Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding’s First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a questions and answer session. As a reminder, today's conference call is being recorded. I would like now to turn the meeting over to your host for today's call, Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella.

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's first quarter 2021 earnings conference call. The company's results were released earlier today and available on the company's IR website at www.jinkosolar.com, as well as on Newswire services. 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. Li Xiande, Chairman of the Board of Directors and Chief Executive Officer of JinkoSolar Holding Company Limited; Mr. Gener Miao, Chief Marketing Officer of JinkoSolar Company Limited; Mr. Pan Li, Chief Financial Officer of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, Chief Financial Officer of JinkoSolar Company Limited. Mr. Li 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. Pan Li, 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 US 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 is now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holding. Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li.

Leveraging our competitive strengths in supply chain management and our global network, we achieved strong results in the first quarter of 2022 with total revenues of RMB 14.8 billion, reflecting an 86% increase year-over-year and quarterly shipments rising by 57% year-over-year to 8.4 gigawatts. Despite facing significant challenges from macroeconomic uncertainties and supply chain disruptions caused by the resurgence of COVID-19, we managed to enhance our in-house cost structure, resulting in over a 60% year-over-year increase in our gross profit for the first quarter. Polysilicon prices and shipping costs were notably high and fluctuating during this quarter. Since March, the rise in COVID-19 cases in China has prompted extensive preventive measures, leading to significant delays in material and finished product deliveries and amplifying cost pressures for many companies. To address the risks and uncertainties posed by the pandemic, we acted early to secure sufficient stock of new raw materials and ensured close cooperation among our production, supply chain, and sales teams to meet production and delivery schedules. In China, we experienced some project delivery delays due to logistical imbalances from the COVID-19 surge in certain areas. Nevertheless, domestic demand has remained robust. Since the start of 2022, various Chinese provinces have implemented time-of-use tariff policies that have further stimulated demand for distributed generation, particularly in industrial and commercial systems. For utility projects, sustained high prices in the supply chain have encouraged some customers to proceed with new projects without delay. During the quarter, bids for large-scale projects increased gradually, culminating in over 60 gigawatts of such projects completed by the end of March. In Europe, the ongoing Russia-Ukraine conflict has significantly heightened demand for solar energy, with continued growth anticipated throughout the year. The low-carbon benefits and economies of scale offered by photovoltaic technology are expected to drive rapid growth in distributed generation in countries that rely heavily on gas-fired and thermal power. We remain confident and optimistic about our outlook for the year, projecting total global installations to reach approximately 250 gigawatts. In summary, we believe the impact of the pandemic on our production and operations is temporary and manageable. The resilience of the photovoltaic industry amid volatility and significant fluctuations has been increasing, supported by the gradual recovery of logistics and the resumption of polysilicon supply. We are optimistic about the industry's gradual recovery and the increase in shipments and installations, and we reaffirm our annual shipment guidance for 2022, which remains unchanged. Next, I would like to discuss our advancements in N-type research and development as well as our mass production efforts. We continue to lead the industry in both technical development and production volume, currently achieving 16 gigawatts of N-type TOPCon cell capacity in Hefei, with smooth ramp-up and mass production cell conversion efficiency exceeding 24.6%. We are consistently investing in technology for new cell structures and metallization methods aimed at increasing efficiency and reducing costs. Recently, we set a new world record for our N-type TOPCon, reaching maximum conversion efficiency of 25.7%. Concurrently, we are refining the N-type cell technology platform to improve and implement the latest technologies for mass production, thereby achieving technical leadership in the market. As the advantages of N-type modules become increasingly recognized, we have noted growing acceptance and demand for our other N-type products from global customers. We are confident in our ability to ramp up to full production capacity and boost sales of the Tiger Neo modules, which positions us well to expand our market share and enhance our profitability. Furthermore, we are optimistic about domestic demand in China and are expanding our resources and local presence in the country’s distributed generation market. Our efforts to establish diverse channels are already yielding positive results, and moving forward, we plan to align our market strategy, pricing systems, and brand development to gain technical advantages in the distributed generation sector. This will enable us to provide our customers with low-carbon, reliable, and cost-effective products and solutions. We have successfully increased the N-type cell production capacity to 16 gigawatts. Given our advantages in N-type technology and strong market demand, we plan to invest in a second phase of N-type cell production, targeting an additional capacity of 16 gigawatts. This growth in N-type cell production capacity will further streamline our production infrastructure and lower integration costs. Consequently, we are raising our full-year guidance, expecting annual production capacity for mono wafers, solar cells, and modules to reach 55 gigawatts and 60 gigawatts, respectively, by the end of 2022. Before handing over to Gener, I would like to share our guidance for the second quarter of 2022, where we anticipate total shipments to range from 8.5 gigawatts to 9.5 gigawatts.

Thank you, Ms. Li. Module shipments in the fourth quarter were approximately 8 gigawatts, and less than 400 megawatts of wafers and cells were sold in China additionally. By the first quarter, our accumulated global module shipment has surpassed 100 gigawatts, thus becoming the first company in the industry to achieve this historic milestone. Regarding the regional landscape, Europe, Asia Pacific, and emerging markets were the regions with the most shipments. In terms of absolute numbers, our shipments to Europe increased by more than 30% quarter-over-quarter, and our shipments in China nearly tripled year-over-year. In Europe, the Russia-Ukraine war boosted solar demand, and it is expected to grow steadily in the future. The high demand for distributed generation combined with success in large-scale projects continues to demonstrate strong growth momentum in the Chinese market. Although deliveries for some domestic projects have been delayed due to logistic restrictions caused by the resurgence of COVID-19 and the supply chain disruptions, we are still bullish on China's market demand and are moving forward with our plans to enhance deployment in China. As a responsible global enterprise, we advocate the freedom of trade. We believe our competitive products and professional services are key to envision the wide adoption of clean and green energy on a global scale. In the U.S., policies have temporarily disrupted the market and short-term supply becomes difficult, but we remain bullish about the market potential in the long term. Therefore, we have been proactively deploying and working with all parties to come up with a feasible solution. The wafer-cell module capacity of our integrated production facilities overseas have been ramping up very smoothly. With a profound and comprehensive overseas supply chain, we are confident in our ability to flexibly respond to the changes in the U.S. market. In terms of contracts, we have high visibility for the full year's order book. Global customers are increasingly interested in our targeted new products. We are confident about ramping our production to full capacity and selling out the hybrid new series. We hope the entire product line will contribute more than 20% of our total shipments. In the face of market and price fluctuations, the demand for distributed generation remains strong. We have proactively expanded our global market share in DG, for example, in Europe, APAC, and Emerging Markets. The proportion of distributed generation in our shipment is expected to be in the range of 35% to 40% this year. We expect that the proportion will steadily grow quarter-over-quarter. In terms of product mix, the proportion of our Tiger Pro 182-millimeter large-sized products has already exceeded 80% in the fourth quarter and is expected to exceed 90% in the whole year. Recently, we launched a new series of PV products, covering three major application scenarios, including wafer, industrial and commercial rooftops, and residential rooftops. With high efficiency and cloud technology adopted, these new and innovative products will provide customers with high quality and green building solutions. To conclude, we remain optimistic about the global PV demand in 2022, confident in our dedicated future global marketing network as well as vertically integrated overseas supply chain advantage. We are confident about delivering the most competitive products and services to our customers and further improving our market share. With that, I will turn it over to Pan.

Thank you, Gener. For the first quarter of 2022, total revenues increased significantly year-over-year as a result of strong shipment growth and competitive module prices to mitigate the impact of higher raw material prices. We strengthened our supply chain management. Nevertheless, gross margin decreased both sequentially and year-over-year as we ramped up capacity for more cost-effective anti-modules and increased sales of premium anti-products. We expect a strong recovery and improvement in profitability for the coming quarters. Let me go into more details. Total revenue was $2.33 billion, a significant increase of about 86% year-over-year. Gross margin was 15.1% compared with 16.1% in the fourth quarter last year and 17.1% in the first quarter last year. Total operating expenses were $344.8 million, basically flat sequentially, but a significant increase year-over-year. Logistic constraints in many parts of the world drove up shipping costs, increasing sales expenses. To mitigate this, we reflectively adjusted the shipping arrangements domestically and overseas according to market conditions and were able to benefit from several strategic agreements with major shipping companies. We also flexibly adjusted to other means of transport in order to reduce the impact of shipping costs on profitability. Total operating expenses accounted for 14.8% of total revenues in the first quarter this year, up from 13% in the fourth quarter and down from 15% in the first quarter of last year. We will continue to control operating expenses. As revenues continue to grow, we expect the operating expense ratio will gradually decrease. EBITDA was $126 million compared with $183 million in the fourth quarter last year. Net income attributable to JinkoSolar Holding ordinary shareholders was $4.6 million, resulting in diluted earnings per ADS of one time. The change in the fair value of convertible senior loans due to an increase in the company's stock price in the fourth quarter led to a loss of $16.6 million. Our foreign exchange hedging mechanism has proven to be effective. In the first quarter of 2022, we realized a net foreign exchange gain, including a change in the fair value of foreign exchange derivatives of approximately $12 million compared to a net loss of $165 million in the fourth quarter last year. We will continue our strategies to hedge against foreign exchange risk. Moving to the balance sheet. At the end of the first quarter, the company had cash and cash equivalents of $2.66 billion, up from $1.4 billion at the end of the fourth quarter and $1 billion at the end of the first quarter last year. Our cash position has significantly improved, and we will continue to strengthen our liquidity. Accounts Receivable (AR) turnover days were 66 days in the first quarter compared with 52 days in the first quarter last year. Inventory turnover days were 17 days in the first quarter this year compared with 88 days in the fourth quarter last year. Total debt was $4.33 billion at the end of the first quarter of 2022 compared with about $4 billion at the end of the fourth quarter last year. Net debt was $1.6 billion compared with $2.56 billion at the end of the fourth quarter last year. After the listing of the Jiangxi Jinko earlier this year, our finance structure is expected to improve with access to competitive financing. This concludes our prepared remarks. We are now happy to take your questions.

Thank you. We have a first question from Philip Shen from ROTH Capital. Please go ahead, Mr. Shen, your line is open for questions. Apologies for this, ladies and gentlemen. We have a question from Alan Lau from Jefferies. Please proceed.

Thank you, operator. Thanks a lot management for taking my questions. I have a couple of questions. So, we know that for the Asia subsidiary of the company, they had issued preliminary first-quarter results, which indicates a net profit of around RMB 400 million. This number is quite different from the net profit at the US level. We also know that the company has no longer issued non-GAAP income, which has excluded the changes in fair value of these companies. So, I would like to know how to compare the profit level, what's the difference between the profit levels in these two entities? And what is the more fair estimate of the core profits at the US level?

This is Charlie speaking. In terms of net income translations, JinkoSolar Holding and its holding companies report under US GAAP, while the subsidiaries report under local GAAP. One of the most significant differences is that the holding company only owns, let’s say, 58% of the shares of the companies. On top of that, the holding company had convertible bonds, which incurred a loss due to changes in fair value triggered by an increase in ADS shares during the first quarter. Additionally, there are also some GAAP differences. The holding companies have some international projects, which adds to the complexity. So, to answer your question, the big difference is because of the holding structure and the impact of convertible bonds due to the increase in share price. There are also smaller discrepancies due to the GAAP reporting differences as well as international party assets.

Understood. Thank you. My second question is about the investment in polysilicon. I would like to know if there will be a material contribution in profit, especially if the raw materials fluctuate later in the year. What is the expected magnitude of that amount?

So, the answer is no. We don't expect any income or investment income in the future. We did have arrangements with a polysilicon plant where we invested 9% of equities, which has a capacity of 10,000 tons. We hold 9% of equity and invested around RMB 300 million. But from the accounting perspective, since we only have 9%, it's a very small minority, so we record it under the cost method. If we were to hold over 20%, we could account for the net income. We also have arrangements with another polysilicon facility and plan to hold 18%. So, from an accounting perspective, we will not record any investment income unless the underlying companies declare dividends.

Understood. Thanks a lot. My last question is about the increased capacity guidance. I would like to know how much of shipments have materialized in the first quarter for the anti-type modules, or how much of orders have been secured for the second quarter?

Sure. For the new capacity of 16 gigawatts, the large-sized TOPCon capacities are currently at the ramping-up stage. The output was minimal in the first quarter, and we expect to reach full capacity by the end of the second quarter. Thus, we did not have shipments from the new capacity in the first quarter. From an order perspective, customer interest is strong. We are confident we can ship over 10 gigawatts segments for the full year. In the second quarter, I anticipate around 10% to 15% of that, and the second half of the year will take up around 85% to 90%.

Thanks and good morning. I’m just curious if you could help us understand any initial impact you're seeing from the ongoing antidumping countervailing tariff investigation in the U.S. and how that's impacted your plan and potential future shipments as of now?

So Gener, would you like to take the question?

Okay. Sure. Let me take that one. For the anti-circumvention investigation, yes, it is impacting the whole industry a lot, right? The potential risk of retroactive tariffs, even the higher end of the range of possible tariffs, might cause a lot of uncertainty for manufacturers. That's why many factories and peers choose to pause and wait to see the consequences or the announcements from the U.S. government. For Jinko, we have established a vertically integrated supply chain from wafer to cell and module, along with long-term contracts we have secured with several non-China polysilicon suppliers. So, combining all those factors, we feel we are capable of offering some of the most reliable solutions from the solar panel manufacturing side. That has led to positive feedback from customers in the U.S. regarding their strong interest in securing supply from our side. However, we still cautiously manage the manufacturing process to ensure that the company’s risk remains within tolerable limits.

Thanks. And just a follow-up on that. Could you speak to how your contracts with your customers are structured in terms of—should there be a retroactive tariff, who is actually responsible for that? Does it vary based on your contracts? Please help us understand how that works.

I don't think we are able to disclose the details of the contracts. But from the company's perspective, we cannot afford the huge potential risk of retroactive tariffs. That's why we are reaching different solutions with different customers. Some customers choose to ship the modules themselves, some choose to take the risk, while others may delay their projects or halt them until the announcements happen. Each customer has different appetites and solutions.

Hi guys. Thanks for taking my question. Sorry about the mix-up earlier. I was navigating two earnings calls. In terms of the anti-circumvention case, I think you guys had a clear solution to address the U.S. market that would avoid the WRO situation. Can you talk to us about how much you're expecting to ship into the U.S. before the anti-circumvention hit in 2022? Now, how much do you expect the shipments into the U.S. to be? Is it directionally accurate to suggest that before you were in the 3 to 4 gigawatts range and now it could be sub-500? Just trying to get a sense for the magnitude of the change. If you didn’t change your annual guidance, where do you expect those modules to be going now if they’re not going to the U.S.? Is Europe taking up the slack?

Thank you, Phil. Jinko is one of the early victims of the WRO. We experienced disruptions, I believe in the second half of last year. That’s why we have prepared several solutions to ensure we can deliver our supply to the U.S. market. Currently, our wafer capacity in Vietnam is ramping up smoothly, and we believe we can offer a unique solution to the U.S. market. However, it's still difficult to quantify the volume as logistics are unpredictable, especially considering customer clearance timing is out of our control. As for our guidance, we remain bullish about global demand this year, especially for the U.S. After the anti-circumvention situation, we've seen rapid growth in European demand and with the Chinese market picking up, we’re confident that demand will cover the loss experienced in the U.S. market.

Thanks for the color. Shifting gears to Q2, you gave some guidance there. I was wondering if you could go through the margin outlook. Do you expect, with the pricing power of module pricing going higher, is there any chance that you could expand margins in Q2? Or is there a risk that it could contract, or do you expect it to be flat in Q2?

This is Pan. For Q2, we expect that the gross profit margin would be stable.

Okay. Stable versus Q1, Pan?

Yes, compared to Q1 this year.

Great. Thanks. Then in terms of the dividend that you discussed for the ADR, since you received it from the subsidiary, do you plan to pay it out, do a buyback, or keep it? Can you talk through the plans?

For the dividend, it’s not a big number. I expect to receive it after tax in late May. We haven’t made a decision on how we’ll use the dividends. We may discuss with the board to decide later. It’s a small amount that might be used for investment opportunities, particularly in the solar companies supplying materials or through minority investments to build an ecosystem for solar. This is one option. The second could be to pay dividends to U.S. investors.

Understood. Thanks, Charlie. Can you talk through the potential options? Would you consider a buyback, or what’s being considered?

Yes. The holding companies do not have significant operating assets, except for the equities for the businesses. So we may consider taking some investment opportunities for solar companies supplying materials or the eco-system.

In terms of module pricing, how do you expect that to trend in Q2, Q3, and Q4? Should we anticipate module pricing increasing as we proceed through the year, and do you think it continues into 2023, or does it come back down in 2023?

Thank you for the question. In our opinion, module prices are stabilizing, sitting around the current market price, maybe fluctuating slightly. Demand remains strong across multiple markets despite turbulence in the U.S. Considering this, many customers are adjusting their plans based on current system costs to avoid waiting for sudden sharp price fluctuations. We believe Jinko's N-type product will provide added value to customers with high return rates. Thus, we are continuing to expand our entire capacity.

Thank you for the insights. On a housekeeping note, could you share what the Q1 cash flow from operations was?

I'll provide the number after the call. I believe it was positive. I can't remember the exact number.

Hi, guys. Good evening. Thanks for taking the questions. Apologies if some of this has already been covered. One question on the AD/CVD circumvention investigation, have you considered or are your customers asking about taking products from your Mainland China operations as opposed to buying from your sites in Southeast Asia? Is that an option you are exploring or that customers are requesting?

Thank you for the question. We've discussed that previously. We're experiencing various customer opinions regarding the risks of different solutions. Our guiding principle is clear—we can only accept limited risks as a company. Any risk beyond that requires us to identify alternative solutions. Some customers are choosing to ship the modules themselves, delay their projects, or hold inventory, while others are more willing to navigate through these uncertainties.

Technically speaking, if a customer were to purchase panels from you shipped in from Mainland China, what’s your company-specific antidumping and countervailing duty tariff assessed on Chinese made products right now?

Different companies have different rates assessed. Some assessments are ongoing. Based on preliminary figures, Jinko's AD/CVD rate is roughly around 50%. Additionally, we expect to incur another 14%-15% and 25%, leading to a total of approximately 90% to 100%.

Understood. That’s quite significant. Thank you. I assume any capacity increases mean a CapEx increase, as well. What's the new CapEx budget you're outlining for 2022?

For the year, the expected CapEx would be US$3 billion.

So, that's a substantial increase from the previous estimate of US$1.8 billion to US$1.9 billion?

Yes, the increase is due to our adjusted capacity outlook for this year, predicting up to 55-60 gigawatts for wafers and modules.

It doesn't seem like the capacity increase impacts your shipment guidance, which you reiterated. So, this is all mainly going towards the end of the year and into 2023. Any early thoughts on growth in shipments for next year, given all this CapEx?

You're correct. The new capacity construction starting in Q2 is for preparations for next year. With an expected capacity of 55-60 gigawatts, we are optimistic for next year. Given the current high prices of polysilicon, we believe growth will accelerate next year.

Thank you for the clarity. I appreciate it.

Thank you. We have no other questions. Ladies and gentlemen, thank you very much for your participation in this conference call. You may now all disconnect.