Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co., Ltd. Second Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. I'd now like to turn the meeting over to your host for today's call Ms. Ripple Zhang, JinkoSolar Investor Relations Manager. Please proceed, Ripple.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar’s second quarter 2020 earnings conference call. The Company's results were released earlier today and are available on the Company's IR website. We have also provided a supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Charlie Cao, Chief Financial Officer; and Mr. Gener Miao, Chief Marketing Officer. Mr. Chen will discuss JinkoSolar’s business operations and the Company highlights, followed by Mr. Miao, who will talk about the sales and marketing, and then Mr. Cao, who will go through the financials. They will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties as such our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar’s public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under the applicable law. It's now my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar. Mr. Chen will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Chen.

Thank you, Ripple. Good morning and good evening to everyone, and thank you for joining us today. During the second quarter, our total solar module shipments reached 4,469 megawatts, total revenues were $1.2 billion, and gross margin was 17.9%. Demand in overseas markets was negatively impacted due to the COVID-19 pandemic. Nevertheless, our high-quality products, well-diversified global marketing network, and premium customer service stood out among the competition and helped to maintain growth momentum. In shipment volume, most of our orders were executed on time, and we were able to increase our market share. At the start of the second quarter, weak demand from the overseas market led to a drop in module prices. Many upstream manufacturing companies controlled inventory in order to reduce risk, leading to a decline in raw material prices. As a result, stiff competition in the solar supply chain made it tough for companies with limited product competitiveness and cost control capabilities to remain competitive. Smaller companies have had to successively reduce their capacity utilization or withdraw from the market completely. Costs in the solar supply chain increased in the latter part of the second quarter, in part due to the rush in installations in China, driving up demand, and the overseas market showing positive signs of improvement from the peak of the health outbreak. The recent increase in costs was also influenced by the supply shortage of polysilicon, which further squeezed profit margins for non-integrated solar module manufacturers, whereas the production capacity and infrastructure of integrated manufacturers demonstrated strong resilience to risks and price fluctuations. The epidemic has accelerated the survival of the fittest and forced further improvements throughout the industry supply chain, substantially increasing the leverage of integrated module manufacturers. The combined shipment volumes of the top five solar module manufacturers are expected to account for 65% to 70% of the industry’s total shipments this year. We expect the market share of the top five module manufacturers to increase next year. When the global market share is dominated by a handful of top solar firms, excellence in technology will stand out even more in this landscape. In the future, profit margins resulting from imbalances between supply and demand are going to be less. Barriers brought by advanced technology and product differentiation will become more significant. Recently, our large area N-type solar cell reached a conversion efficiency of 24.79% and set a new world record for the industry. We believe in the next two or three years, advanced cell technology will make the greatest contribution to the competitiveness of end products. We are optimistic about the direction of our N-type cell technology. While we currently have the leading edge in the market in terms of cell technology, we will continue to invest heavily in our R&D to ensure the matching competence for silicon wafers and modules. In 2020, the popularity of large size and bifacial modules exceeded our expectations and demonstrated that further reduction in levelized cost of energy remains the core distinction among clean energies. Together with several leading PV companies, we are working to establish a new standard for 182 millimeter wafers in order to reduce the industry’s upstream and downstream coordination problems caused by size diversification and the increase in cost and promote the efficient and centralized development of the industry. We’re currently increasing our R&D resources into technological research related to high power output, 182 millimeter modules with the aim of promoting these modules as our main product for next year. Since the second quarter, the global pandemic has experienced gradual recovery in between epidemic waves causing restrictions to come back and to play in certain markets. As a result, global demand for PV installations has gone through extreme lows and then rapid recovery, which has then influenced the annual installation capacity in many regions. The coronavirus pandemic has affected demand to a certain extent. However, the decline in prices has also revived demand. As the epidemic situation continues to ease, we believe demand will eventually accelerate. The shortage of supply in the Chinese market has driven up prices along the supply chain. At the moment, prices have stabilized, and we expect strong market demand to continue until the end of 2020. Due to the recent economic environment and the pandemic situation, the growth of the PV industry has slowed down, but the rate of the progress in the industry has actually beaten expectations. We remain firmly confident about the future of solar as a new energy source. In the short term, 2020 is the last year for subsidies in the Chinese market. Thanks to adequate preliminary preparations and the increased participation of more powerful state-owned and essential enterprises, the pace and the completion progress of bidding projects in 2020 are expected to be better than in 2019. The overall recovery in the overseas markets remains supportive with some regions experiencing surprising growth in the mid and long-term. Looking back at the last two phases of China's five-year plan, the actual completion rate of PV projects has significantly exceeded expectations. With the withdrawal of market subsidies, industry drivers have undergone fundamental changes. China’s PV installation capacity has entered into a period of steady growth momentum, which increases the probability of accelerated growth over the next five years. Solar energy has become one of the most cost-efficient power sources around the world, and we expect new technology in energy storage to usher in a new era of rapid development for the sector and the new growth to be the PV energy storage industry. In short, PV has already been extremely competitive in terms of technology improvements and cost reduction capabilities as well as potential resulting from accelerated transformation in the energy sector and diversified application scenarios in the downstream market. Gener will address more on markets later. At the end of the second quarter, our in-house production capacities for mono silicon cell and high-efficiency solar modules have reached 20, 11, and 25 gigawatts respectively with 5 gigawatt module capacity ramped up in the third quarter. Our in-house production capacities for mono silicon wafers, cells, and high-efficiency solar modules are expected to be reached 20, 11, and 30 gigawatts respectively by the end of 2020. In order to benefit from the high growth in the broader market space and the total shipments for next year, we are now considering further increases in production capacity for each segment and will increase the proportion of integrated level accordingly. The PV industry is facing rapid changes, and that's why we have to maintain a certain level of flexibility in our production capacity. This will give our business the advantage to respond to any changes in a timely manner while sustaining reliable operations and remaining fully focused on the evolving market demand. This week, we announced our plan to list our principal operating subsidiary Jiangxi Jinko on the Shanghai Stock Exchange's Sci-Tech innovation board or the STAR Market. We believe the listing of JinkoSolar on the New York Stock Exchange, as Jiangxi Jinko on the STAR Market will raise our profile with investors, both in China and globally, and provide us with additional opportunities to grow in the future. Before turning over to Gener, I would like to quickly go over our guidance for the third quarter of 2020. We expect total solar module shipments to be in the range of 5 to 5.3 gigawatts for the third quarter of 2020. Total revenues for the third quarter are expected to be in the range of $1.22 billion to $1.3 billion. Gross margin for the third quarter is expected to be in the range of 17% to 19%. We reiterate our guidance for the full year 2020 shipments to be in the range of 18 to 20 gigawatts.

Thank you, Mr. Chen. During the second quarter, total shipments of solar modules reached 4,469 megawatts, covering 91 countries worldwide. Asia Pacific, North America, China, and Europe contributed the largest proportion of the total shipments and are expected to continue to contribute substantial volumes to our total shipment for the third and fourth quarters. In terms of the market demand, our installations in the domestic market drove significant growth in China at the end of the second quarter. As more and more countries return to normalcy and the health crisis continues to improve overseas, we have seen a notable recovery in global sales. Strong market demand in the third quarter has driven prices up sharply throughout the supply chain, forcing some installation demand to be delayed until 2021. At present supply and demand has re-stabilized which will keep sales flowing until the fourth quarter. We expect total global installations to be close to 120 gigawatts in 2020. Overseas demand in 2021 is likely to grow with active transactions in Asia Pacific, the Middle East, North America, and Europe. There are also a large number of installation projects planned in China in 2021. Given that the original target of 15% of non-fossil energy consumption in 2020 has already been exceeded, the Chinese government is currently drafting its 14th Five-Year Plan to amend the original target to 20% of non-fossil energy consumption by 2030. In the next five years, average annual installations in the Chinese market will most likely reach 60 gigawatts. After the U.S. economy started to recover in May, demand from the residential market has gradually recovered from the lows of the epidemic, and our smart rooftop solar PV installations have returned to the January pre-pandemic level. The U.S. imported approximately 15 gigawatts of modules in the first seven months of the year, and the average monthly import volume was over 2 gigawatts. After falling to their lowest record in June, monthly imports rebounded to a 2.2-gigawatt level in July. Recently, the U.S. Democrats' Presidential candidate, Joe Biden, proposed a new sustainable infrastructure and clean energy plan, which aims to achieve carbon-free power generation by 2035 and set clear objectives for the entire economy to be carbon neutral with net-zero GHG emissions by 2050. In general, Europe has gradually returned to normal. Demand has been relatively stable in several major PV markets, including Spain, Germany, the Netherlands, Poland, Portugal, and Italy. Actual installed capacity in the European market this year is expected to be significantly higher than our previous expectations. Recently, the second round of the solar auctions in Portugal attracted worldwide attention and set a new world record at a price of $0.01316 per kilowatt hour. Germany has amended the Renewable Energy Act to extend bidding for 18.8 gigawatts of PV power generation projects by 2028, which comprises of 5.3 gigawatts of rooftop installation and 13.5 gigawatts of large-scale ground power stations. The Netherlands held its first large-scale solar auctions for renewable energy, and the solar sector dominated with the largest share of 796 megawatts. Commencing in 2021, the EU's 27 member states are planning to adapt to the 2030 Climate and Energy Framework that will require renewable energy to account for at least 32% of primary energy consumption by 2030. This framework will certainly stabilize the long-term development of clean energy in Europe. India has been one of the most severely affected countries by the coronavirus pandemic, and the situation continues to intensify with new infections climbing over 90,000 cases each day. As restrictions continue to ease nationwide, local transmission of the coronavirus is expected to continue in India for some time. Furthermore, India’s worsening economic ties and trade values with China will further affect many projects currently under development in India, as well as some previously commissioned PPA projects. In particular, the border adjustment tax in India has lowered our expectations for PV installation in the Indian market this year. Coronavirus cases have softened sharply in the Middle East, and new daily cases in major countries have remained below 2,000. The health pandemic continues to take its toll in Latin America as Brazil emerged as a top global coronavirus hotspot, while Chile and Mexico are both seeing some improvements. On a brighter note, Brazil has removed its import tariffs for 101 specific items, including solar modules, trackers, and inverters, thus reducing taxes from 12% to zero since August 1st. This is expected to help the distribution market recover from the impact of COVID-19. In short, although periodic outbreaks of the current pandemic trigger some concerns, we see economic activity in most regions of the world improving significantly, despite the fact that policies and economic slowdown in certain countries due to COVID-19 will act as a drag on solar installations. The increasing competence of the global solar supply chain and the high grade advantage of clean energy have won growing support from governments and installers. In the mid to long term, we expect that reductions in solar costs will continuously exceed expectations. As grid parity is welcomed everywhere, the impact from policy cycles will greatly diminish. With continued cost reductions and incremental growth coming from the expanding energy storage business, we are facing exciting new opportunities, and our potential PV market size is expected to grow substantially. Recently, we were ranked as a Top Solar Brand in Debt Financed Projects and named one of the most bankable PV manufacturers in the world by Bloomberg New Energy Finance. 100% of BNEF survey respondents considered the Company as highly bankable. This outstanding brand recognition connects us to more customers in the broad PV market space. We will continue to dedicate resources to stringent quality control of our high-efficiency products to improve customer service excellence and work more closely with our clients for customized product solutions according to their project requirements. This year, we have been able to accelerate the promotion of applications that enable further reductions in LCOE. We have also joined forces with several leading PV companies to establish a new standard for 182 millimeter wafers and launched the P-type Tiger Pro and N-type Tiger Pro module with maximum power outputs of 581 and 610Wp respectively. So far, we have secured over 1 gigawatt of orders for high-efficiency modules from the Tiger Pro series, and the first batch is scheduled for delivery from August to October this year. Next year, large-size wafer products are expected to account for over 70% of our total shipment, while significant growth in demand is expected for higher power output efficient products. Finally, we are currently conducting market research and accelerating technical results associated with new products to better understand how we can serve the needs of our customers and facilitate the provision of more differentiated products and services for our global clients.

Thank you, Gener. We reported strong operational and financial results for the quarter with total shipments and gross margin in line with our guidance and total revenue exceeding our guidance. Financial indicators, such as total revenues, gross margin, and net income have all increased dramatically compared with the same period last year. The Company’s increased in-house integration levels have contributed to this year-over-year growth. Let's go into more detail for the quarter now. Total revenue was $1.2 billion, up 22% year-over-year. Gross margin improved to 17.9% compared to 16.5% last year. EBITDA was $119 million compared to $66 million in the same period last year. Non-GAAP net income was $53 million, significantly increased year-over-year. This translates into non-GAAP diluted earnings per ADS of $1.2. Total operating expenses accounted for 12.8% of total revenue, an increase from 12.6% sequentially and flat with the same period last year. The sequential increase was primarily due to an increase in shipping costs associated with the significant increase in solar module shipments during the second quarter of 2020 and an increase in disposal loss on fixed assets. Moving to the balance sheet, at the end of the second quarter, our balance of cash and cash equivalents was $970 million compared to $670 million by the end of Q1. Accounts receivable turnover days were 71 days compared to 76 days in the second quarter last year. Inventory turnovers were 90 days compared to 140 days in the second quarter last year. Total debt was $2.3 billion compared to $1.8 billion by the end of Q1, in which $128 million was related to international solar projects. Net debt was $1.37 billion compared to $1.14 billion by the end of Q1 2020. On Monday this week, we announced our strategic plan to list our principal operating subsidiary Jiangxi Jinko on the Shanghai Stock Exchange after certain inter-group restructuring. If the listing is successful, we expect to have greater access to cheap resources of capital which will support us in capturing a greater share of market goals and value creation. We are committed to maintain our New York Stock Exchange listing for JinkoSolar. The pre-IPO financing, which is to be completed by the end of next month, will be used for advanced capacity expansion and the need for working capital. This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.

First question is from Philip at Roth Capital Partners.

Hi everyone. Thanks for the questions. I would like to discuss the Q4 outlook. The implied shipment guide is for 6 gigawatts, which would represent a 30% increase year-over-year. How do you expect your margins to trend in Q4? Back on the Q1 call, you mentioned being 75% booked for the full year of 2020. With prices rising across the entire supply chain, including poly and glass, can you share your margin outlook for Q4 and how you are maintaining the 17% to 19% from Q3? Thanks.

In Q4, we anticipate that our gross margin will decrease compared to the third quarter due to rising production costs, especially for materials, stemming from shortages. However, we expect market prices in China to trend upward, particularly in the second and third quarters. Given these factors, we predict that our gross margin will face some pressure and be slightly lower than in the third quarter.

Okay. Thank you, Charlie. I think you guys have fixed pricing for your contracts. Have you been able to raise the pricing on customers, which had fixed pricing, for example, in either Q3 or for Q4 shipments?

We anticipate that in the second quarter, China will perform very well. We have the necessary and available capacity to take advantage of the market price increase. Additionally, if we finalize a contract, we will adhere to the original terms of that contract.

Got it. Okay, great. Can you discuss your outlook for 2021? I understand you increased your module capacity to 30 gigawatts. Is that a good figure to consider for shipments next year? Additionally, how do you anticipate your margins will trend throughout each quarter in 2021?

2021, overall the market situation, we're expecting a pretty good year. We announced our plan to get access to the China capital market. We are expecting to close RMB3.1 billion financing by the end of the month. We plan to invest particularly in the sales capacity as a mono wafer capacity expansion. If you look at the situation now, the tier 1 companies are dominating the market shares. Compared to this year, we expect our growth rate to be gradually higher next year. So, 30 gigawatts of our module capacity is kind of reasonable as a base case.

Yes, we are still working on finalizing our 2021 plan and budget. However, I believe our target will definitely be around 30 gigawatts.

Great. Okay. That's helpful. And, coming back to your 458 million pre-IPO raise, can you talk through kind of how you got to the valuation at which that equity comes in? And also, what the use of proceeds will be? I'm imagining a big chunk of that is going to be for capacity expansion in '21. So, I know you just mentioned Gener that you guys are still evaluating, but any additional color on that would be fantastic. Thanks.

Okay. So, for the RMB3.1 billion, it's including third-party reputable investors, like the investment arms of reputable commercial banks and investment firms in the sector. So, back to your first question, how we arrived at the valuation is based on negotiation with third-party investors. For the majority portion of the proceeds, it will go toward advanced capacity expansion. Looking at our capacity, we have very low capacity in solar cells. That will be our key focus, as well as we plan to increase our mono wafer capacity to solidify our competitiveness.

Great. Okay. One last housekeeping question. Can you share what the depreciation and CapEx were for Q2, and then your expectations for Q3 and Q4?

I will follow up with you on the depreciation numbers after the call, as I need to verify the details. However, I can confirm that the capital expenditures for this year are approximately 3.5 billion.

Our next question is from Brian at Goldman Sachs.

Just maybe a quick housekeeping follow-up from Phil’s questions. Do you have the cash flow from operations and free cash flow results for the quarter?

No, we have the EBITDA number, right? We announced the EBITDA number as well as Phil’s question on depreciation. I have the number now. It's roughly $40 million, and the operating cash flow is negative. Because this quarter, we anticipated next quarter our shipments will continue to increase. And in terms of the detail numbers, I will get back to you after the call.

Okay. Fair enough, will follow up. And then, on the balance sheet, I noticed that the debt number was up about $500 million from Q1 to Q2. Can you talk to what that was related to? And then, any kind of bigger picture thoughts around delevering?

From the deleveraging perspective, we are in the process of financing 3.1 billion, which will decrease our leverage. In terms of second quarter versus first quarter, the total debt increased a little bit in connection with capacity expansion as well as working capital for the inventories and accounts receivables.

Okay. Fair enough. And then, I guess, related to the debt and next steps in the STAR listing process, you mentioned some intercompany restructuring. Could you elaborate on what that means? How long it takes? And then, does it have to do with some of the intercompany loans? And, can you just kind of give us a bit more detail around what has to happen from here and how long that will take?

Yes. It’s a very short timing in terms of the organization because we need to put 100% of all manufacturing assets under the China entity. And it’s easy for us because we only need to organize certain entities under the China entities control, particularly the cells entities. In terms of scope, I just want to emphasize, it’s 100% of manufacturing assets, including wafers, cells, and modules. We still have some two or three international solar downstream projects, which we’re trying to scale down in the future. So, international solar downstream assets are not in the scope of the entities we plan to launch an IPO in China.

Thank you for the information. I have one last question. Charlie, you mentioned that gross margins are expected to remain flat in the third quarter and slightly decrease in the fourth quarter. Could you provide some additional details on that, considering the current volatility in the supply chain, particularly regarding polysilicon costs? One of your competitors provided very specific guidance for 2021.

Yes. Reflecting on the second quarter, we initially had a rather pessimistic outlook for the latter half of the year due to the global coronavirus situation. However, the renewable energy market has not been expected, and prices touched their lowest point in the second quarter before rising significantly in the third and fourth quarters. Conversely, certain materials, particularly polysilicon and glass, have faced shortages, which has increased costs and impacted our internal production expenses. Consequently, we anticipate that in the fourth quarter, gross margins will trend down compared to both the third and second quarters.

Alright, fair enough. But, would you say mid-teens is too pessimistic of you, or is that about the right range?

You mean for the fourth quarter, right?

Yes, fourth quarter specifically.

I think it’s slightly down compared to the third quarter. I don’t expect that number in the fourth quarter.

Next question is Paul Johnson from indiscernible.

So, there's been a lot of talk about China's next five-year plan. And there's been some speculation that the target could go up to 50 gigawatts a year. But then, on the flip side of that, clearly incentives end next year. So, any country where we've seen incentives end, you've seen a big decline in demand. So, can you talk about what your view is on what you see with respect to demand in China next year? And then, I have a follow-up.

Sure. I think, for China's 14th Five-Year Plan, currently the market suggesting, the total demand side is substantially increasing, and the draft has not been released yet. There is no public information on it. According to the rumors, we are reading or we're seeing in the market right now, I think that if you convert the total installation number into annual installation number, I think the number indicates over 60 gigawatts, and maybe in the range around 60 to 70, even higher.

On top of that, I'm not sure if you're aware, our President Xi had a speech at the United Nations. China is committed to reaching the peak of carbon emissions by the end of 2030. We will try to achieve net-zero carbon emissions by 2060, which shows China's commitment to renewable energy. As well as the next five-year time, I think it’s just like Gener said, it's under discussions. We think there are high possibilities that China will raise upward the target.

Okay, that's very helpful. There's been a lot of focus on the relisting of U.S. ADR stocks in China, specifically on the Shanghai Stock Exchange. From what we understand, many U.S. investors are anticipating these listings and expect the profits to be used to purchase U.S. ADR stock. However, is it illegal in China to list on the Shanghai Stock Exchange and then use those proceeds outside of China? Do you have any information on this, and do you agree?

I think, regarding this topic, particularly in China, let's say you issue this year 10%, and typically, you have use of the targets; you typically use for CapEx as far as working capital. In China, for public companies, there are some requirements, let's say 10% of net income each year; public companies are required to distribute as dividends to investors. From that perspective, I need to check through the lawyer. But from dividends perspective, I think it’s okay. The China entities are able to distribute dividends outside of China and ultimately dividends to the U.S. shareholders. But I need to check.

There are currently no more questions. Management, do you have any final remarks? If not, then this concludes today's call. Thank you everyone for participating. You may disconnect now. Goodbye.