JinkoSolar Holdings Company Ltd

JKS Details

JinkoSolar Holdings Company Ltd (NASDAQ: JKS) is one of the largest solar module manufacturers with an integrated installed capacity of 22 GW for mono wafers, 11 GW for solar cells, and 31 GW for solar modules, as of 31 December 2020. It sells its solutions and services to a diversified international utility, commercial and residential customer.

Result Performance – For the Financial Year Ended 31 December 2020 – (FY20)

For the year ended 31 December 2020, the revenue jumped by 18.1% YoY to US$5.38 billion mainly led by an increase in the shipment of solar modules (Annual shipments stood at 18,771 MW, up 31.4% YoY), which was partially offset by a fall in the average selling price of solar modules. Further, gross profit was reported at US$945.8 million, up 13.6% YoY and gross margin at 17.6% for FY20. Total operating expenses for the year FY20 stood at US$672.3 million, an increase of 18.5% YoY mainly on an increase in shipping costs, an increase in disposable loss on PPE, costs on upgradation of production equipment and an increase in impairment loss. EBITDA for the year increased by 20.6% YoY to US$463.5 million. Meanwhile, Non-GAAP net income was reported at US$146.9 million, down 1.2% YoY, and GAAP net income stood at US$35.3 million.

Key Data (Source: Company Reports)

Recent Updates

• As per the release dated 2 June 2021, the company was ranked Top Performer in PV Evolution Labs' (PVEL) 2021 PV Module Reliability Scorecard for the seventh consecutive time. JKS is one of two manufacturers to be recognized as a Top Performer since 2014.
• On 1 June 2021, the company stated that its flagship Tiger Pro dual glass module has received the world's first IEC TS 62804-1-1:2020 certificate issued by DEKRA, one of the world's largest independent inspection companies.
• As per the release dated 31 May 2021, the company plans to release its unaudited financial results for Q1FY21 before the open of U.S. markets on Friday, June 25, 2021.
• On 31 May 2021, the company stated that the maximum solar conversion efficiency of its large-area N-type monocrystalline silicon solar cells attained 25.25%, indicating a new world record for large-size contact-passivated solar cells.

Risks:

Due to the nature of the business, the growth and profitability depend on the demand for and the prices of solar power products and the up-gradation of photovoltaic technologies. Further, any unfavourable change in the government subsidies and other economic incentives in the solar energy sector might decrease the profitability of JKS and materially impact the business. Meanwhile, the company is exposed to significant guarantee liabilities and in case of debtors’ default, the financial position would be affected.

Outlook:

The company stated that the ultra-high efficiency modules are leading the industry towards grid parity, which is favouring the company significantly. In addition, the flagship product, Tiger Pro Series, continues to innovate and strengthen the position for future growth. Further, shipments of large-size products are showing signs of improvement and it is expected that ~50% of total shipments will be driven by Tiger Pro series in FY21 (Total Shipment expected: 25.0-30.0 GW). Meanwhile, the company has developed multiple solutions for residential, C&I, and utility customers in eight markets and has shipped the energy storage products to the Middle East and Africa. Importantly, the company expects Q1FY21 total revenue in the range of $1.18 billion to $1.30 billion with a gross margin between 12% and 15% and total shipment in the ambit of 4.5-5.0GW.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

In the ongoing volatile week, the stock has given a flattish close at $41.21, forming a ‘Doji’ candle on the weekly chart thereby suggesting indecision. The technical indicator RSI with a reading around 47 suggests gaining of positive momentum.

Going forward, the stock may have resistance around the 50% retracement level of $50.80 whereas support could be around $30.00. 

Stock Recommendation:

The stock rose by ~101.22% in 9 months. It has made a 52-week low and high of $15.2700 and $90.2, respectively.

Considering the aforesaid facts, we have valued the stock using an EV/EBITDA multiple-based illustrative relative valuation and have arrived at a target price which reflects a rise of low double-digit (in % terms). We have applied a slight discount to EV/EBITDA Multiple (NTM) (Peer Average) considering fall in gross profit margin at 17.6% in FY20 versus 18.3% in FY19, and slide in net margin at 1.1% in FY20 versus 3.3% in FY19.

Considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of US$41.21 per share, up by 2.39% on 10^th June 2021.  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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