JinkoSolar Holding Co Ltd DR

Hello, ladies and gentlemen, and thank you for standing by for Genco Solar Holding Co. Limited's third 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 Wang, Genco Solars and Vista Relations. Please proceed, Stella.

Thank you, operator. Thank you, everyone, for joining us today for Genco Solar's third quarter 2024 earnings conference call. The company's results were released earlier today and available on our company's II website at .gencosolar.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 II website. On the call today from Genco Solar, Mr. Lee Sender, chairman and CEO of Genco Solar Holding Co. Limited, Mr. Janet Miao, CMO of Genco Solar Co. Limited, Mr. Pan Lee, CFO of Genco Solar Holding Co. Limited, and Mr. Charlie Tao, CFO of Genco Solar Co. Limited. Mr. Lee will discuss Genco Solar's business operations and company highlights, followed by Mr. Miao, who will talk about sales and marketing. And then Mr. Pan Lee, 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 Security Solidification 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 Genco Solar's public findings with the Securities and Exchange Commission. Genco 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 Sender, chairman and CEO of Genco Solar Holding. Mr. Lee will speak in Mandarin and I will translate his comments into English. Please go ahead, Mr. Lee. While earnings were under pressure across the industry during the quarter, we achieved relatively outstanding results, leveraging our leading position in -top-com technology, competitive products, as well as global sales and manufacturing networks. Imbalance between supply and demand led to continuous price decline in the end market, causing loss to almost the whole industrial chain. As we worked to balance utilization rates, achievements, and profitability, prices in the last quarter were stable sequentially, and achievements to the U.S. market increased significantly quarter over quarter. We also continued to optimize our integrated costs through technical advancement and supply chain management. Growth margin was 15.7 percent, and the net income was U.S. dollars 3.2 million. Significantly improved sequentially.

In

September, the newly added installation was 20.89 gigawatts in China, up 32.4 percent over the year, and 26.9 percent sequentially, reversing the sequential declining trend of the previous two months. Due to seasonal demand volatility in some overseas markets, module exports in September decreased sequentially. Demand was slightly weak, while clearing out of supply were accelerated. This profitability throughout the whole industrial chain and the pressure, some companies that had insufficient cash flow and poor resistance have gone bankrupt, reorganized, or being acquired from time to time. During this month, the CPIA held symposiums aimed at encouraging manufacturers to adopt self-discipline in their pricing strategies and production volume management. CPIA also released a report calling on manufacturers to participate in bidding in rational manners, avoid selling or bidding with prices below cost, and also bid organizers to formulate reasonable bidding plans, shifting the focus to products and service quality as well as contract performance. We believe these matters may help eliminate uncompetitive capacity and accelerate the industry consolidation. We believe that with enhanced supervision of related departments, domestic prices will eventually return to reasonable levels.

In

the third quarter, we further consolidated our competitiveness edges. By the end of this quarter, the mass-produced efficiency for our end-type topcon sales improved to approximately 26.2%. As topcon is still in a stage of rapid technology and product upgrades, we have continued to invest in R&D and are gradually adopting certain new technologies into mass production based on market demand, investment, and payback periods to maintain a leading position in the industry.

We

have continuously improved our smart production capabilities to lead the industry in the digital transformation. Recently, at our Shanxi MegaBase, we built the Zinco 360 smart platform in cooperation with Sanhua Technology, and it has been certified by TUV Inland. By integrating MES and QMS systems with some cutting-edge technologies such as the Internet of Things, AI, and Big Data Analysis, the platform can improve real-time equipment monitoring in the vast majority of our production process and ensure whole process management from warehousing of raw materials to warehousing of finished products.

As one of

the leading voices in the fight against the climate change, Zinco Solar has always aligned its operations with global climate goals. Recently, we participated in the 2024 New York Climate Week, where we officially launched the first climate white paper. We have kept improving ESG management in our supply chain, and so far we have completed third-party ESG audits for most of our key suppliers, and the majority of our suppliers have signed our Code of Conduct.

We have also continued to improve our supply chain, and we have also continued to improve our supply chain, and we have continued to improve our supply chain, and we have continued to improve our supply chain, and we have continued to improve our supply chain, and we have continued As

we navigate through cycles, the leading enterprises in our industry will emerge ahead thanks to their superior cost control, extensive sales network, and effective cash flow management. In the long term, they will continue to benefit from continuous investments in R&D and expansion of their global capabilities. We will focus more on balancing market structure and profits. We expect the model shipment to be between 90 gigawatts to 100 gigawatts for four years, 2024, and 22.3 to 32.3 gigawatts for the fourth quarter. We will also continue to optimize our assets and the liability structure, as well as turnover 10 over-efficiency, further strengthening our resilience to risk.

Thank you, Ms. Lee. Our total shipments were 25.9 gigawatts in the third quarter, with module shipment accounting for 92 percent, nearly flat sequentially. We remain, we maintain our global leading position in module shipment during both the third quarter and the first three quarters. This achievement is a testament to the trust of our global clients in our reliable, high-efficiency products and services. In the third quarter, around 60 percent of modules were shipped overseas, with Europe, North America, and emerging markets all healthy. Distribution business accounted for approximately 37 percent of total shipment, compared to approximately 45 percent in the second quarter. Thanks to continuous improvement in Tiger News product strengths, Tiger News shipments accounted for nearly 90 percent of total shipment, a steady increase from 85 percent in the second quarter. In China, the ratio of Tiger News has grown to over 90 percent, while it increased to nearly 70 percent in North America. We once again topped the PV Tech 2024 Q3 module tech bankability report with a AAA reading, and also received the highest bankability score in this industry. This honor rewards our commitment to quality, innovation, and R&D, as well as global clients' trust in our product quality, bankability, and reliability over the long term. Recently, we launched the next-generation top-count technology solar panel named Tiger News 3.0. The Tiger News 3.0 product will be manufactured on the production line of a zero-carbon factory certified by TUV Rheinland, catering to the client's demand for the high-efficient, reliable, and clean product. Also, in the latest BNEF energy storage Tier 1 list in Q4 2024 ranking, Jinqiu Energy has once again been recognized as a Tier 1 manufacturer by Bloomberg for its outstanding performance in the energy storage sector. By the end of the quarter, our accumulated global shipment exceeds 280 gigawatts. We helped our global clients achieve the grid parity with green and economic renewable energy solutions. Short-term cycle volatility in this industry shifts in the macro environment, and the disturbance from international trade policy brings PV companies not only challenges, but also opportunities. We always proactively seize opportunities from challenges in the market demand, balance market risk, and lead the industry development with more high-efficiency and reliable products and services while maintaining a reasonable market share.

Thank you, General. We are pleased to have achieved steadily improving financial results with our leading position in -top-cone technology, competitive products, global marketing, and manufacturing network, as well as our efforts to control costs and expenses. Key financial metrics such as total revenue, gross margin, operating income, and net income all increased sequentially. We'll continue to improve the efficiency of our working capital, achieving sustainable growth in operating cash flow, and enhance our resilience to risk. Let me go into more details now. Total revenue was about $3.5 billion, up 2% sequentially, and down 23% -on-year. The sequential increase was mainly due to the increase in module shipments. The -to-year decrease was mainly due to the decrease in the average selling price of solar modules. Gross margin was .7% compared with .1% in the second quarter, and .3% in the third quarter last year. The sequential increase was mainly due to the increase in the average selling price of modules, and the -over-year decrease was mainly due to the decrease in ASP of modules. Total operating expenses were $539 million, down about 1% sequentially, and up 20% -over-year. The -over-year increase was mainly due to the increase in shipping costs, as the shipments of the solar modules increased, and an increase in the impairment of loan leave assets. So operating expenses accounted for .4% of total revenues in the third quarter, compared to .9% in the second quarter this year, and about 10% in the third quarter last year. Net income attribute to our ordinary shareholders was $3.2 million in the third quarter, excluding impact of a change in fair value of the convertible nodes, and long-term investments in solar supply chain companies, share-based compensation expenses, and the impairment of the capacity utilization, which was strategically adjusted by the company. The adjusted net income attribute to our ordinary shareholders was $14.8 million. Moving to the balance sheet. At the end of the third quarter, our cash and cash equivalent were about $3.2 billion, compared with about $2 billion in the second quarter. AR turnover days were 98 days, compared with 89 days in the second quarter this year. And inventory turnover days was 66 days, compared with 82 days in the second quarter this year, as a result of improved operating efficiency. At the end of the third quarter, total debt was $5.23 billion, compared to $3.86 billion in the second quarter this year. Net debt was $2.05 billion, compared to $1.95 billion in the second quarter this year. This concludes our prepared remarks. We're 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. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from with Roth Capital Partners. Please go ahead.

Everyone, thanks for taking my questions. First one is on the volume of modules shipped into the US in Q3. Can you confirm what it was? And then, sorry if I missed it. And then, can you also provide the megawatts you expect to ship into the US in Q4?

Thanks. Our

Q3 shipment to the US is roughly 15 to 18 percent of total shipment. I think you can figure out the detail numbers. Q4, we forecast that the number will be lower because of the seasonality issues and the market turbulence. However, when we look into the whole year, it should fall into our expectations, which is roughly 5 to 10 percent of the total shipment or the total number within the expectation.

Great. Thanks, Chener. Can you share what it might be for Q3? With the volume in the US and the ADCVD decision coming, what's your confidence level in whether or not it will be retroactive and also won't be a high number? How are you managing that risk? Thanks.

Yeah, so from our perspective, we still take the US market as a long-term market. So no matter how the policy or tariff changes, we're always trying to figure out the solutions to survive and compete in the US market. So regarding 2025, we still have not decided the final number yet because of the upcoming election and also there will be the numbers of ADCVD announced pretty soon. So we think we will figure out the numbers after that when we see more certainty. So we will talk maybe soon regarding that topic. Regarding the retroactive risk, we still believe we heard about the petitioner's request on this, I think it's CVDs. So we are still evaluating the risk and waiting for the final decision. Regarding the ADs, since we are in the sample list, we are cooperating with our lawyers to try to not trigger the retroactive risk. So we are doing our best to avoid the unnecessary risks.

Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Rajiv Shudra with Sunsara Capital. Please go ahead.

Good morning and congratulations on a good quarter. I have a few questions. The first question is on your average second prices in the third quarter were obviously higher than they were in the second quarter and the reason was the increased shipment to the United States. If the shipments to the US are going to go down and queue for as a percentage, should we expect a pretty significant decline in ASPs quarter over quarter in the double digit range?

The third quarter,

the ASP quarter by quarter is quite flat given we have more shipments in the US and looking to the fourth quarter and the market price in the third quarter is in the downward trend. So we think it is kind of moderate and downward in terms of the prices in the fourth quarter which is the third quarter.

So I guess another way of asking the question is what is the expectation for ASPs in China in the fourth quarter relative to the third quarter and also in Europe, again Q4 versus Q3?

Yes, if you look at the index, a lot of independent products are published in the price. The trend is quite similar but now the CTIA, China, the industry association is leading the policy studies and trying to mitigate the oversupply of the pricing problems in the industries and we think the price has already reached the bottom and hopefully we think the price will be stabilized and helps the industry to go to the relatively disciplined approach.

So I guess the question is if prices stay stable from here in China and Europe for the rest of the year, are they still down relative to the third quarter?

Oh I get the question because of the mix of different readings, we have lower shipments in the US which is our readings in the fourth quarter so the blended ASP should be a little bit lower.

Okay, moving on to the EBITDA number for the third quarter, can you tell me what the depreciation number was in Q3 and also can you confirm if EBITDA in Q3 was in excess of $400 million?

No, EBITDA we have discussed the detailed numbers and the depreciation per quarter roughly $70 million US dollars so you can do the calculations.

Sorry, Charlie can you repeat the depreciation in the third quarter?

It's roughly $70 million US dollars a quarter.

$78 million

US dollars.

$70

million US

dollars. $70 million US dollars. And next question is on storage, can you give us an update on the storage business and are you likely to hit $100 million in revenues this year or is it still smaller than that?

Hi Rajiv, I don't think it's the right time to disclose the detailed numbers. We are still trying our best to grow the storage business into an ambitious goal so we think we will share the positive or good news with all the investors once it's ready but for us it's still an early stage business. We think it's not the right timing to disclose the numbers.

Okay and finally on shipping costs, can you give us an idea of what the trend line in shipping costs was in the third quarter and what you're expecting Q4 and beyond? I'm talking about shipping costs per unit or what?

Yes, in the first half year the logistics cost is relatively higher, particularly the political tensions in the Middle East and the impact over the regions including US logistics costs and now we're expecting the logistics costs will be relatively lower starting fourth quarter and from the supply side the containers, there's sufficient containers to supply the demands so we're expecting the logistics costs will be relatively lower quarter by quarter.

Also a final question is on the GNA expenses. Last year in the fourth quarter the GNA expenses were over 200 million. Should we expect and which was a sharp increase from the third quarter? Should we expect a similar trend in the fourth quarter this year?

Throughout this year we continue to train the operating expenses including the GNA expenses so looking to Q4 versus Q3 we are expecting the operating expenses will be lower Q4 versus Q3. I see

okay

thank

you. 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. We will now pause momentarily to allow questions to be registered. once again if you wish to ask a question please press star 1 on your telephone. Your next question comes from Brian Lee with Goldman Sachs & Co. Please go ahead.

Hey everyone thanks for doing the questions. Just a couple housekeeping ones. Did you give us the free cash flow number in the quarter and also the capex number in the quarter?

For the full year we estimate I don't have the exact numbers for the third quarter but the full year 2024 the capex will be around 9 billion RMB. Our operating cash flow is roughly 5 billion so then operating cash flow you know the free cash flow is negative the 4 billion RMB.

Okay that's helpful and then can you give us an update on the latest status of your Frankfurt listing efforts and also maybe a little bit of color around net proceeds expected and what we should be sort of modeling in terms of cash impact on the balance sheet plus dilution. Thanks. You

know

the GDR you know the GDR you know we we just announced it's roughly total is 4.5 billion RMB and roughly the dilution will be 5 percent or 6 percent depending on the you know the issuers the price but the timetable is still in the earlier stage in the operations and we expect the GDR and will be roughly completed in the second quarter next year and the use of the seeds and we have this cause is the majority is for the existing you know the Sanxi Super Factory second phase we have roughly been in construction and to be completed by the end of this year and the main part will be the use for the working capital purposes as well as small numbers and for the US existing module capacity

further expansions. All right thanks a lot best of luck with it. Appreciate it.

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 Mohammed Amat with Emirates Development Bank. Please go ahead.

Yeah so my question is how much of your business is from the utility segment and from the rooftop solar segment and another question is that your diluted EPS is 0.57 per ADS. How it is calculated because the number of shares is 53.4 million and basic shares are 52 million but the difference in basic and diluted EPS is huge 1.45 versus 0.57.

For the detailed EPS and we can share the detailed calculation and I think it's very simple so after the call we can share the detailed calculation with you and in terms of the percentage of utility versus yeah

the DG we I think we we talked about it during the prepared remarks that the DG ratio is roughly a high 30 range so if you want to know the detail numbers we can share with you. Hold on a second it's roughly 37 percent that's the D it means you know 63 percent is utility.

Okay okay 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. We will now pause momentarily to allow questions to be registered. There are no further questions at this time that does conclude our conference for today. Thank you for participating you may now disconnect.