JinkoSolar Holdings Company Ltd

JKS Details

JinkoSolar Holdings Company Ltd (NYSE: JKS) is a solar module manufacturer that distributes its solar products to diversified international utility, commercial and residential customers. The company is vertically integrated in manufacturing solar modules along with components and has an installed capacity of 22 GW for mono wafers, 11 GW for solar cells, and 31 GW for solar modules, as of December 31, 2020. The company has a market capitalization of ~US$1.78 billion as on 23^rd April 2021.

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

For the financial year ended 31 December 2020, the revenue increased by 18.1% to $5,384 million versus $4,273 million in FY19 driven by the rise in the shipment of solar modules, which was somewhat nullified by a slide in the average selling price of solar modules. Annual shipments of the company stood at 18,771 MW, up 31.4% YoY. Further, gross profit reported at $946 million, up 13.6% YoY and Non-GAAP net income stood at $147 million, down 1.2% YoY.

Key Data (Source: Company Reports)

Recent Updates

• On 14 April 2021, the company joined the United Nations (U.N.) Global Compact, the largest business sustainability initiative. With this, the company plans to align business operations as per 10 universally accepted principles in the domain of human rights, labour, environment, and anti-corruption.
• On 9 April 2021, the company released its Q4FY20 and FY20 financial year ended 31 December 2020. The company has reported Q4FY20 shipments at 5,774 MW, up 27.2% YoY and total revenues at $1.44 billion, down 1.1% YoY. Further, the gross margin for Q4FY20 stood at 16.0%, versus 17.0% in Q3FY20 and 18.2% in Q4FY19. Meanwhile, in Q4FY20, Non-GAAP net income reported at $5.1 million, a fall of 92.3% YoY.
• On 29 March 2021, the company said that it has launched a new series of ultra-efficient Tiger Pro modules that has increased power capacity, targeted for distributed generation market. The model is based on Tiger Pro 182mm, 54-cell design that gives a supreme power of 415W and an ultra-high efficiency of 21.3%.

Risks:

The technological advancement, market oversupply and decline in silicon feedstock prices has put pressure on average selling price of modules. JSK is expecting prices to continue to slide as economies of scale to reduce the unit price. Roll-back of various government incentives may post threat to the business such as expiration of production tax credits in the US, FIT cut by Japanese government, etc. Further, the ongoing trade tension between the US and China may increase the import costs and impact margins. Operations may also be affected by various anti-dumping policies by countries.

Outlook:

Amidst COVID-19, the company has reported decent growth in both revenues and shipments in FY20 over FY19. Also, the company became the world’s largest PV manufacturer, with aggregate module of 70GW. Further, the company is expected to build on the ongoing growth momentum in FY21 with growth rate of over 30% with focus on new generation Tiger Pro flagship products that is expected to contribute 40%-50% of the total shipments, with total orders of over 10 GW.

Importantly, the company is driving its attention towards optimization of supply chain management throughout the network/partners on a regular basis. Beyond by strong full year shipment of 18.8GW, up 31.4 YoY, the company is anticipating to ship 25.0–30.0 GW (including wafer, cell and module) in FY21. Further, the company expects Q1FY21 total revenue in the range of $1.18 billion to US$1.30 billion with gross margin between 12% and 15%.

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

Stock Recommendation:

The stock has witnessed a fall of ~42.2% in 3 months and over the last 6 months, it has decreased by ~39.6%. However, the stock reported an increase of ~93.3% in 9 months and an increase of triple digit ~158.3% in 1 year. The stock has a 52-week low and high of $13.67 and $90.20, respectively and is currently trading below the average of 52-week high-low range.

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 Median) considering its lower liquidity position and higher Debt/Equity ratio.

Considering the aforesaid facts, we give a “Buy” recommendation on the stock at the current market price of US$39.23 per share, down 1.06% on 23^rd April 2021.

JKS Daily Technical Chart

(Source: Refinitiv (Thomson Reuters))

Note: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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