JinkoSolar Holding Co Ltd DR

limited second quarter 2024 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, Ms. Stella Lang, JNCO Solar's Investor Relations. Please proceed, Stella.

Thank you, operator. Thank you, everyone, for joining us today for Jinko Solar's second quarter 2024 earnings conference call. The company's results were released earlier today and are available on the company's IR website at www.jinkosolar.com, as well as on New South Wales 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 are Mr. Li Xiande, Chairman and CEO of Zinco Solar Holding Company Limited, Mr. Jenna Miao, CMO of Zinco Solar Company Limited, Mr. Pan Li, CFO of Zinco Solar Holding Company Limited, and Mr. Charlie Tao, CFO 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 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 inherited 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 Xiande, 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.

Thank you. It covers more than 200 countries and regions. This is a re-improvement of China's global strength. The price of the industry chain for the second quarter has dropped by less than a quarter compared to the first quarter. We have flexibly adjusted the opening power of the market and various sectors, and combined the optimization of the supply chain and the cost control of the second quarter, which is 11.1% of the profit. Compared to the basic products, we have adjusted the use rate to 52.1 million US dollars, which has dropped by less than a quarter.

We are pleased to announce that thanks to our leading position in N-type top-count technology, competitive products, as well as global sales and manufacturing network, our module measurements grew by 34.1% year-over-year to 23.8 gigawatts in the second quarter, ranking first in the industry. By the end of the second quarter, we had led the industry as the first solar company in the world to reach a total module measurements of to nearly 200 countries and regions. This again demonstrated the power of our globalization strategy. In the second quarter, prices in several segments of the industry chain declined slightly on a sequential basis. We flexibly adjusted our production scheduling strategy and utilization rates for different processes and also optimized our supply chain strategy to control costs. Growth margin was 11.1% in the second quarter, almost a slide sequentially. Adjusted net income was US$52.1 million, slightly down sequentially.

At the same time, the expansion of the project in the industry has stopped, and there are many cases of young people, and some companies have reduced or stopped. Since the current period, the price of industrial chain is still at the bottom, and most of the housing prices have fallen below the cash rate. The opening power of the industry has dropped relatively rapidly, and the overall price has dropped. We believe that the low-price industry does not have the right information. The meeting of the country and the industry level is open and the policy of control and control is in place. The new market is a signal that the industry is healthy and developing. The financial situation is much more flexible and strong, and it supports the advantage of technology innovation capabilities, growth control capabilities, and brand channel capabilities. These will further Global demand shows faster growth momentum in the first half of 2024.

The newly added installations in China totaled 102 gigawatts in the first half, up 30% year over year. From January to June, total solar module exports increased by around 20% year over year. At the same time, we saw an increase in capacity expansion projects delayed, suspended, with even some terminated. As to existing capacity, some manufacturers have cut or suspended production Coming into the third quarter, prices in the industry chain were low and volatile, with prices in most segments falling below cash cost. The utilization rates across the industry declined compared to the second quarter to an overall low level. We view this irrationally low prices as unsustainable. Meanwhile, government and industry launched the control policies to promote the healthy and orderly development of the solar industry. Financial institutions became more selective preferring to favor strong and excellent companies with technological innovation and cost control capabilities as well as brand channels advantages. We believe that all these matters will further accelerate the elimination of the outdated capacities as well as industrial integration. In the future, we expect companies with robust and sustainable operations to reinforce their industry leadership. The in-depth industrial adjustments are bringing both challenges and opportunities to companies. We will continue to improve our management efficiency, strengthen and expand our globalization advantage, taking on challenges in the industry with our resource advantages and innovative capabilities.

Thanks to our global footprint and the competitiveness of our products, by the end of the second quarter, the visibility of our order book for 2024 exceeds 80%.

We have maintained an overall leading utilization rate in the industry, especially for end-time sales utilization rate nearly 100%.

We kept refreshing our records for cell efficiencies.

At the end of the second quarter, lab efficiency of our N-type TOPCOM-based perovskite tandem solar cell reached 33.24%, a significant leap beyond our previous record of 32.33% last year. The mass-produced efficiency of our 182 TOPCOM cells exceeds 26.1%. We firmly believe that Topcon remains the past with the best economic performance in terms of cost, mass production yield, intellectual property protection, and customer acceptance, and still has room for further cost reduction and efficiency increase. We intend to keep our leading position by gradually adopting new technologies while consider both efficiency improvement and economic return.

We continued to optimize our supply chain to cater to the demands of global clients.

for low-carbon, clean, high-efficient, and reliable products. In the first quarter of this year, we unveiled new grain panels to produce the zero-carbon factory as certified by TUV Rheinland for compliance with the relevant criteria and the requirements. So far, we have received positive feedback from our clients. This once again confirmed our commitment to clean, manufacturing, and product innovation.

In the face of the change in the international trade situation, the increase in global capacity is becoming more and more important. In recent years, we have announced that we will use PRS to build a 10 gigawatt high-efficiency M-type battery and host in VR in SART. This is the company's innovative transformation from global sales to global production. It is an important milestone in the company's globalization. This in-shift in international trade, the continuing expansion of our globalization capabilities is becoming increasingly important.

As recently announced, we have entered into a strategic partnership with renewable energy localization company a wholly-owned subsidiary of PIF, and Vision Industries Company to form a joint venture in Saudi Arabia for the production of 10 gigawatts of high-efficiency solar cells and solar modules. This is another step in our innovative transformation from global cells to global manufacturing and an important milestone for our globalization strategy. With years of experience overseas, We are dedicated to building localized solar ecosystems together with our partners to achieve synergy of resources and complementarity of advantages and further grow our competitiveness in a global market. We are accelerating the clearing out of the P-type capacity to optimize our capacity structure. We expect our annual production capacity for monowafers, solar cells, and solar modules to reach 125 and 130 gigawatts respectively by the end of this year. We expect our advanced capacity structure to continue to lead the industry.

Thank you very much. Thank you.

with our advantages in M-type top-con technology, competitive products, as well as global sales and manufacturing network, we reiterate our guidance for module measurements to be between 100 and 110 gigawatts for the four-year 2024. And we will continue to implement our globalization strategy to actively seize market opportunities and mitigate market risks. We expect module shipments to be between 23 to 25 gigawatts for the third quarter of 2024. By the end of this year, we expect mass-produced N-type cell efficiency to reach 26.5%. Overall, we are holding a healthy cash flow. We will continue to optimize the structure of our assets and liabilities, as well as our cash flow levels. strengthening our resistance to risk.

Thank you, Ms. Li. Total shipments were 25.3 gigawatts in the second quarter, with module shipment accounting for approximately 94%. We are pleased that we continue to rank number one in the world for the module shipments as we are increasingly recognized by global clients for our high-efficient and reliable products and services. In terms of geographic mix, approximately 60% of our module shipment went to overseas markets in the second quarter, with Asia Pacific and Europe accounting for majority. Sequentially, shipments to the US were relatively stable and shipment to Europe increased by 40%. Thanks to the continuous improvement in Tiger News product strength, Tiger News shipment accounted for 85% of total shipment in the second quarter, A steady increase from nearly 80% in the first quarter as these modules are increasingly accepted by clients, particularly in China, Europe, and North America. Currently, we lead the industry as the first solar company in the world to reach a cumulative anti-module shipment of 100 megawatts. They continue to enjoy a premium in global market with premiums in some markets like Europe, U.S., and the Middle East especially high. On the strength of our extensive global sales network, we will continue to optimize our shipments and the product performance. We were recognized as the top performer across all reliability categories in the PV module reliability scorecard calculation by Kiva TVEL for the 10 consecutive times. and we topped the PV Tech 2024 Q2 module tech bankability report with the highest AAA rate. This is a continuous recognition of our commitment to quality, innovation, and R&D over the long term, as well as clients' long-standing trust in our products' quality, bankability, and reliability. Recently, we became one of the few companies to have won both Tier 1 energy storage provider and the Tier 1 PV module manufactured by Bloomberg. These honors are not only a testament to the power of our outstanding brand, but also an affirmation of our proactive contribution to global energy transformation. As the economics of solar energy become more apparent, We expect demand in the global market to stay around 600 GW in 2024 and grow steadily in 2025. In addition to mainstream markets like China, US and Europe, emerging markets such as Middle East and some countries in Asia Pacific are also showing strong growth potential. With our accumulated experience in global sales as a growing industry trend footprint, we are confident we will. Over time, seize the opportunities brought about by the growth in global market demand more rapidly and more high-efficiently, and optimize overseas supply chains to effectively cope with changes in international trade policies. We will continue to optimize our products and services, constantly enhancing our competitiveness globally through strategic partnerships market positioning, and outstanding client relationship benefits. With that, I will turn the call over to Pat.

Thank you, Junior. We are pleased to report sequential growth in module shipments and total revenues in a very challenging second quarter. While module prices declined, we reduced cost through supply chain optimization and technology upgrades. improved operating efficiency of optimized asset and liability structures. Growth margin was relatively flat sequentially, and our asset liability ratio was down by one percentage point compared to the year beginning. Despite the challenging situation in the industry, we did not stop returning value to our shareholders for their long-term support. At the beginning of August, we announced a cash dividend of $1.5 per ADA, which was paid today as planned. In addition, as of today, we have repurchased a total of 5.6 million ADAs in an aggregate amount of over $113 million in the open market. and our share repurchase program announced in July 2022, and the extended share repurchase program announced in December last year. Let me go into more details now. Total revenue was about 3.3 billion, up 4.4% sequentially, and down 21% year-over-year. The year-over-year decrease was mainly due to a decrease in average selling price of solo modules. Gross margin was 11.1% compared with 11.9% in the first quarter this year and 15.6% in the second quarter last year. The year-over-year decrease was mainly due to the decrease in average selling price of modules. Total freighting expenses were about $525 million, up 24% sequentially, and up about 18% year-over-year. The sequential and year-over-year increases were mainly due to the write-up of the net book value of the equipment resulted from the fire accident in Shanxi Province, which was partially offset by estimated insurance proceeds from the fire accident in the second quarter this year. So the operating expenses accounted for about 16% of the total revenues in the second quarter compared to 13% in the first quarter and about 11% in the second quarter last year. Net loss attribute to the J&K Solar Holdings Company limited ordinary shareholders were 13.9 million in the second quarter this year, excluding the impact of the change in fair value of the convertible sending notes. Fair value loss relate to the investment in solar supply chain companies. Share based compensation expenses and net loss resulted from a fire accident in Shaanxi. Adjusting net income attribute to the Jinko Solar Holding Company ordinary shareholders was about $52 million. Moving to the balance sheet, at the end of the second quarter, our cash and cash equivalent were $1.91 billion compared with $2.4 billion in the first quarter this year. AR-10 number days were 89 days compared with 100 days in the first quarter this year. Inventory turnover days were 82 days compared with 89 days in the first quarter this year as a result of improving operating efficiency. At the end of the second quarter, total debt was $3.86 billion compared to $3.66 billion in the first quarter. Net debt was $1.95 billion compared with $1.22 billion in the first quarter this year. This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.

Thank you. If you wish to ask questions, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. Your first question comes from Philip Shen with Roth Capital Partners.

Hi, this is Matt Ingram on for Phil. Thank you for taking our questions. Looking into the back half of the year in 2025, how do you see module pricing trending And then on gross margins, what is it going to take to return to the mid-teens margin levels, and do you think this could be achievable in 25?

Thanks for the question. This is Jenna. I think in general, the market price will stay at, let's say, a relatively low level for a while for most of the market. It's really because, in general, the oversupply situation is quite obvious across the industry. But for sure, the market-wise, it depends on how fast the cost reduction can catch up with the low-price situation right now. So we, at least from what we are seeing right now, quarter by quarter or month by month, and the cost reduction is happening almost every day. So hopefully with the improvement from the cost control and also all the actions we are taking or the whole industry is working on, the margin could go back to at least a healthy level as early as possible.

Okay, great. Thank you. And then kind of on supply and demand, with module prices so low for so long, is that resulting in any demand elasticity? And if so, which countries or regions could we see upside surprise in demand? And then on the supply side, when do you think this oversupply situation across the supply chain gets resolved? Does this happen next few quarters, next 12 months, or longer?

It's really difficult to forecast which day the market will turn upside down. But we see everything is gradually going to that direction. Everyone from the demand side, no matter it's US, Europe, or China, or other emerging markets, we still foresee healthy growth year over year. Meanwhile, when we see the supply side, for sure we have seen some newcomers have dropped their plans to give up what they planned to do previously. And also from the policy-wise, we see some China government policy initiative, which is trying to control the new expansion of the capacity, which shows a pretty strong signal to let's say constrained capacity supply side as well. And also the current loss-making market will shake out some of the weak players across industry too. So adding all those up together, supply side, we see a steady growth year over year. And the supply side, we see some actions taking. It might take some time, but it's moving on the direction to restrict the supply into more rational levels So adding those two together, we hope to give it several quarters. The things will get back to a rational level, I hope.

Great. Thank you. I'll pass it along.

Thank you.

Your next question comes from Alan Lau with Jefferies.

Thank you for taking my question. This is Alan from Jefferies. So first of all, The results are actually quite impressive, especially during the backdrop of a very challenging market environment. So I've got a couple of questions I would like to tag with the management. First of all, what is the US shipment amount and also the US shipment expectation in the second half of this year? And what is your view on the policy risk in the US market, especially there were

recently filings of critical circumstances so for us it's a it's a very special market we see the the market is First step for Ginkgo, we are gradually getting back our market share gradually after the efforts we have taken in the last two years' time. If you look into the total shipment numbers, we have provided the range of 5% to 10% as the annual shipment range, but if we look into Q4, it's roughly 5% to 6%. So seasonally, you know, a change is required. For example, right now there's a rush before the tariffs kick in. Also, the market demand is kicking up. So season, quarter by quarter, there will be some small changes. But in general, I think it's still falling to the range between 5% to 10% of our total shipment in the U.S. And for the long term, we still believe the U.S. is a great market because of the demand, thanks to the AI driving, you know, the electricity demand is strong, and also the IRA Act is a strong support to the new capacities both on the manufacturing side and on the utility project development side as well. So in long term we are still a big fan of US solar market and we believe we will continue to be there to find a stable supply fan to serve our clients in US. even if there might be some turbulence on the trade policy side, but we still have some prepared solution on it.

For the second, I think you are talking about the urgent circumstances for the AD3. It's really a little bit of risk, but we have practically managed

Is it because of the relatively stable volume from Jingbo? Like there was no spike in volume. So you think it's actually compliant with the rules, right?

It's a little bit complicated, but, you know, we are the mandatory respondent to the case AD3D. So, and if you are going to be qualified for the, you know, the situations, you must be, you know, in the volume shipments after the finding date of case and the resistance before, and there should be a significant increase of shipments. So, we proactively manage and the volume. So that is what I'm saying, you know. But there's still some kind of risk, but we think the risk is low for Zinco.

Thank you. It's very clear. So, and also we'd like to know what is the progress in our Middle East? Because there was a huge announcement on the capacity pancake water Saudi Arabia. So we would like to know what is the estimated timeline of that capacity and what type of policy you expect would be benefited?

It's really a very strategic move for our international manufacturing and it's not only a period of facilities in Saudi Arabia and we are working with PIF and the racing industries. And Saudi Arabia, we have a very big ambition for the energy transition by 2030. And we work together to localize the production of advanced capacities to give us certain model capacities. And Saudi, I think the government has a policy department which is, you know, the goal is to, you know, to help to promote local productions in Saudi Arabia. So we wait back, you know, after our operational, you know, in 2026, and then the modules in Saudi Arabia locally will be have, I think, have a premium compared to, you know, the modules out of Saudi Arabia. And on top of that, the government has, you know, has a strong support policies to the joint ventures in Saudi as well.

So will there be any localization requirement on tendering so that you can ensure all of your modules will be sold and also even some of your competitors you have to buy your modules because of that localization requirement.

I would like to be more confident. We will have a very unique component in Saudi and for the Saudi market. And Saudi, if you look at the total market size, it's roughly 50-60% of the total Middle East. And we are very optimistic in the next three to five years. And I think you want to explore your detailed policies. There are some policies existing, but it's going to be developed, I think, by the government as well. And the current policy is 20% local content with some kind of additional penalty. But the big issue is in Saudi Arabia, know any qualified module producers. Most of the developers at this stage, they get the waiver letter, by my understanding, because there is no available local producers. I think we are in a good position to penetrate the market after launch our joint venture.

So you'll be technically the only qualified producers by January 6th. So that might bring you premium there, right?

I would love to say that. I think, you know, we will be the first mover. So we'll take that around.

And an accounting question on the financials. Because I saw in the adjusted... calculations of adjusted earnings. Actually, it's around 380 million. So is it like R&D 665 and then you take 58% of shareholding on the loss of that so that you get 380 million?

So you're talking about EPS or where the average is?

They're just the net income. So it's shown as 378 million RMB. So there's a net loss due to the Shanxi fire accident of 380 million. So we'd like to know if this 380 million is 58% of 665 million in the A-share level.

Yeah, you're talking about the total numbers for the A-share. It's kind of the number you're talking about. close to 58%, so close to 58%, so the minority, there's I think a separate line, net income attribute to non-controlling interest, that consolidated all the net income should be allocated to the minority interest from the perspective of the U.S. fiscal.

including the loss from the Shanxi province, right? It's also proportionate.

Yes, proportionate.

Yes. Thank you. Thank you. So my final question is, what is the usage of FPL policy? Now, can you use 100% of that to save costs?

Oh, you mean the politics out of China, right?

The SDR, the granular politics, yeah.

I think we get kind of the, you know, improvement on the utilization levels, and typically it's kind of 30%, you know, 50%.

Thank you. Thank you. I'll pass on. Thanks a lot, Charlie. Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from William Griffin with UBS.

Hi. Thanks a lot for the time. Just a couple for me. The first one was on the tandem cell efficiency that you noted in the press release. Could you just talk about kind of where you are in the development process for that technology and how long before you think we could see something become commercially available?

Yeah, the tantrum, the tantrum is still in R&D stage, but we are optimistic for the, you know, for the future of the commercialization of the TopCon, you know, plus the, you know, the tantrum in technology. But still, you know, it's a, If you look at the time scheme, we believe in the next five years it's still in a laboratory stage. It's possible after five years it could be commercialized, but it depends on a lot of progress. Back to the question, we don't believe it's commercially 100% visibility at this stage. you know, the earlier time, maybe after five years.

Got it. Thank you. And then just on the Topcon side, obviously there's been a lot of, you know, headlines and reports of litigation, companies claiming IP around Topcon. a little bit hard to get a good handle on, you know, the patent landscape there. Just wondering if you could speak to, you know, how comfortable you are with your position sort of in the Topcon IP landscape across your key markets and maybe any sort of discussions around licensing or, you know, other legal actions that maybe you've been having.

So the patent, you know, if you look at, you know, Jingle is a kind of the TopCon promoter, you know, the leader of technology. And in the recent three years, we invested around 5% to 6% total revenue on R&D, and the significant part we put into the TopCon. So we're really very confident, you know, about our patents, particularly on TopCon. If you look at the total volume, if you look at the quality, if you look at the, you know, the patterns are, you know, they're spread in different countries, particularly out of China. So I think at the beginning of this year, we also announced some kind of news. We granted some kind of patents to one solar company, one solar module company, one solar cell company. So that, you know, demonstrated our, you know, strong capabilities on R&D and patent positions.

All right, thanks very much. Thank you.

Your next question comes from Adi Chandri with Sensara Capital.

Good morning. I have a few questions. The first couple of questions are just housekeeping. Can you tell us what the depreciation and the capital spending numbers were for the second quarter and what the targets are right now for the full year? Okay.

Okay, thank you for the question. In the second quarter, we reduced our CapEx as compared with the first quarter, which was the total CapEx in the first half year was about 4 billion RMB, and our perspective Total capex in the whole year will be adjusted to about 9 billion RMB.

I think the big question, you know, the big picture is, you know, it's a tough situation, right, in the industry. But the industry has suffered in, I think, three or four quarters. And as top-down companies, we help them manage the companies and sustainable growth and we balance the shipment for the greatest and further solidify our positions on the cash flows particularly. On top of that, we significantly cut off, cut the tax this year as well as next year, as well as lower the operating expenses and optimize our operation and including the train some labor force. And if you look at our CapEx next year, we don't have any CapEx plan except for the Saudi Arabia capacities, which is a strategic move. So just for your understanding, But we think, you know, after several quarters, we cannot project exactly. But we have seen, you know, the big players, top two, top three, even some kind of relatively mental players have been consolidated or be face-offs in juniors, you know, the downward cycle. So we... I think we are getting prepared really to go through the cycle time.

So are you suggesting that CapEx in 2025 will be even less than the $9 billion in 2024? Yes, definitely.

And Saudi Arabia is very unique, even because we take 40% equity. And really, equity is will be 100 million U.S. dollars next year. So except for that, I think we have some kind of maintenance capex as well as some kind of investment on R&D, you know, R&D capex. So definitely it's going to be, you know, lower next year.

Okay. And what about depreciation in the second quarter?

So each month, roughly, if you want to use your financial models, it's kind of 500 million RMB to 600 million RMB you can put in your financial models. Anyway, if you have a detailed number of questions, I would suggest you can have a follow-up with our IR teams and give your detailed number.

OK. OK. So moving on to the next question. That is on your average selling prices. Your average selling price in the second quarter was down quite a bit. It was down actually more than 10%, 15% from the first quarter. And part of the reason I get from reading the presentation is that DG was 50% of sales, and most of DG is, I think, in China. So the combination of focus on China and DG led to uh more than a pretty sharp decline in asp now as you go into the second half of the year and shipments as a proportion of total shift away from china shift away from dg will that provide a more benign backdrop for pricing for you

You know, the spot market price in the last three or six months has continued to decline, but we think it's going to be the lowest level to be stabilized. But if you look at financial numbers, because we have different markets in the utility scale, the DG segment, we have different markets, U.S., Japan, different markets. different regions and different lead times for signing the contracts. So, if you look at the ASP, you're right, I think it's affecting the industry-wide, the downwork of support market-wise for the modules. Because we have different lead times, different countries, so each quarter, Q2, Q1, and Q2, The average is based on the downward side, where we expect to be continually trained in the third quarter, but relatively stable in the fourth quarter. On the other side, if you look at the supply chain perspective, the material costs continue to be trained.

So, can we expect that the decline in ESPs will moderate from Q2 to Q3 relative to what we saw in Q1 to Q2?

Yes, I would like to say, you know, if you look at Q4 versus Q3, it's going to be relatively, you know, modernized.

Okay. Okay. But can you say that we are at the point where pricing can be expected to be stable or we are not there yet?

I think kind of in a time scheme, you know, if you look at the sectors, most of the sectors is suffering cash losses. We don't believe there's a significant room further. And with the face-to-face capacities, it should be. If you look at the solar wafer price in recent week, some of top players, they have increased the swap market price a little bit, and even the party price has been stabilized. So step by step, I think you will see the module and as well as the solar sale price.

I see. Okay. Charlie, your costs were down apart from the decline in polysilicon prices. Your production costs were down quite significantly also in the second quarter, and that helped you maintain the gross margin at a double-digit level. Can you break down some of the reasons why the costs were down, and can we expect costs to keep on coming down at the same rate that we saw from the Q4 to Q1, and then Q1 to Q2, we have had some pretty dramatic declines in cost here, and that is separate from the polysilicon.

Yes, you know, there are a lot of efforts we are working on, you know, the contingent to, you know, to optimize our design, you know, and the key materials, the purchase price continued to be have been improved, and improved the working efficiencies, and labor costs cut off, and operating expenses optimizations. So there are a lot of efforts we are working on.

So does that mean that gross margin can go up in the third quarter relative to the second quarter?

No, I don't believe that, frankly, but I think we are confident. The gross margin is bottom line. We try to stabilize.

But you're not confident that it can go up from Q2 to Q3 yet?

No, I would like to say, you know, stabilized are kind of, you know, if you look at our peers, you know, we are relatively good positions, and stabilized and face-down takes time. I think it's not going to take one or two years, but maybe take a couple of, you know, several quarters. And on top of that, we... you know, we take leverage our, you know, global manufacturing and the marketing capabilities and optimize the, you know, the economics.

Okay, another question is on the N-type market. What do you think the size of the N-type market will be in 2024, this year? I mean, and what will your market share be? If you do 90 to 95 gigawatts.

Hi, Richard. Sorry to interrupt you. We will take this as a final question. And for more questions, we can discuss after the call.

Is that OK?

Yes.

OK, thank you.

I think n-type this year is kind of the top-down dominant. This is a domination year for n-type top-down. And the market penetration for Top Gun, roughly, I think, maybe 70% to 75%. And Jingle, roughly 90%. So if you look for next year, I think it should be 1% penetration for M-Type.

There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may disconnect. Thank you. Hello, ladies and gentlemen, and thank you for standing by for JNCO Solar Holding Co. Limited Second Quarter 2024 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, Ms. Stella Lang, JNCO Solar's Investor Relations. Please proceed, Stella.

Thank you, Operator. Thank you, everyone, for joining us today for Jinko Solar's second quarter 2024 earnings conference call. The company's results were released earlier today and are available on the company's IR website at www.jinkosolar.com, as well as on New South Wales 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 are Mr. Li Xiande, Chairman and CEO of Zinco Solar Holding Company Limited, Mr. Jenna Miao, CMO of Zinco Solar Company Limited, Mr. Pan Li, CFO of Zinco Solar Holding Company Limited, and Mr. Charlie Tao, CFO 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 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 inherited 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 Xiande, 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.

Thank you. It covers more than 200 countries and regions. This is a re-example of the globalization of the economy. The price of the industry chain of the second quarter fell below the low of the first quarter of the second quarter. We flexibly adjust the opening power of the market and the various sectors, and combine the optimization of the supply chain to control the cost. The second quarter profit is 11.1%, compared to the basic products. The adjustment rate is 52.1 million US dollars, down below the low of the first quarter.

We are pleased to announce that thanks to our leading position in N-type top-count technology, competitive products, as well as global sales and manufacturing network, our module measurements grew by 34.1% year-over-year to 23.8 gigawatts in the second quarter, ranking first in the industry. By the end of the second quarter, we had led the industry as the first solar company in the world to reach a total module measurements of to nearly 200 countries and regions. This again demonstrated the power of our globalization strategy. In the second quarter, prices in several segments of the industry chain declined slightly on a sequential basis. We flexibly adjusted our production scheduling strategy and utilization rates for different processes and also optimized our supply chain strategy to control costs. Growth margin was 11.1% in the second quarter, almost flat sequentially. Adjusted net income was US$52.1 million, slightly down sequentially. 三百年全球需求整体呈现高速增长的态势。 2024年三百年国内光估新增商机规模累计达到102.4个计划,同比增长了30%年期。 1-6月份光估组件累计出口量同比增长20%左右。

At the same time, the expansion of the project in the industry has stopped, and the annual situation has worsened. Some companies have reduced or stopped. Since this period, the price of industrial chain is still at the bottom. Most of the housing prices have fallen below the cash price. The opening power of the industry has dropped relatively rapidly, and the overall price has dropped. We believe that the low-price industry does not have the right information. The country and industry level meeting is open and the control policy is in place. The new market has released a signal that the industry is healthy and developing. The new economy is more flexible and strong. It has the advantage of supporting companies with technology innovation capabilities, quality control capabilities, and brand channel capabilities. These will further accelerate the development of innovative and industry-oriented products that can be used in the future. In the future, different enterprises will continue to develop and expand their business capabilities and industries. The deep adjustment of the industry will bring challenges to enterprises, and at the same time, there will be opportunities. We will constantly improve management efficiency, consolidate and expand the efficiency, and respond to the challenges of the industry with the advantage of resources and innovation.

Global demand shows faster growth momentum in the first half of 2024. The newly added installations in China totaled 102 gigawatts in the first half, up 30% year-over-year. From January to June, total solar module exports increased by around 20% year-over-year. At the same time, we saw an increase in capacity expansion projects delayed, suspended, with even some terminated. As to existing capacity, Some manufacturers have cut or suspended production. Coming into the third quarter, prices in the industry chain were low and volatile, with prices in most segments falling below cash cost. The utilization rates across the industry declined compared to the second quarter to an overall low level. We view these irrationally low prices as unsustainable Meanwhile, government and industry launched the control policies to promote the healthy and orderly development of the solar industry. Financial institutions became more selective, preferring to favor strong and excellent companies with technological innovation and cost-control capabilities, as well as brand channel advantages. We believe that all these matters will further accelerate the elimination of outdated capacities as well as industrial integration. In the future, we expect companies with robust and sustainable operations to reinforce their industry leadership. The industrial adjustments are bringing both challenges and opportunities to companies. We will continue to improve our management efficiency, strengthen and expand our globalization advantage, taking on challenges in the industry with our resource advantages and innovative capabilities.

Thanks to our global footprint and the competitiveness of our products,

By the end of the second quarter, the visibility of our order book for 2024 exceeds 80%. We have maintained an overall leading utilization rate in the industry, especially for end-time sales utilization rate nearly 100%.

As of last year, 32.33% of the total sales, we want to increase the average net profit of Supercom to more than 26.1%. We are determined to improve Supercom's technology, cost, net profit, profit protection, customer technology, and so on. It is still the most cost-effective technology route. And with the space to continue to reduce the cost-effectiveness, we will combine the cost-effectiveness of the project to promote new technical applications to maintain the lead.

We kept refreshing our records for cell efficiencies. At the end of the second quarter, lab efficiency of our N-type TopCon-based perovskite tandem solar cell reached 33.24%, a significant leap beyond our previous record of 32.33% last year. The mass produced efficiency of our 182 TopCon cells exceeds 26.1%. We firmly believe that Topcon remains the past with the best economic performance in terms of cost, mass production yield, intellectual property protection, and customer acceptance, and still has room for further cost reduction and efficiency increase. We intend to keep our leading position by gradually adopting new technologies while consider both efficiency improvement and economic return.

We continued to optimize our supply chain to cater to the demands of global clients.

for low-carbon, clean, high-efficient, and reliable products. In the first quarter of this year, we unveiled new grain panels to produce the zero-carbon factory as certified by TUV Rheinland for compliance with the relevant criteria and requirements. So far, we have received positive feedback from our clients. This once again confirmed our commitment to clean, manufacturing, and product innovation.

In the face of the change in the international trade situation, constantly increasing globalization is becoming more and more important. In recent years, we have announced that we will use PRS to build a 10GW high-efficiency N-type battery and component in the Saat. This is the company's innovative transformation from global marketing to global manufacturing. It is an important milestone in the company's globalization strategy. This in-shift in international trade, the continuing expansion of our globalization capabilities is becoming increasingly important.

As recently announced, we have entered into a strategic partnership with renewable energy localization company a wholly-owned subsidiary of PIF, and Vision Industries Company to form a joint venture in Saudi Arabia for the production of 10 gigawatts of high-efficiency solar cells and solar modules. This is another step in our innovative transformation from global cells to global manufacturing and an important milestone for our globalization strategy. With years of experience overseas, We are dedicated to building localized solar ecosystems together with our partners to achieve synergy of resources and complementarity of advantages and further grow our competitiveness in a global market.

We are also accelerating the release of P-LINK energy. As of the end of 2020, our current high-efficiency batteries and components will reach 120GW, 95GW, and 130GW.

We are accelerating the clearing out of the P-type capacity to optimize our capacity structure. We expect our annual production capacity for monowafers, solar cells, and solar modules to reach 125 and 130 gigawatts respectively by the end of this year. We expect our advanced capacity structure to continue to lead the industry.

Thank you. Thank you.

These are our advantages in M-type top-com technology, competitive products, as well as global sales and manufacturing network. We reiterate our guidance for module shipments to be between 100 and 110 gigawatts for the full year 2024. And we will continue to implement our globalization strategy to actively seize market opportunities and mitigate market risks. We expect module shipments to be between 23 to 25 gigawatts for the third quarter of 2024. By the end of this year, we expect mass-produced N-type cell efficiency to reach 26.5%. Overall, we are holding a healthy cash flow. We will continue to optimize the structure of our assets and liabilities, as well as our cash flow levels. strengthening our resistance to risk.

Thank you, Ms. Li. Total shipments were 25.3 gigawatts in the second quarter, with module shipments accounting for approximately 94%. We are pleased that we continue to rank number one in the world for the module shipments as we are increasingly recognized by global clients for our high-efficient and reliable products and services. In terms of geographic mix, approximately 60% of our module shipment went to overseas markets in the second quarter, with Asia Pacific and Europe accounting for majority. Sequentially, shipments to the US were relatively stable and shipment to Europe increased by 40%. Thanks to the continuous improvement in Tiger News product strength, Tiger News shipment accounted for 85% of total shipment in the second quarter, A steady increase from nearly 80% in the first quarter as these modules are increasingly accepted by clients, particularly in China, Europe, and North America. Currently, we lead the industry as the first solar company in the world to reach a cumulative and tight module shipment of 100 gigawatts. They continue to enjoy a premium in global market with premiums in some markets like Europe, U.S., and the Middle East especially high. On the strength of our extensive global sales network, we will continue to optimize our shipments and the product performance. We were recognized as the top performer across all reliable categories, reliability categories in the PV module reliability scorecard calculation by Kiva TVEL for the 10th consecutive times. and we topped the PVTEC 1024Q2 module tech bankability report with the highest ATA rate. This is a continuous recognition of our commitment to quality, innovation, and R&D over the long term, as well as clients' long-standing trust in our products' quality, bankability, and reliability. Recently, we became one of the few companies to have won both Tier 1 energy storage provider and the Tier 1 PV module manufactured by Bloomberg. These honors are not only a testament to the power of our outstanding brand, but also an affirmation of our proactive contribution to global energy transformation. As the economics of solar energy become more apparent, We expect demand in the global market to stay around 600 gigawatts in 2024 and growth steadily in 2025. In addition to mainstream markets like China, US and Europe, emerging markets such as Middle East and some countries in Asia Pacific are also showing strong growth potential. With our accumulated experience in global sales as a growing industry trend footprint, we are confident we will Over time, see the opportunities brought about by the growth in global market demand more rapidly and more high-efficiently, and optimize overseas supply chains to effectively accomplish changes in international trade policies. We will continue to optimize our products and services, constantly enhancing our competitiveness globally through strategic markets market positioning, and outstanding client relationship management. With that, I will turn the call over to Pat.

Thank you, Junior. We are pleased to report sequential growth in module shipments and total revenues in a very challenging second quarter. While module prices declined, we reduced cost through supply chain optimization and technology upgrades. improved operating efficiency of optimized assets and liability structures. Growth margin was relatively flat sequentially, and our asset liability ratio was down by one percentage point compared to the year beginning. Despite the challenging situation in the industry, we did not stop returning value to our shareholders for their long-term support. At the beginning of August, we announced a cash dividend of $1.5 per ADA, which was paid today as planned. In addition, as of today, we have repurchased a total of 5.6 million ADAs in an aggregate amount of over $130 million in the open market. and our share repurchase program announced in July 2022, and the extended share repurchase program announced in December last year. Let me go into more details now. Total revenue was about $3.3 billion, up 4.4% sequentially, and down 21% year over year. The year-over-year decrease was mainly due to a decrease in average selling price of solo modules. Gross margin was 11.1% compared with 11.9% in the first quarter this year and 15.6% in the second quarter last year. The year-over-year decrease was mainly due to the decrease in average selling price of modules. Total freighting expenses were about $525 million, up 24% sequentially, and up about 18% year-over-year. The sequential and year-over-year increases were mainly due to the write-up of the net book value of the equipment resulted from the fire accident in Shanxi Province, which was partially offset by estimated insurance, proceed from the fire accident in the second quarter this year. So the operating expenses accounted for about 16% of the total revenues in the second quarter compared to 13% in the first quarter and about 11% in the second quarter last year. Net loss attribute to the J&K Solar Holdings Company limited ordinary shareholders were 13.9 million in the second quarter this year, excluding the impact of the change in fair value of the convertible sending notes, fair value loss related to the investment in solar supply chain companies, share-based compensation expenses, and net loss resulted from a fire accident in Shanxi, adjusting net income attribute to the Jinko Solar Holding Company ordinary shareholders was about $52 million. Moving to the balance sheet, at the end of the second quarter, our cash and cash equivalent were $1.91 billion compared with $2.4 billion in the first quarter this year. AR-10 other days, were 89 days compared with 100 days in the first quarter this year. Inventory turnover days were 82 days compared with 89 days in the first quarter this year as a result of improving operating efficiency. At the end of the second quarter, total debt was 3.86 billion compared to 3.66 billion in the first quarter. Net debt was $1.95 billion compared with $1.22 billion in the first quarter this year. 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 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. Your first question comes from Philip Shen with Roth Capital Partners.

Hi, this is Matt Ingram on for Phil. Thank you for taking our questions. Looking into the back half of the year in 2025, how do you see module pricing trending And then on gross margins, what is it going to take to return to the mid-teens margin levels, and do you think this could be achievable in 25?

Thanks for the question. This is Jenna. I think, in general, the market price will stay at, let's say, a relatively low level for a while for most of the market. It's really because, in general, the oversupply situation is quite obvious across the industry. But for sure, the margin-wise, it depends on how fast the cost reduction can catch up with the low-price situation right now. So we, at least from what we are seeing right now, quarter by quarter or month by month, The cost reduction is happening almost every day. So hopefully with the improvement from the cost control and also all the actions we are taking or the whole industry is working on, the margin could go back to at least a healthy level as early as possible.

Okay, great. Thank you. And then kind of on supply and demand, with model prices so low for so long, is that resulting in any demand elasticity? And if so, which countries or regions could we see upside surprise in demand? And then on the supply side, when do you think this oversupply situation across the supply chain gets resolved? Does this happen next few quarters, next 12 months, or longer?

It's really difficult to to forecast which day the market will turn upside down. But we see everything is gradually going to that direction. Everyone from the demand side, no matter it's US, Europe, or China, or other emerging markets, we still foresee healthy growth year over year. Meanwhile, when we see the supply side, for sure we have seen some newcomers have dropped their plans to give up what they planned to do previously. And also from the policy-wise, we see some China government policy initiative, which is trying to control the new expansion of the capacity, which shows a pretty strong signal to let's say constrained capacity supply side as well. And also the current loss-making market will shake out some of the weak players across industry too. So adding all those up together, supply side, we see a steady growth year over year. And the supply side, we see some actions taking. It might take some time, but it's moving on the direction to restrict the supply into more rational levels So adding those two together, we hope to give it enough several quarters. The things will get back to a rational level, I hope.

Great, thank you. I'll pass it along.

Thank you.

Your next question comes from Alan Lau with Jefferies.

Thank you for taking my question. This is Alan from Jefferies. So first of all, The results are actually quite impressive, especially during the backdrop of a very challenging market environment. So I got a couple of questions I would like to check with the management. First of all, what is the U.S. shipment amount and also the U.S. shipment expectation in the second half of this year? And what is your view on the policy risk in the U.S. market, especially there were recently filings of critical circumstances?

So, for U.S., it's a very special market. We see the market is, first for JNCO, we are gradually getting back our market share gradually after the efforts we have taken in the last two years' time. So if you look into the total shipment numbers, we have provided the range of 5 to 10% as the annual shipment range. But if we look into Q4, it's roughly 5 to 6%. So seasonally, you know, it changes because, for example, right now there's a rush before the tariffs kick in. Also, the market demand is kicking up. So season, quarter by quarter, there will be some small changes. But in general, I think it's still falling to the range between 5% to 10% of our total shipment in the U.S. And for the long term, we still believe the U.S. is a great market because of the demand, thanks to the AI driving, you know, the electricity demand is strong, and also the IRA Act is a strong support to the both on the manufacturing side and on the utility project development side as well. In the long term, we are still a big fan of the U.S. solar market and we believe we will continue to be there to find a stable supply fan to serve our clients in the U.S. even there might be some turbulence on the trade policy side, but we still have some prepared solution on it.

For the second, the urgent, I think you are talking about the urgent circumstances for the AD3. It's really a little bit of risk, but we have practically managed

Is it because of the relatively stable volume from Jingle? Like there was no spike in volume. So you think it's actually compliant with the rules, right?

It's relatively complicated, but we are the mandatory respondent to the case AD3D, so if you are going to be qualified for the situations, you must be in the volume shimments after the finding date of case and the resistance before, and there should be a significant increase of shimments, so we proactively manage and the volume. So that is what I'm saying, you know. But there's still some kind of risk, but we think the risk is low for Zinco.

Thank you. It's very clear. So, and also we'd like to know what is the progress in our Middle East? Because there was a huge announcement on the capacity pancake water Saudi Arabia. So we would like to know what is the estimated timeline of that capacity and what type of policy you expect would be benefited?

You know, it's really a very strategic move for our international manufacturing. And it's not only a period of facilities in Saudi Arabia, and we are working with the and the region industries. And Saudi Arabia, we have a very big vision for the energy transition by 2030. And we work together to localize the production of advanced capacities to give us certain module capacities. And Saudi, I think the government has a policy department which is, you know, the goal is to, you know, to help to promote local productions in Saudi Arabia. So we wait back, you know, after our operational, you know, in 2026, and then the modules in Saudi Arabia locally will be have, I think, have a premium compared to, you know, the modules out of Saudi Arabia. And on top of that, the government has, you know, has strong support policies to the joint ventures in Saudi as well.

So will there be any localization requirement on tendering so that you can ensure all of your modules will be sold and also even some of your competitors You have to buy your modules because of that localization requirement.

I would like to be more confident. We will have a very unique competitiveness in Saudi and for the Saudi market. And Saudi, if you look at the total market size, it's roughly 50-60% of the total Middle East. And we are very optimistic in the next three to five years. And I think you want to explore your detailed policies. There are some policies existing, but it's going to be developed, I think, by the government as well. And the current policy is 20% local content with some kind of additional penalty. But the big issue is in Saudi Arabia, there is... know any qualified module producers. So most of the developers at this stage, they get the waiver letter, by my understanding, because there is no available local producers. But I think we are in a good position to penetrate the market and launch our joint venture.

So you'll be technically the only qualified producer by January 6th. So that might bring you premium there, right?

I would love to say that. I think we will be the first mover. So we'll take that around.

And an accounting question on the financials. Because I saw in the adjusted... calculations of adjusted earnings, actually it's around 380 million. So is it like R&D 665 and then you take 58% of shareholding on the loss of that so that you get 380 million?

So you're talking about EPS or where the average is?

They're just the net income. So it's shown as 378 million RMB. So there's a net loss due to the Shanxi fire accident of 380 million. So we'd like to know if this 380 million is 58% of 665 million in the Asia level.

Yeah, you're talking about, you know, the total numbers for the Asia is kind of, you know, the number you're talking about and the Because the U.S. close 58%, so close 58%, so the minority, there's a, I think, a separate line. Net income attribute to non-controlling interest, that consolidated all the, you know, net income should be allocated to the minority interest from the perspective of the U.S. Mexico.

including the loss from the Shanxi province, right? Yes. It's also proportionated.

Yes, proportionate.

Yes. Thank you. Thank you. So, my final question is, what is the usage of FPL policy? Now, can you use 100% of that to save costs?

Oh, you mean the politics out of China, right?

The SDR, the granular politics. Yeah. I think we get kind of the improvement on the transition levels.

And typically, it's kind of 30% to 50%.

Thank you. Thank you. I'll pass on. Thanks a lot, Charlie.

Thank you.

Once again, if you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. Your next question comes from William Griffin with UBS.

Hi. Thanks a lot for the time. Just a couple for me. The first one was on the tandem cell efficiency that you noted in the press release. Could you just talk about kind of where you are in the development process for that technology and how long before you think we could see something become commercially available?

Yeah, the Tantum, the Tantum is still in R&D stage, but we are optimistic for the, you know, for the future of the commercialization of the Topcon, you know, plus the, you know, the Tantum technology. But still, you know, it's a, If you look at the time scheme, we believe in the next five years it's still in a laboratory stage. It's possible after five years it could be commercialized, but it depends on a lot of progress. Back to the question, we don't believe it's commercially 100% visibility at this stage. the earlier time, maybe after five years.

Got it. Thank you. And then just on the Topcon side, obviously there's been a lot of headlines and reports of litigation, companies claiming IP around Topcon. a little bit hard to get a good handle on, you know, the patent landscape there. Just wondering if you could speak to, you know, how comfortable you are with your position sort of in the Topcon IP landscape across your key markets and maybe any sort of discussions around licensing or, you know, other legal actions that maybe you've been having.

So the patent, you know, we, if you look at, you know, Jingle is a, kind of the TopCon promoter, you know, the leader of technology, and in the recent three years, we invested around 5% to 6% total revenue on R&D, and the significant part we're putting into the TopCon. So we're really very confident, you know, about our patents, particularly on TopCon. If you look at the total volume, if you look at the quality, if you look at the the patterns are expressed in different countries, particularly out of China. So I think at the beginning of this year, we also announced some kind of news. We granted some kind of patents to one solar company, one solar module company, one solar cell company. So that, you know, demonstrated our strong capabilities on R&D and patent positions.

All right, thanks very much. Thank you.

Your next question comes from Adi Chandri with Sensara Capital.

Good morning. I have a few questions. The first couple of questions are just housekeeping. Can you tell us what the depreciation and the capital spending numbers were for the second quarter and what the targets are right now for the full year? Okay.

Okay, thank you for the question. In the second quarter, we reduced our CapEx as compared with the first quarter, which was the total CapEx in the first half year was about 4 billion RMB, and our perspective Total capex in the whole year would be adjusted to about 9 billion RMB.

I think the big question, you know, the big picture is, you know, it's a tough situation, right, in the industry. But the industry has suffered in, I think, three or four quarters. And as top-run companies, we help them manage the companies and sustainable growth and we balance the shipment for the greatest and further solidify our positions on the cash flows particularly. On top of that, we significantly cut off, cut the capex this year as well as next year, as well as lower the operating expenses and optimize our operation and including the train some labor force. If you look at our CapEx next year, we don't have any CapEx plan except for the Saudi Arabia capacities, which is a strategic move. Just for your understanding, But we think, you know, after several quarters, we cannot project exactly. But we have seen, you know, the big players, top two, top three, even some kind of relatively middle players have been consolidated or be phased out in juniors, you know, the downward cycle. So we... I think we are getting prepared really to go through the cycle time.

So are you suggesting that CapEx in 2025 will be even less than the $9 billion in 2024?

Yes, definitely. And Saudi Arabia is very unique, even because we take 40% equity and really equity will be $100 million next year. So except for that, I think we have some kind of maintenance capex as well as some kind of investment on R&D, you know, R&D capex. So definitely it's going to be, you know, lower next year.

Okay. And what about depreciation in the second quarter?

So each month, roughly, if you want to use your financial models, it's kind of 500 million RMB to 600 million RMB you can put in your financial models. Anyway, if you have a detailed number of questions, I would suggest you can have a follow-up with our IR teams to give you a detailed number.

OK. OK. So moving on to the next question. That is on your average selling prices. Your average selling price in the second quarter was down quite a bit. It was down actually more than 10%, 15% from the first quarter. And part of the reason I get from reading the presentation is that DG was 50% of sales, and most of DG is, I think, in China. So the combination of focus on China and DG led to more than a pretty sharp decline in ASPs. Now, as you go into the second half of the year and shipments as a proportion of total shift away from China, shift away from DG, will that provide a more benign backdrop for pricing for you?

You know, the small market price in the last three or six months is continuing to decline, but we think it's going to be the lowest level to be stabilized. But if you look at financial numbers, because we have different markets, the utility scale, the DG segment, we have different markets, U.S., Japan, different markets. different readings and different lead times for signing the contracts. So if you look at the ASP, and you're right, I think it's affecting the industry-wide, the down world of sport market price for the models. Because we have different lead times, different countries, so in each quarter, Q2, Q1, and Q2, The average is based in downward signs, where we expect to continually train in the third quarter, but basically stable in the fourth quarter. On our side, if you look at the supply chain perspective, the material costs continue to be trained.

So can we expect that the decline in ESPs will moderate from Q2 to Q3 relative to what we saw in Q1 to Q2?

Yes, I would like to say, you know, if you look at Q4 versus Q3, it's going to be relatively, you know, modernized.

Okay. But can you say that we are at the point where pricing can be expected to be stable or we are not there yet?

I think kind of in a time scheme, you know, if you look at the sectors, most of the sectors is suffering cash losses. We don't believe there's a significant room further. And with the capacity, it should be. If you look at the solar vapor price in recent weeks, some of the top players, they have increased the swap market price a little bit, and even the party price has been stabilized. So step by step, you will see the module and as well as the solar cell price.

I see. Okay. Charlie, your costs were down apart from the decline in polysilicon prices. Your production costs were down quite significantly also in the second quarter, and that helped you maintain the gross margin at a double-digit level. Can you break down some of the reasons why the costs were down, and can we expect costs to keep on coming down at the same rate that we saw from Q4 to Q1, and then Q1 to Q2. We have had some pretty dramatic declines in cost here, and that is separate from the policy.

Yes, you know, there are a lot of efforts we are working on, you know, the contingent to, you know, to optimize our design, you know, and the key materials, you know, to be helping improve and improve the working efficiencies and labor costs, you know, cutoff and, you know, operating expenses, you know, optimizations. So there are a lot of, you know, efforts we are working on.

So does that mean that gross margin can go up in the third quarter relative to the second quarter?

No, I don't believe that, frankly, but I think we are confident. The gross margin is bottom, and we try to stabilize.

But you're not confident that it can go up from Q2 to Q3 yet?

No, I would like to say, you know, stabilized are kind of, you know, if you look at our peers, you know, we are in relatively good positions. And stabilized and phase-out takes time. I think it's not going to take one or two years, but maybe take a couple of, you know, several quarters. And on top of that, we... you know, we take leverage our, you know, global manufacturing and the marketing capabilities and optimize the, you know, the economics.

Okay. Another question is on the N-type market. What do you think the size of the N-type market will be in 2024, this year? I mean, and what will your market share be? If you do 90 to 95 gigawatts.

Sorry to interrupt you. We will take this as a final question. And for more questions, we can discuss after the call.

Is that OK?

Yes.

OK, thank you.

I think n-type this year is kind of the top-down. This is a domination year for n-type top-down. And the market penetration for TopGum, roughly I think maybe 70% to 75%. And Jingle, roughly 90%. So if you look for next year, I think it should be 1% penetration for M-Type.

There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.