Before the markets opened on June 25, JinkoSolar Holding Co. Ltd. (JKS, Financial) announced its financial results for the first quarter of 2021, which ended on March 31.
Despite reporting lower revenue and earnings compared to the prior-year quarter, the solar module manufacturing juggernaut managed to beat both top- and bottom-line estimates. In response to the good news, the stock jumped more than 13% to close at $43.
Earnings results
For the quarter, the company recorded revenue of 7.94 billion renminbi ($1.21 billion), down 6.4% year over year. The diluted loss per share was equivalent to 14 cents on a GAAP basis (55 cents per American Depository Receipt for the U.S. listing), and on an adjusted basis, diluted earnings per share came in at 4 cents (or 15 cents per ADS). Analysts had been expecting revenue of $1.19 billion and an adjusted loss per ADS of 2 cents.
In terms of shipments, the company delivered 5,354 MW during the quarter (4,562 MW for solar modules, 792 MW for cells and wafers). Solar module shipments were up 33.7% year over year.
JinkoSolar reported that the sharp increase in polysilicon prices during the quarter kept downstream demand low, but lower demand is helping prices to stabilize, which should allow demand to recover in the second half of the year.
The company continues to leverage its industry leadership position and high production efficiency standards to grow its market share. Recently, it entered into a strategic investment agreement with Inner Mongolia Xinte Silicon Materials Co. Ltd. to secure polysilicon material supply, as well as a strategic cooperation agreement with China COSCO Shipping Corp. to improve transportation solutions.
The gross profit of $207.3 million was down 18% compared to a year ago. The gross margin was 17.1%, which was down from 19.5% in the year-ago quarter but represented an improvement compared to 16% in the fourth quarter of 2020.
Income from operations in the first quarter of 2021 was $22.8 million versus $112.0 million in the year-ago quarter, resulting in an operating margin of 1.9% compared to 8.6%. Total operating expenses increased 30.9% year over year to $184.6 million.
As of March 31, the company had $1.07 billion in cash and cash equivalents and restricted cash. Total interest-bearing debts were $2.67 billion.
Looking forward
Xiande Li, JinkoSolar's Chairman and CEO, had the following to say about the company’s outlook:
“Gross margin for the second quarter is expected to be in the range of 12% to 15%. Full year 2021 shipments (including solar wafers, cells and modules) are expected to be in the range of 25GW to 30GW. Taking into account this year's supply chain and market conditions, we have adjusted our capacity expansion plan.
By the end of 2021, we expect our in-house annual production capacity of monocrystalline silicon wafers, high efficiency solar cells and modules to reach 30GW, 24 GW and 32 GW, respectively."
In addition to the long-term growth in demand for renewable energy, particularly solar power, the company cited its focus on research and development as well as its scale advantage as growth drivers.
JinkoSolar remains optimistic that the imbalance of upstream and downstream demand will stabilize by the second half of 2021, which should result in higher sales as polysilicon prices stabilize.
For the second quarter, the company guides for total shipments in the range of 5.1 GW to 5.3 GW (with solar module shipments in the range of 4.0 GW to 4.2 GW). Total revenue is expected to be in the range of $1.2 billion to $1.25 billion.
For full-year 2021, the company estimates total shipments (including solar modules, cells and wafers) to be in the range of 25 GW to 30 GW.
Valuation
Due to its bottom-line struggles over the past year, JinkoSolar currently trades with a price-earnings ratio upwards of 2,000. However, as long as it can at least return to its pre-Covid levels of profitability, the company should eventually trade with more reasonable earnings multiples, according to the Peter Lynch chart.
As the world’s largest producer of solar panels that continues to grow and build supply chain partnerships and scale advantage, the company seems to be in a good position to return to profitability soon.
