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Early 2011 Solar Winner: Jinko Solar
Jinko Solar shares are up 45% YTD to start 2011 (as of 23 Jan 2011) as a result of strong sales and improving gross margins while other solar panel manufacturers are seeing margins decline.
JinkoSolar Holding Co., Ltd. (NYSE Stock Code: JKS) is one of the few solar manufacturers that has a vertically integrated model, producing high quality crystalline ingots, wafers, cells, and monocrystalline and polycrystalline PV panels. The company (founded in 2006) is based in Pudong Shanghai, employs 5,600 professionals with factories in Shangrao (Jiangxi) and Haining (Zhejiang) covering more than 165 acres.
Jinko Solar started as a recycler of silicon ingots and integrated upwards to where it now produces monocrystalline and polycrystalline solar panels. From an efficiency & warranty point of view – Jinko Solar's solar panels don't stand out in terms of performance or quality of their warranty. Basically, they are right in the middle of what is available. However, where they do quite well is in the area of pricing and consistency. This is because Jinko Solar has installed NPC technology from Japan and operates one of the largest fully-automated module manufacturing solar panel plants in China. The company also uses automated equipment from leading international equipment manufacturers such as GT solar, NTC-Komatsu, Roth & Rau, Kutler, Tempress, Despatch, Baccini, Berger and NPC. Jinko Solar also introduced Berger technology for cell and module power testing along with a rigid quality control system, which enables the company to track 16 in-line quality control points and helps them achieve superior gross profit margins. In a market that is price competitive and is increasingly selecting solar panels more on the basis of price – rather than on the basis of features, the company is well positioned to compete because it's vertically integrated supply chain and automated production capacity allows it to offer its products at lower prices to attract business – while still achieving a better than industry profit margin.
At the end of last year, the company had more than 440 solar customers from 10 different countries: China, the Netherlands, Germany, the United States, India, Belgium, Singapore, South Korea, France, Spain, Israel and others. Jinko Solar has expanded its international sales and opened offices in Munich (Germany) and Bologna (Italy) and San Francisco and maintains a logistics warehouse in Rotterdam (in operation since January 2010). The company competes in the ground based utility-sized, commercial and residential markets – but seems to be doing best in the intermediate commercial markets in Europe, no doubt do its lower prices.
The company is one of the larger Chinese solar businesses, and competes against Trina Solar (TSL), Yingli Green Energy (YGE) and Suntech Power (STP). Compared to its Chinese peers, it has the highest price-to-book ratio by far, suggesting high hopes for the company and a possible free fall if the company takes an unexpected turn for the worse. As it stands today, however, Jinko Solar is a highly lucrative triple wager on a recovering global economy, an undeniably powerful Chinese economy and a resulting paradigm shift towards solar power.
> The company's valuation has tripled since the first IPO in May 2010 > Gross margin increased to 33.5% in the third quarter, up from 26.9% in the second quarter of 2010 and up from 15.8% in the same quarter a year ago. The standout note here is that most solar companies are seeing margins compress rather than expand. > The comments which stood out the most from management were that it secured additional solar module contracts for 2011 with both existing and new solar companies across a number of geographical regions > The Company has significantly lowered its non-silicon cost ahead of its cost reduction plan. > The management team of Jinko still owns 54% of the company’s equity, which suggests future dedication towards continued growth. > There are also seven mutual funds that list Jinko as a main holding.
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