Jinko Solar is the world’s largest solar module manufacturer with 15,000 employees in 23 countries generating over $4 billion on the top-line in the last 12 months.
Last September, the company’s stock was trading north of $30 a share. Today, it’s under $18 thanks to U.S. trade tariff proposals and higher capital expenditures.
However, over the last decade JinkoSolar has done extradoinarily well, earning over $500 million in net profit, and the future will be even more profitable with solar technology helping make solar cheaper than traditional energy as soon as 2020 based on some analyst estimates.
In 2018, most homeowners paid between $2.71 and $3.57 per watt to install solar, and the average gross cost of solar panels before tax credits is north of $19,000. Using the U.S. average for system size (6 kilowatts) solar panels cost between $11,380 and $14,990 after tax credits. While that’s 6% lower than at the same time last year, it’s an expense that only the truly dedicated are going to be able to afford.
Jinko continues to guide higher, and even on the low end of the estimates, the company’s price multiple will be less than 15x.
Sunrun was founded in 2007, came public in 2015, and is one of the most overlooked brands. It’s also the most undervalued and has now teamed up with Comcast to offer solar in millions of homes. This is just one of many strategic partnerships that will help Sunrun grow.
While there is less data on Sunrun, the figures are pretty good so far. Since going public, it has grown sales, book value and profit, which was $125 million in the last 12 months. What really matters is how much money it can earn going forward.
Sunrun gives a few options to make it affordable for everyone, but the long-term goal seems to be generating recurring fees on a monthly subscription basis from a grid service business. With a 30% tariff on imported solar modules, the residential base that Sunrun targeted will help insulate the company’s financial performance.
For 2018, Sunrun should remain profitable, but with such wide estimates for earnings, it's very hard to determine value based on profits at this point. I do believe that this sector will produce a 10x to 100x return from at least one participant, maybe more.
Bottom line
My monthly energy bill is around $200 a month (annually) or about 10 cents per square foot here in Washington, D.C. As a consumer, I would need to know that my bill would go down before buying. Maybe one day, we’ll have all the energy we need for $10 a month. For now, solar companies are attempting to disrupt the industry by lowering costs, which is always a good thing.
Jinko and Sunrun are two companies that serve different markets in the same sector. While I think Chinese stocks still offer the biggest opportunity for re-valuation, America is shifting to clean energy, and the shift is starting at the consumer level.
Disclosure: I am not long/short any stock mentioned in this article but may initiate a position in Sunrun over the next 72 hours.
