the industry. Recently, our integrated project in Shaanxi, China started construction. Phase 1 and Phase 2 for a total of 28 gigawatts wafer cell and module integrated capacity are expected to start production in the first half of 2024. In addition, we are optimistic about the growth potential brought by solar storage parity in the long run. and our capacity build-up and development of energy storage business are progressing steadily.

近期,我们的182型高效电磁单晶硅电池的实验室转化效率达到了26.89%, 又一次创造了TOPCOM电池转化效率的新高, 是我们研发创新的重要里程碑。 继晶晶能源领先整个行业推动N型TOPCOM技术升级后, It is expected that next year, N-SYNC Topocom will occupy more than 70% of the industry and become mainstream. N-SYNC Topocom technology has higher conversion efficiency, lower industrialization costs, and other advantages. We firmly believe that the technology of Topocom is still mainstream technology in the next three to five years. We are confident that through continuous technical delivery and the advantages of integrated production, we will be in the dynamic leading industry for about half a year in terms of power, cost, and product power.

Recently, our high-efficiency 182N-type TopCon cell set a new record with maximum lab conversion efficiency of 26.89%, again creating an important milestone in the innovation of our products and solutions. Thanks to our leadership in driving N-type TopCon technology, N-type TopCon product is expected to capture market share greater than 70% in the whole industry. achieving absolute dominance. With higher conversion efficiency, lower industrialization costs, and other advantages, we firmly believe TopCon technology will remain the mainstream technical path for now and in the future three to five years. We are confident to be ahead of the industry dynamically by about half a year in terms of power output, cost, and the product competitiveness. Through continuous technology iteration and leveraging our integrated capacity.

作为负责任的全球化公司,我们在可持续发展,持续进步,凭借在CSR方面的优异表现,我们在EcoVidus评级中获得了领先行业的高峰。 我们致力于越来越多的国家和地区提供清洁,高效,可效的光伏产品和储能解决方案,

As a responsible global company, we continue to make progress in sustainable development. This excellent performance incorporates social responsibility. We received a high rating from EcoVegas, outperforming the mainstream PV companies. We are dedicated to providing clean, high-efficient, and reliable solar products and energy storage solutions to more and more countries and regions, making our contribution to global energy transition.

话题交给Jana之前, 我来介绍一下业绩指引。 预计2023年底, N型电池量产效率将达到25.8%, 有信心超额完成70到75GW的出货目标。 系统N型主电出货量将达到60%左右。 预计2023年, Before turning over to Jenner, I would like to go over our guidance for the fourth quarter and the full year of 2023.

By the end of 2023, they expect mass-produced N-type cell efficiency to reach 25.8%. We are confident to exceed the four-year module shipment's guidance of 70 to 75 gigawatts, with N-type module accounting for approximately 60% of total module shipment. They expect our annual production capacity for monowafers, solar cells, and solar modules to reach 85, 90, and 110 gigawatts, respectively, by the end of this year, with end-type capacity accounting for over 75% of the total capacity. We expect the module measurements to be about 23 gigawatts for the fourth quarter of 2023. We are confident we will continue to lead the industry with our advanced technology and premium, high-efficient products.

Thank you, Ms. Lee. Total solar shipments were 22.6 gigawatts in the third quarter, with module shipments accounting for 95%. As we continue to improve product quality and further develop our client service network, our brand influence continues to grow. By end of the third quarter, our all-time accumulative global solar module shipments exceeded 190 gigawatts, covering over 190 countries and regions. In response to market volatility, we flexibly adjusted the geographic mix of our shipments during the quarter. The domestic market became the dominant area for our shipments, according for around 40%. Shipments to emerging markets remained stable sequentially while Asia Pacific and North America increased compared to the last quarter. We are particularly pleased that the shipments of high-efficiency Tiger Neo modules exceeded 60% of total module shipment as Tiger Neo accelerated its market penetration, especially in China, Middle East, and North Africa, and Asia Pacific. Thanks to higher efficiency and the high added value to customers, Tiger Neo products still carry a sustainable premium compared to similar P-type products and continue to outperform the industry average. In terms of prices, lower upper stream costs have been reflected in module prices, which decreased compared to the second quarter. As prices declined, some clients have slowed the pace of new orders and some of the existing orders were delayed. However, lower margin prices leading to greater economic benefits also drove plenty of demand, which fueled the gap caused by delayed orders. We adjusted prices and market strategy timeline to cope with market shifts and solicited real-time feedback from clients. Our order signing moves on steady as planned. With our globalized self-network and the localized customer service infrastructure, we are committed to maximizing the value of products and services we provide to our clients. Recently, we signed a 3.6 gigawatt module supply agreement with N-Type Tech Renew with AquaPower. With industry-leading efficiency, reduced degradation and temperature coefficient, enhanced bifacial factor, outstanding low-light performance, and unparalleled yield per watt to reduce system lifetime energy cost, Tiger Neo delivers at least 3% of power generation gain to clients. Particularly under the climate conditions of desert area in Middle East, The excellent temperature coefficients and the bifacial factor will significantly risk power generation and the project IRR. As industry chain prices declined and started to stabilize, large-scale utility projects accelerated the connection to the grid, and we expect a new installation record in China this year. Relatively high inventory in Europe is being gradually digested. and demand remains strong in U.S. market under the Inflation Reduction Act. We are also optimistic about growing solar demand in Saudi Arabia and other Middle East countries to support energy transition. With high demand certainty and the help of our high-efficient products and services, we are confident that we will expand our market share. With that, I will turn the call over to Penn.

Thank you, General. The significant growth in our module shipments, decrease in raw material cost, as well as our continuous cost control helped our key financial metrics, including total revenue, gross margin, operating margin, and net margin improved year-on-year. At the end of September, we declared a cash dividend of $1.5 per ADA, which is expected to be paid on or around December 6 this year. With the continuous expansion of our global industrial chain, market footprint, and the power of our products, we're confident to maintain a healthy and sustainable profitability, meeting our commitment to shareholders. Let me go into more details now. Total revenue was $4.36 billion flat sequentially and up 63% year-over-year. Gross margin was 19.3% compared with 15.6% in the second quarter this year and 15.7% in the third quarter last year. The sequential and year-over-year increases were mainly due to the decrease in the cost of raw materials. Total operating expenses accounted for 9.9% of total revenues, compared with 10.6% in the second quarter this year and 15.4% in the third quarter last year, improving year-over-year. Income from operations was about $410 million compared with income from operations of $212 million in the second quarter this year and $8.8 million in the third quarter last year, improving both sequentially and year-over-year. Operating margin was 9.4% compared with 5% in the second quarter this year and 0.3% in the third quarter last year, improving sequentially and year-over-year. Net income attribute to Jinko Solar Holdings ordinary shareholders was 181.4 million flat sequentially and compared to 77.3 million in the third quarter last year, improving year-over-year. excluding the impact of a change in fair value of the notes and long-term investments and share-based compensation expenses, the adjusted net income was 184.6 million, flat sequentially and up two times year-over-year. Let's move into balance sheet. At the end of the third quarter, our cash and cash equivalents were $1.93 billion compared with $2.35 billion in the second quarter. AR turnover days were 87 days compared with 79 days in the second quarter of 2023. Event-free turnover days decreased to 67 days in the third quarter from 70 days in the second quarter this year. At the end of the third quarter, total debt was 4.23 billion compared to 4.73 billion in the second quarter this year. Net debt was 2.29 billion compared to 2.38 billion in the second quarter this year. Our debt structure is improving. This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.

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 are on a speakerphone, please pick up the handset to ask your question. Our first question today will come from Philip Shen of Roth MKM. Please go ahead.

Hi, everyone. Thanks for taking my questions. You guys had a pretty nice margin in Q3 despite the collapse in module prices. It seems like you've been able to match your cost structure with your module pricing. So I was wondering if you could give us your sense of how you expect module pricing to trend in Q4 and then also Q1, and then also in terms of margins. Do you expect similar margins in Q4 and Q1 versus Q3, or do you think there could be potential for even margin expansion in Q4 and Q1? Thanks.

Hey, Philip. This is Charlie. And we did very good, you know, in the first nine months, including the third quarter, thanks to our strong order of visibility. And we almost finished. this year's target, 75 gigawatts. And regarding the module price, the trend is downward trend. And we are expecting the ASP in Q4 is downward trend versus third quarter. And because we have more exposures to Chinese market in the fourth quarter, we expect the gross margin is possibly slightly down, quarter over quarter. Next year, we believe the module price will be relatively stabilized. It's very important for us to next year, we look up as quickly as possible the sales orders And we are in a good position. I think we have the largest end-type in TopCon capacities, and we have the most largest integrated capacities out of China for the U.S. market. And we expect to have over 30% sharements to European market and the U.S. market together. we are aiming to over 85% shipment or top count next year. So we are confident we can deliver relatively better performance compared to our peers next year.

Got it. Okay. So Q4 margin could be down slightly because of the China mix. And in Q1, perhaps you could have some expansion beyond, so growth or expansion of the margin in Q1 and Q2?

It's too early to say, but this year, our performance in the US market is not so good because the module was delayed, detained. And we expect next year, everything is getting on the on the schedule and the margin contribution from the U.S. market will, you know, be quite significant, you know, starting from next year.

Great. Okay. Thank you. You mentioned, Charlie, just now the U.S. shipments. And so I was wondering, in Q3, was there a large benefit in margin from the healthy amount of U.S. shipments because you've been able to be released from detention very quickly. And then also, next year, I think in the past, you were talking about 10 gigawatts of shipments for the US market in 24. But in your PowerPoint today, you highlighted 12 plus gigawatts by year end 23 of integrated capacity. So do you think 24 could actually be closer to 12 gigawatts? And we can leave it there.

Thank you. Next year, yes, our target is over 10 gigawatts shipment in U.S. market. And that's our biggest target. And the contribution, you know, earning contribution from U.S. market in third quarter is not good because, you know, we shift around 1.3, 1.4 gigawatts. But most of the modules was produced six to nine months ago. And it's a relatively high cost, including the storage cost. So back to your question, it's improving quarter by quarter. I believe from beginning of next year, the earning power from the US will be quite significant for JNCO.

Got it. So you were able to generate 19% margin in Q3 despite the high storage cost and the high . That's very interesting. One last question, and I'll pass it on. Can you compare the pre-impairment margins in Q3 versus Q4 actuals? In other words, what is the like-to-like margin trajectory?

You mean the impairment margin? The margin, including impairment, right?

Right. Can you compare the premium parents?

I know, I know. And we did have some impairment, inventory impairment in the second quarter by the end of June. But we don't expect any additional or significant impairment for both third quarter and the fourth quarter. We don't expect. And everything is and we are in good position, and we believe our price is pretty nice if you compare our ASP with the small market price, and we don't expect the inventory, you know, empowerment.

Great. Okay. Thank you for all the detail. I'll pass it on.

Thank you.

Again, if you have a question, please press star and then 1. Our next question today is from Brian Lee of Goldman Sachs. Please go ahead.

Hi. Thanks for taking the questions. This is Grace on for Brian. I guess my first question, just to follow up to the ASP questions earlier, just wondering if you can talk about the ASP trends by maybe end market and by different geography. I'm just asking because we have heard that some of the markets, like especially the DG market, have seen really high channel inventory. So can you provide a bit more color on the ASP trends? Thank you. And I have a follow-up.

Yeah, sure. Normally, we see a DG market is relatively ASP higher than utility. That's what people think. But at the current stage, we see a situation in the U.S. market especially. The U.S. market, because of many reasons, the DG market is more pressured than the utility market. That's what we have observed. I think, personally, we believe a very important reason is because of, let's say, the supply side. If the supply side is using a fully traceable raw material, or they just play the opportunity game on the spot market. I guess that's one of the reasons why we see just oversupply in the U.S. DG market in such short term. For the rest of the world, we believe DG market is relatively healthy, so we still see a strong DG market. For example, in Europe, right now, there are some pressures from the inventory side, but in the long term, we are still a big fan of European market, no matter it's DGO utilities. We believe, as the pre-remarked speech we have, it's starting digesting, so it will take some time, but it will be there. That's what we believe.

Great, thank you. And then my second question is on your shipment guide, your 4Q shipment guide of 23 gigawatts kind of implying a flattish quarter-over-quarter growth. But I think historically your 4Q is worth much higher than 3Qs. Is it driven by the orders delay that you referenced on the prepare remarks or is there something else? And also can you quantify how much of the delay was that and when do you expect those orders to come back? Thanks.

Thank you. We provide a relative conservative number, which I think is the high end of our annual guidance, which will be around 75 gigawatts. Still, on the order book side, we have more than what we need. But we still have some supply bottleneck. That's one of the reason why we continue to expand our capacity, try to fulfill all this commitment we are making. So overall, we are fully confident that we can beat our, let's say, guidance if needed. It depends on the supply side and the market trend. Your follow-up question is about if you're talking about next Q1 or next year's order book. Again, for this next year's total demand side, we are fully confident the market will go up by another 20%, even 25%, compared with 2023. So in the key market, we still believe the high quality and the high efficiency untyped TopCom product is still in some of the, let's say, somehow shortage. That's why we still have the confidence we will continue to build up our order book and extend our market share next year.

Okay, thank you. I pass it on.

Thank you.

Again, it is star and then one to ask a question. Our next question will come from Rajiv Chowdhury of Intrinsic Edge Capital Management. Please go ahead.

Good morning, and congratulations on a very strong quarter in what was a very difficult environment for the industry. I have a few questions. I want to start by asking if there were any inventory-related charges in the gross margin number in the third quarter.

Hello, Rajiv. The answer is no.

Okay. And were there any charges in the selling and marketing or general and administrative expenses that were one-time expenses?

Excuse me, repeat that again?

Yeah. Were there any one-time charges in the SG&A line items?

We did have some, you know, roughly, I think, maybe 20 men, 25 men, one of our core for some, you know, previous litigation regarding one of the module contracts a long time ago. So it's a long time. I think it's in the other training. expenses, not in the DNA expenses, but we did have some, you know, just 20 minute, you know, one off shots.

Okay. Uh, and, um, going back to, um, the, the gross margin, um, I, I'm trying to understand what your, uh, uh, what your, uh, cost of, uh, poly silicon was for the quarter. And the number I'm coming up with is around $16 on average, $16 per kilo on average between Chinese polysilicon and U.S. polysilicon. Is that a fair estimate?

Rajiv, we don't disclose the number, but you can look at the index and the China poly roughly, I think, in the range of the 60 RMB per kg to 90 RMB per kg. And by the policy, out of China, it's kind of, I think, two or five times, you know, compared to China. It's a different, you know, price, you know, mechanism.

Yeah, actually, DQ Energy just reported their ASP for the quarter was actually $7.60. So that is actually closer to 50 RMB per kg.

Yeah, you're right, you're right. You can't, you know, there's a public index, right, for the poly, and you can do the calculations, but think about, we have the When inventory come over days is roughly 60 to 80 days, we have production lead times. You need to think about the time difference to do the calculations. But you can do the calculation based on the train, but the detail, the numbers, I think we have the supply chain advantage compared to market price. But we have different mix for the US market, which is you know, the market out of the U.S. The Polly price is different.

So Charlie, is it fair to say that because you have 60 to 80 days of inventory that your Polly prices are always lagging the spot market by 60 to 80 days?

Yeah, you can do the, you know, estimation based on that.

Okay. My other question is about competition. at the prices where modules are right now, what percentage of the industry players between Tier 2 and Tier 3 do you think are losing money right now? And what percentage of these companies are cutting back on their production because the pricing is below their cash costs?

We have seen this The situation in recent, I think, months is for different utilization rates for different players in the industries. For the Tier 1 integrated companies, like Jinko, we have order visibility. We're a good mix for the N-type versus P-type. And we have good management costs. For some orders with relatively low price, we are able to continue to deliver, I think, the reasonable margin of growth for facilities. But for the Tier 2, Tier 3 players, even some, you know, let's say they are not integrated, they are not international companies, they are reducing their utilization rate. So it's going to be different. It's going to be different scenarios. and for different companies. I think the tier one top tier company will take the advantage to get more market shares.

Right, right. Do you see that happening already that tier three companies are cutting back their production right now?

Yeah, they're doing, you know, the utilization for tier two, tier three. They're, you know, lower their utilization rates.

So it is reasonable to think that your ASPs are going to be much higher than the spot market prices because you are selling into the utility market, which is more contract driven, and a lot of the spot prices that tier three companies are selling into really are fire sales.

It's fair to say that, but different companies have different mix to different countries, and different mix to the DG RACI utilities, and different product mix. So I think for Jinko, we are confident, and we are combined together. Our module price is relatively higher than the market price. It's not market price. It's the small price you'll see. you saw from the public website.

Tali, can you also talk about what was the level of depreciation in the third quarter and the EBITDA for the third quarter?

Actually, we have disclosed the EBITDA, including the details breakdown. You can look at the PBT, and we have detailed numbers. It's roughly 600 million US dollars. You can look at the details, including the calculation.

I see. Okay. Sorry, I have not had a chance to look at that. Percentage of the market, not Ginkgo, but the market this year will be Topcon, and what the percentage will be next year in terms of how much Topcon will be produced by the other companies?

This is the first year for any type of Topcon to penetrate the market, and we think that overall the market size it's 20, 25% this year, but we did over 60%. And next year it's possible and type will, you know, achieve 60%, 70%, but we are able to achieve, I think over 85%. Yeah.

So, uh, so if the, if the market this year is over 400 gigawatts, You're saying that Topcon this year is over 100 gigawatts?

Let me take it as the last follow-up. So roughly we estimate the total industry output for Topcon in this year will be somewhere around 100 to 110 gigawatts. And so across which Jinko will contribute around 70 gigawatts-ish. So next year, the number definitely will be more than doubled for the total industries. We're expecting somewhere around 400 gigawatts, but definitely JNCO will take a main part of it, but definitely not as big as this year.

Right. Okay. Okay. Thank you. And finally... Finally, one last question on the interest-bearing debt. You made a point that the interest-bearing debt came down in the third quarter. Is that something that we should expect will continue in Q4 and Q1?

Yeah, we are gradually decreasing the debt because our earnings increased. Gradually, yeah.

The operating cash flow for each company, we generated, I think, this year. For the first nine months, it's around 11 billion RMB operating cash flows. That's significant improvement. So for the leverage, the total debt, we're expecting to continue to, let's say, decrease Great.

Thank you, and congratulations again.

Please press star and then 1 to ask a question. Again, it is star and then 1 to join the question queue. Our next question today will come from Alan Lau of Jefferies. Please go ahead.

Thank you. So first of all, congratulations to the company in the very impressive results in 3Q and despite other peers are actually having declining profits quarter over quarter. So some of the questions on the details as to whether How is the U.S. shipment situation? How much has the company shipped to the U.S.? What is the view on 4Q shipment to the U.S.? Has the custom inspection improved, et cetera? Thanks.

We just talked about the earnings contribution from the U.S. for Jinko in third quarter. You know, we have smooth, you know, the clearance, let's say, with the VP, starting from July. And the Q4, we delivered roughly 1.3, 1.4 gigawatts. And we are expecting stable, you know, treatment, you know, Q4 versus Q3. And because, you know, a lot of inventory was, you know, was detained, you know, in the first half of the year. So we shift relatively high volume in third quarter. Fourth quarter, our production return to normal planning, normal standards, and we shift around to similar numbers. But contributions, earning contribution will quarter by quarter improve. Third quarter, the contribution is not so big because of the inventory. was produced six or nine months ago. The cost, storage cost, production cost is relatively higher. But next year we are expecting with strong earnings from U.S. cement.

So what you mean is because you have locked in the that the module price through the contract, and then as the input price is now declining. So you expect U.S. market will actually be improving a lot from Genco perspective, right?

Yeah, it's, you know, if you look at the market, the market, the module price is high, right? Because it was... it was only can be supplied from the capacity out of China. There is the UFLPA issues, you know, for the industry in the last 12 months. And for Jinko specifically, because our inventory, you know, was produced long time ago, and we get the process very smooth and starting from July, and The relatively old inventory, the cost is really higher. So earning a gross margin contribution is small for third quarter. But going forward, we expect to, you know, the earning contribution will be improved very quickly, quarter by quarter. And next year, Q1 will be in a very good position.

I think that is a very positive point that a lot of investors have not fully appreciated this. Thanks a lot for the clarity on this. And then my next question is, so everyone has been talking about the infantry in Europe. So how do we see it and around how many days or months of infantry we have in Europe?

Yeah, so approximately in Europe market, that's a main DG-based market. So in that kind of segment, in my opinion, that's normally around two months of the local inventory plus the logistic time, maybe one month to one and a half months should be reasonable, so total together. If you're taking from the manufacturer point of view, on average, it should take three to three and a half months of the volumes. That's the, let's say, normal or, let's say, the standard inventories across everyone. If you look into the seller's point or distributor's point, you know, that's normally approximately two months of the inventory.

Understood. So, you think the At current level, it's actually at two months and it is actually normal, right?

No, I'm saying for a DG-based distributor-generated driven market, that's the market standard, let's say, right? At the current status, especially you mentioned Europe, I think you know that because of the prices falling, So the end customer is having the hesitation to wait until the market price coming to the lower level. So that slow down the, let's say, the sales volume at the end customer side. That's the reason why from the channels or the inventories point of view, you know, the inventory is higher than the, let's say, normal situation. However, in my opinion, the end customer, the end market and demand is still there, but it just creates some hesitation. But I believe it takes maybe one or two more months time to observe, digest all the inventories across the whole channel, but the demand is still robust in Europe.

Understood. So, could you share your view on the utility side of things in Europe? Because I think people have been focusing a lot on the DG market in Europe, and actually infantry is mostly related to DG, but how about utility markets in Europe?

In utility segment, not only in Europe, but across the whole globe, there's barely any inventories, a real inventory, right? So most of the inventory under the utility segment is more, you know, build, wait until the schools deliver on site, but it's not a free inventory you can redirect to sell to others, right? So that's why even accounting basis, it is defined as inventory, but from a sales point of view, it is not available to sell, right? It's just a wait until the right timing or it's on the way to the destinations, right? That's why not only Europe, but across the whole world, that's more or less the situation in utility. Even if there's some inventory on the accounting basis, but it should not be risky too much.

Yeah, I see your point. I would like to know how is the demand in utility side of things like in U.S. or in Europe as well? Because will the decline in module prices stimulate more installation in the utility side? And how does that compensate with the interest rate?

Yeah, so firstly, it's the demand side. Definitely, we see there's some more attractions. for the end customer to continue to develop more solar projects in utility segment because IRR is becoming more and more attractive. The yield is higher and higher. However, it's a cycle. When you develop a project, it doesn't happen at day one. 12 months, 18 months, sometimes even 24 months, even more, to have all this, you know, to finish the whole development cycle, even, you know, early financing to close the financing part to be ready to place orders to the module side. So it takes a pretty long cycle. So my simple answer is yes, we see a very promising future, both U.S. and Europe, but it takes some time to... to have all those pipelines released to become a real order for the manufacturer like Jinko. And secondly, your question is regarding... Sorry, I forgot your second question.

How does that compensate the increase in interest rate? Because in some of the earnings calls in the U.S., because banks like J.P. Morgan and Bank of America are saying that

I randomly checked with some customers. I won't say that's 100%, but I checked some key clients of us, and most of them, their feedback is positive, because for the existing projects, even if their financial is closed, So normally they secure a fixed interest rate across the whole life cycle of their projects, investment cycles. So for them it's safe. And even with the module price coming down and they have more, let's say, returns for their investments or the interest rate doesn't hurt that part. And for the ongoing projects, because the interest rate is higher, And most of the clients can pass the majority of the interest rate, higher interest rate cost to the end customers, to the PPA customers, who can sign a more attractive PPA price than before. But definitely that won't be 100%, but that's my, I share that point from the customer feedback.

Thank you, thank you. That's definitely part of the, some of the cases may happen. Thank you. So I think my final question will be in relation to what is your view on what is the progress of your U.S. expansion capacity and what is your view as of now as to the chance of getting the IRA subsidies because there has been quite a lot of market chatters as to there are some lobbying happening in in Washington, etc., to target against Chinese players. So we'd like to know, do you have an update on those?

No, we don't have a clear... We are waiting for this detailed guidance, official detailed guidance released as well. So I think it's still not finalized yet. So we are waiting for that as well. But for the U.S. market, we believe that's a very promising market. We're still holding our bullish positions on that, and we are trying to do whatever we can to serve the U.S. market. But we will take more actions once all those details get released.

So your plan will complete by the end of this year, right?

We will see. But the previous plans stick to what we have. And if your question is regarding whether we have new plans, we have to wait until the detailed guidance release.

Okay. So your plan in Jacksonville, your 1 gigawatt plan, will be completed on time, right? Yes.

Okay. Thank you. Thanks a lot.

At this time, we will conclude our question and answer session. For any additional questions, please contact ir at jincosolar.com. The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.