JinkoSolar Holding Co., Ltd. Q4 FY2022 Earnings Call

Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Company Limited Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a 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 would now like to turn the meeting over to your host for today's call, Ms. Stella Wang, JinkoSolar's Investor Relations. Please go ahead, Ms. Stella.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar's fourth quarter 2022 earnings conference call. The company's results were released earlier today and are 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 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 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 is now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holdings. Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li.

We closed a challenging 2022 with satisfactory results, demonstrating strong operational and financial performance in the fourth quarter. By utilizing our excellent global supply chain management and marketing network, we saw significant increases in total shipments and revenue compared to the previous year. By the end of 2022, we became the first in the industry to deliver a total of 130 gigawatts of solar modules. Throughout the year, despite rising raw material costs, we continuously optimized our cost structure through technical advancements and manufacturing improvements, which alleviated some pressure on our profitability. Annual shipments of high-efficiency premium N-type modules surpassed 10 gigawatts, enhancing our product mix and steadily improving our profitability. Our net income was approximately $102.9 million, reflecting a 29.1% increase quarter-over-quarter and nearly tripling year-over-year. Despite compounded challenges, including surging raw material costs, pandemic disruptions, and macroeconomic uncertainties, the demand for solar products remained strong throughout 2022. The energy crisis stemming from the Russia-Ukraine conflict accelerated the rise in traditional energy prices, making photovoltaic (PV) energy a preferable solution for countries seeking energy transformation due to its low-carbon footprint and economic benefits. Global PV demand in 2022 reached around 320GWdc to 330GWdc, marking a 50% increase from the previous year. In China, the newly added installations grew 59.3% year-over-year to reach 87.4 GWac, approximately 505 GWdc, while distributed installations surged nearly 75% year-over-year. By the end of December, the imbalance between polysilicon supply and demand, along with inventory adjustments, led to price changes across polysilicon, wafers, cells, and modules, causing some downstream customers to pause orders. Since February, polysilicon prices have bounced back, and pricing fluctuations within the solar supply chain have impacted market sentiment. However, with sufficient polysilicon supply to meet module demand for 2023, we believe that any short-term rise in polysilicon prices will be temporary and will likely be followed by a decline that will reduce module prices and enhance the economics of PV projects. We expect global PV demand to continue growing in 2023, and we are confident in our ability to further boost our competitiveness and profitability in the global market, supported by our well-developed supply chain and proprietary products. During the fourth quarter, as the industry remained volatile, we improved our operational management by strictly controlling inventories and flexibly adjusting production schedules and volumes. Our second phase of 8 GW TOPCon cell capacity in Hefei achieved full production in the fourth quarter, and the second phase of 11 GW TOPCon cell capacity in Jianshan is expected to reach full production in March 2023. With a total of 35 gigawatts of TOPCon cell capacity gradually coming online, our integrated capacity continues to rise, driving down overall costs. In December, our N-Type TOPCon cell's lab efficiency set a new benchmark with a maximum conversion efficiency of 26.4%, surpassing our previous record of 26.1% set in October. By the end of 2022, the mass production efficiency of our fully operational TOPCon cell capacity reached 25.1%, with the integrated cost of N-Type nearly matching that of P-Type. We are confident in maintaining our leadership position in R&D, mass production, efficiency, and selection capacity. At the end of 2022, we became the first module manufacturer globally to deliver over 10 gigawatts of N-Type products. Our established global marketing footprint and the technological advantages of our N-Type products have positioned us as preferred suppliers for global clients. As more industry peers develop N-Type capacity, our strategy to lead in N-Type technology has started to set industry trends. The entire industry's effective supply of N-Type TOPCon modules is expected to reach 120 to 130 gigawatts in 2023. Leveraging our experience in mass production and marketing, we anticipate our N-Type shipments will further increase their market share in 2023, significantly exceeding the industry average. By the end of 2023, we project that the mass production efficiency of TOPCon cells will reach 25.8%. We maintain an optimistic outlook for the mid to long-term growth potential of the PV market and will continue to invest in N-Type capacity, which now competes well in technology and cost. By the end of 2023, we aim to achieve new production capacities for modern wafers, solar cells, and solar modules, expected to reach 75 gigawatts and 90 gigawatts, respectively. We forecast module shipments to range from 11 gigawatts to 13 gigawatts for the first quarter of 2023 and from 60 gigawatts to 70 gigawatts for the entire year. Our strategy will ensure we maintain our leadership in N-Type modules through ongoing technological integration, improvements, enhanced production capability, and cost optimization. We are pleased to report achieving historically high shipment volumes both quarterly and annually, thanks to our technological advantages and expansive global marketing network. Total shipments in the fourth quarter of 2022 approached 16.8 gigawatts, with module shipments comprising 95% and a 78% year-over-year increase. Annual module shipments reached 44.5 gigawatts, doubling compared to the previous year. Regionally, shipments in China and Europe were the highest, accounting for more than 65% of the total. In China, annual module shipments tripled year-over-year, while those to Europe doubled, and our growth in emerging markets nearly doubled as well. Some projects in China that were not connected to the grid last year have been postponed to 2023 due to COVID and supply concerns. As supply chain costs decline towards more reasonable levels, we expect installations to rise in 2023. Europe will continue expanding PV installations due to the ongoing energy crisis and increasing electricity costs. In the U.S., we have high expectations for market demand fueled by incentives from the IRA and other third-party institutions, with an adequate project pipeline already in place. Additionally, the energy transformation is accelerating in Latin America, Asia-Pacific, the Middle East, and other regions, bringing more opportunities. In 2023, we will uphold our global expansion strategy, with Europe and China remaining our primary markets, collectively accounting for over 50% of total shipments, and we expect gradual recovery in U.S. shipments. Our shipment structure is optimizing, with distributed generation accounting for over 50% of total improvements compared to 2021. Our competitive N-type Tiger Neo module shipments comprised around seven gigawatts, remaining within a reasonable range. By the end of 2022, we became the first module manufacturer worldwide to ship over 10 gigawatts of N-type modules and expect this proportion of N-type module shipments to rise to about 60% in 2023, reinforcing our leadership in N-type technology within the industry. Moreover, the global clean energy transition is initiating a new growth cycle for the solar-plus-energy storage business. We have already established framework and distribution agreements with multiple power developers and distributors globally. In 2023, we will further invest in the storage business to provide our clients with safer, more sustainable solar-plus-storage system solutions. Regarding pricing and orders, our 2023 order visibility has surpassed 50%, with overseas orders being significant contributors. The proportion of our highly efficient and premium N-type Tiger Neo is expected to be notably higher than in 2022, keeping our products competitive in the industry. By overcoming various challenges, a PV enterprise can grow more resilient. At JinkoSolar, we are continually enhancing our capacities to manage risks and strengthening our marketing network and client relationships. We are dedicated to delivering reliable, high-quality products and services to our clients, providing them with more economic value, and further improving our global market share.

Thank you, Gener. We’re pleased to have achieved the strong fourth-quarter results based on our solid operation and management strategy against the backdrop of strong demand in the global market. Both solar shipments and total revenues increased significantly year-over-year. Shipments of N-type modules, premium and cost advantages more than doubled sequentially in the fourth quarter, partially contributing to our improved profitability. In addition, we continue to enhance control over our operating expenses. Total operating expenses accounted for about 12% of total revenues in the fourth quarter, a significant decrease from over 15% last quarter. Operating margin was more than nine times higher sequentially, increasing to 2.1% from 0.3% in the last quarter. As the 35 gigawatt cell capacity put into production in 2022 reaches full production in the coming quarters, our integrated capacity structure is expected to improve further. As shipments of our competitive N-type products increase, we hope to gradually improve our profitability. Let me go into more details now. Total revenue was RMB4.4 billion, an increase of about 56% sequentially and 85% year-over-year. Gross margin was 14.1% compared with 0.7% in the third quarter this year and 16.1% in the fourth quarter last year. The sequential and year-over-year decreases were mainly due to an increase in the cost of solar module raw materials. Total operating expenses were RMB526 million, up 21% sequentially and up 68% year-over-year. The increase is attributed to an increase in shipping costs for solar modules and an increase in impairment loss on property, plant, and equipment. Net income attributable to the JinkoSolar Holding ordinary shareholders was about RMB103 million in the fourth quarter. Excluding the impacts from a change in the fair value of the notes long-term investments and share compensation expenses, adjusted net income was RMB45 million, up 33% year-over-year. Now, I’ll review our 2022 full-year financial results. Total module shipments were 44.5 gigawatts, doubling year-over-year, and total revenues were US$12 billion, also doubling. For the full year of 2022, gross profit was US$1.8 billion, an increase of 85% year-over-year. Gross margin was 14.8% compared to 16.3% last year. The decrease was mainly attributed to an increase in the cost of raw materials. Total operating expenses were RMB1.7 billion, increased year-over-year. The increase was mainly attributed to an increase in shipping costs for solar modules, impairment loss, disposal of PPE, and an increase in share-based compensation expenses. Net income attributable to the JinkoSolar Holding orders was about RMB96 million in the fourth quarter, excluding the impacts from the change in fair value of the notes long-term investments and share-based compensation expenses. Adjusted net income was RMB208 million, 1.7 times year-over-year. Moving to the balance sheet. At the end of the fourth quarter, our cash equivalents were US$1.6 billion compared with US$2.1 billion at the end of the third quarter and US$1.4 billion at the end of the fourth quarter last year. AR turnover days were 73 days in the fourth quarter compared with 69 days in the third quarter this year. Inventory turnover days were reduced to 59 days in the fourth quarter, down from 117 days in the third quarter. Total debt was about US$4 billion, and net debt was US$2.3 billion at the end of 2022. This concludes our prepared remarks. We’re now happy to take your questions. Operator, please proceed.

Thank you. The first question will come from Brian Lee with Goldman Sachs and Company. Please go ahead.

Hi everyone. This is Miguel on for Brian. My first question was the capacity expectations for 2023; you’re guiding to very strong growth in capacity for the year. What are your CapEx requirements for 2023 to support this growth?

Yes. Hey, Miguel. I think we are in the middle of a calculation right now. I think we’ll follow up with you after the call for the further detail of CapEx numbers, right?

Okay, thanks. I appreciate that. And then my follow-up question was just on margins during the fourth quarter. Given the overall decline in the market prices for polysilicon that was observed in the fourth quarter, could you just give more color on what drove the lower quarter-on-quarter gross margins and then what are your expectations for polysilicon prices and then also on margins through the first quarter of 2023 and through the rest of the year? Thanks.

Yes. For the polysilicon, I think overall, we are observing oversupply of polysilicon in the long run. So we believe the reason the turbulence is just the start of the market trend. In general, we believe the polysilicon will go back to the market-based pricing. So that’s what we believe in the long-term. In the short-term, for sure, because of the different seasonalities and the behavior of, let’s say, top players in the polysilicon industry, we still believe there might be some short-term challenges or turbulence. That’s what we see. For the margin-wise, we still believe with more and more capacity online, especially the high-end capacity online with the premium and the competitive cost structure we have, the margin will gradually improve quarter-by-quarter, if there are no big surprises in the market. Hope that answers your question?

Yes. If I could just squeeze in a follow-up on that. Just on the 4Q margins. I guess, what if – were you able to realize any of the lower polysilicon market prices for polysilicon that we saw in the fourth quarter? Or I guess, what drove the – specifically, in the fourth quarter, what drove the lower gross margins? Thanks.

I think if you look into financial figures, the turbulence that happened in the polysilicon prices in early Q1 this year will not be helpful for the Q4 margins. And if you look into the Q1 figures, we have to look into the overall polysilicon cost instead of short-term, let’s say, one week or two weeks of low prices of polysilicon. So in my opinion, you know for that will not significantly change the margin expectations. Again, we will gradually improve the margins, but most of them is due to our internal, let’s say, management improvement and cost structure improvement instead of turbulence. Because, you have to think about the polysilicon inventory numbers, right, that numbers is a very important factor to the cost of the polysilicon.

Okay, understood. Thanks. I’ll pass it on.

The next question will come from Philip Shen with ROTH MKM. Please go ahead.

Thanks for taking my questions. First I’d like to address the U.S. market and the UFLPA situation. So I was wondering if you could share how things are improving, so specifically, you expect to have you ramped up manufacturing in Southeast Asia for fresh shipments to the U.S., expect those new shipments to reach the U.S. and what is the utilization of the Southeast Asia capacity set aside for the U.S.? Thanks.

Phil. Thanks for the question. For the U.S. market, especially regarding the UFLPA inspections, we have seen the light at the end of the tunnel. And we see the improvement, the efficiencies, and the turnover days as I said, gradually improving, while the official CBP officials are becoming more and more professional in that perspective. We have seen the hopes, but it is still not 100% smooth transactional, let’s say, custom clearance yet. But we are hoping that could happen soon. So regarding the question on the Southeast Asia factories of Jinko, and our factory is at high utilization rates not only because of the U.S. market, I think mainly affects the other markets who also have a strong demand for capacities or productions outside China. So our capacity is up and running almost at full speed even by the end of last year. So we are hoping to allocate more capacity and the shipments to the U.S. once all the customer clearance is back to a normal status, which we believe could happen soon.

Thanks, Gener. So when you say soon, are we talking about a couple of months or are we talking about maybe six to nine months?

Well, my perspective, I hope it could happen tomorrow, but it’s not something I can handle or I can decide, so I’m closely working with CBP officers to make it happen as soon as possible.

Okay. Thanks. And then you mentioned, you’re at almost 100% utilization in your Southeast Asia facility serving other countries. Can you share which countries those might be and how they might be impacted once the U.S. market opens up for you? Which markets would decline, if you will? Thanks.

One of the important sources is – there are many names on the list, but one of the big markets is India market. You know that India market has strong demand as well, while they have a high tariff against Chinese products where they have a strong appetite for the Southeast Asia products.

Got it. That makes sense. And then shifting to your comment that the order book visibility in 2023 has already achieved over 50% in large part from international markets. Can you talk to us about what your current contracting activity looks like for the U.S.? Are you taking new orders yet or do you have to get through? Remind us how much backlog you have to get through before – backlog created by the trade situation before you can maybe take new orders?

Based on that right now, we are not capable of taking new orders, because we have lots of backlog, which is big enough for our factory to run under the current status of the CBP approval rates. However, we have faith that everything will get better because once the approval rates and efficiencies are back to normal, I think we are hoping to allocate this to the U.S. market, which will help us to solve the backlog pipelines and the commitments to our clients and starting to pick up new orders. So that is – that question is really difficult to give an expectation of timeline, but we are working hard on it. Thank you.

Yes. That all makes sense. One last question on the U.S. As it relates to pricing in the U.S., can you talk about how you are expecting pricing to trend through the – not just this year, but also in the future years? I know you’re not contracting fresh, but I know you guys probably are very much in touch with your customers. With the ramp-up of IRA manufacturing capacity in the U.S., how much do you think panel prices decline as we get through 2024, 2025, 2026, 2027? But you also have the other forces of UFLPA and other trade action. So what’s your view on module pricing in the coming years? Thanks – in the U.S.

Well, Phil, you know that we are not picking new deals at the current stage in the U.S. market. So I’m not in the right position to discuss fair market numbers. But I can confirm there are many rumors in the market that the U.S. market price is big enough, or let’s say high enough, let’s say for middle-sized suppliers who have not suffered or experienced the UFLPA inspections. So we believe there is a big room to correct the right market price in the future given the UFLPA inspection complexity, and also the IRA brings additional turns to both the investor side and the manufacturer side.

Okay. Thanks for taking all the questions. I’ll pass it on.

No problem. Thank you, Phil.

Our next question will come from Rajiv Chaudhri with Sunsara Capital. Please go ahead.

Yes. Good morning. I have a few questions. The first question is on the cost of polysilicon. You mentioned that was the primary reason why gross margin went down from Q4 – from Q3 to Q1. I’m wondering if you can give us an idea of what your polysilicon cost was – the cost embedded in the Q4 earnings results versus Q3, either in renminbi or in terms of the percentage increase from Q3 to Q1? That’s my first question – sorry Q3 to Q4.

Thanks, Rajiv. We are talking about the polysilicon appliance cost components, right?

Yes, yes. If you can give us more granularity on how much it went up from Q3 to Q4 and what the gross margin might have been if the polysilicon costs had been flat, for example. That would give us an idea of how the cost numbers are playing out.

Yes. I think our trend is likely – it’s like the public polysilicon appliance from the public like the PV InfoLink or other parts available online side. And if you look at the trend of the polysilicon, it reached its peak from October to November. In December because of destock and the China rush and Russia, poly is down dramatically. But because of the production shipments, the positive impact is going to be reflected in the first quarter. So it’s really – the part reached the peak from the cost perspective in Q4. And I think it’s roughly I think, a 10% to 15% quarter-by-quarter increase if we look at the change.

Okay. So you are saying that – or you’re implying that to ship product modules in November, December, you had to buy poly in October, November, prices were very high. And so the benefit of the lower price of poly in December to the extent that you are going to get a benefit will be felt much more in Q1, because that’s when the product gets shipped out. So 10% to 15% increase in the cost of poly from Q3 to Q4 would mean that the gross margin would have gone up from Q3 to Q4 if the cost of poly had stayed flat?

You’re right, you’re right. The polysilicon price assumption is stable. And I think the gross margin is up in Q4 versus Q3. And the poly is significant up and drives down the gross margin in Q4. I think the most important for the company business is we are doing investments in time, starting at the beginning of 2022, and we reached 35 gigawatts N-type capacity by the end of last year and with more N-type shipments and polysilicon now that the supply is sufficient on this downward trend and we have a significant sales order pipeline in 2023, and we think we are in a good position to drive the company’s growth including revenue gross margin and net profitability.

So would you say that from here onward, if the price of polysilicon continues to come down, whether it comes down slowly or rapidly, we don’t know? But if it keeps coming down every quarter, that we should expect an improvement in gross margin on a steady basis quarter-by-quarter?

Yes. It’s a year basis, in this industry, we are optimistic about our profitability and it’s not only the polysilicon. Our competitors are improving a lot. We have good products. We have a very strong R&D team, and we have branding global sales and marketing, and we have very solid supply chain teams that drive up the overall performance.

Can you also talk about the capacity that you had for wafers, cells, and modules at the end of 2022?

I think we disclosed in the presentations slide, 65, 55, 70 gigawatts by the end of last year. And we continue to expand our untapped capacity and total capacity will reach, I think, 75, 75, 90 gigawatts by the end of this year.

Right. Can you also talk about the trends that we should expect in operating expenses in 2023 versus the fourth quarter of 2022? For example, you should incur fewer costs or no cost related to the product coming out of Xinjiang. And you should also incur fewer shipping costs. So should we be expecting a 100 basis point to 200 basis point improvement in operating expenses in 2023 versus the fourth quarter?

Hey, Rajiv. Sorry. Rajiv, I think the operating expenses in the U.S. companies composed a lot of key components. One is the most important is the shipping cost, which is going to improve a lot. Global economy is the – impact to the shipping logistics is not so significant. And we expect the shipment costs to improve a lot. On top of that, our U.S. LPA will improve step by step, and we have incurred significant unexpected stock storage costs for the U.S. market. And that will – we expect significant improvement as well as even in our management teams, internal meetings, we are expecting our overall, let’s say, labor inefficiencies to increase 20% to 30%. And so that’s going to be, I think, with expansion 60 to 70 gigawatts versus 45 gigawatts, roughly a 50% increase on the top line shipment cost improvement and the efficiency continues to be improved. We expect the operating expenses will be on a downward trend quarter-over-quarter.

Also can you talk a little bit about what trend you see in the G&A, in the general and administrative expenses? They went up a lot in 2022 compared to 2021. What sort of growth do you see in those expenses going forward?

Well, we have some specific acquisitions, and for the small size, the equipment to produce small size modules. And we granted stock options. We have one-off stock options based compensation expenses. So that is the key reason for the G&A expenses increase for the year.

Thank you, Charlie.

Welcome. Welcome.

Our next question will come from Alan Lau with Jefferies. Please go ahead.

Hi. Thanks all for taking my question. So I would like to ask about the 4Q results, because the A share results actually show very strong quarter-over-quarter earnings growth almost doubled. Whereas at the U.S. level, the adjusted net income actually declined. So how should we reconcile the difference between these two? And is there any further share-based expenses in there or yes, just what is the difference between the two levels?

Firstly, the issue arises from the account being under PRC GAAP while the growth is reported under U.S. GAAP, resulting in a different consolidation base. The U.S. entity holds only 58% of the equity in Asia. Under U.S. GAAP for 2022, we experience significant differences in income tax expenses related to deferred tax assets. Due to U.S. GAAP, we have substantial losses in overseas entities that are not recognized along with the community and losses under deferred tax assets, and from the start, we have not recognized these under PRC GAAP. Therefore, there is a notable difference in income tax expenses. Additionally, there are discrepancies in accounting for employee welfare benefits based on varying accounting policies. Under U.S. GAAP, we account separately for items such as changes in the fair value of convertible bonds, and for long-term equity and debt related to ecosystem investments, we record gains at fair value. This leads to an adjusted net income that excludes amortization. To address your question, I consider this to be a one-off difference in income tax accounting for Q4, along with some employee benefits that are appropriately accounted for.

Understood. So there is quite a significant increase in the tax, and also I would like to ask another relatively easier question on the average gain because the company has made significant average gain in Q3 and actually RMB has depreciated in Q4 but I think there is EBIT loss. So is it because of the hedging issue or why is that?

So actually, which line item on the...

Foreign exchange loss.

Okay. For 2022 overall, I think, we did very good on the foreign exchange hedge, and on a net basis, we reflect, I think the net gain. And there is zero subdivisions quarter-by-quarter, and I think Q4, the net gains are relatively smaller compared to Q3 because RMB depreciated a lot in Q3 last year.

Understood, thanks. And switching the topic to this technology, so what would you expect the unit net profit or ASP premium of N-type versus TOPCon coming into Q1 because the shipment percentage is higher and the N-type shipments should have even higher contribution to the net profit. So can you share with us?

Yes, the premium is roughly US$1.5. And our efficiency is pretty good leading the industry and we provide additional values to our customers. We think the US$1 to US$1.5 premium is agreeable, the price.

Understood. So is it fair to say that the accounting issues will not exceed a point, and we have declining freight costs, polysilicon costs and also the ASP premium is also high, then we should expect a strong first quarter in terms of the gross margin?

We expect the gross margin expansion in the first quarter. And we have more integrated levels and then the impact, the percentages are expected to reach to 50% and the polysilicon is in downward trends. And so, you're right, we expect it in the first half of the year, the gross margin is in the expansion stage.

Thank you. And then my last question is what is JinkoSolar's plan in the U.S. because it has 400 megawatts already and some of the Chinese peers have already started construction for expansion in poly capacity. So what are the plans for JinkoSolar for now in the U.S.?

We're doing very solid analysis evaluation for expansion in the U.S. and we're optimistic because the IRA is going to be – I think it's a very attractive scheme. And as well as the U.S. market is expected to have strong demand, so we are in the final evaluation stage. But we have already 400 megawatts capacity. And we will expand very quickly.

Understood. Thanks a lot, Charlie, for taking my question. I’ll pass it on. Thank you.

The next question will come from Irma with Citigroup. Please…

Thank you management for taking my call. So I have two follow-up questions regarding on the N-type product capacity. So my first question is about the current unit product cost level of your N-type TOPCon modules compared to the PERC ones? And what is the target level by the end of this year? And my second question is about the capacity, so how many new N-type capacities would you like to build this year? And so adding in addition to the 35 gigawatts by the end of 2022. Yes, that's my question.

Thanks. We have achieved cost parity between N-type and P-type modules by the end of last year. This year, even though polysilicon prices are declining, which may have some adverse effects, we are improving efficiencies and adopting new materials. We expect to maintain the same cost structure for N-type compared to P-type by the year's end. Last year, we had 35 gigawatts of N-type sales capacity, and we anticipate reaching about 55 gigawatts of N-type TOPCon capacity by the end of this year.

Great. Thank you.

This concludes our question-and-answer session as well as our conference call for today. Thank you for your participation. You may now disconnect.