Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co., Ltd. Second Quarter 2024 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 would now like 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 second quarter 2024 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 and CEO of JinkoSolar Holding Company Limited; Mr. Gener Miao, CMO of JinkoSolar Company Limited; Mr. Pan Li, CFO of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, CFO of JinkoSolar Company Limited. Mr. Li will discuss JinkoSolar's business operations and 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's 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 are pleased to announce that our module shipments grew by 34.1% year-over-year to 23.8 gigawatts in the second quarter, thanks to our leading position in N-type TOPCon technology, competitive products, and our global sales and manufacturing network. By the end of the second quarter, we became the first solar company in the world to reach total module shipments of 260 gigawatts across nearly 200 countries and regions, showcasing the strength of our globalization strategy. In the second quarter, prices in several segments of the industry chain saw a slight decline. We flexibly adjusted our production scheduling and utilization rates across different processes, optimizing our supply chain to control costs. Our gross margin was stable at 11.1%, and adjusted net income was $52.1 million, slightly down from the previous quarter. Global demand exhibited strong growth momentum in the first half of 2024, with newly added installations in China totaling 102 gigawatts, an increase of 30% year-over-year. From January to June, total solar module exports rose by approximately 20% year-over-year. However, there were delays, suspensions, and even terminations of some capacity expansion projects, and certain manufacturers have cut or suspended production. In the third quarter, industry chain prices remained low and volatile, with many segments falling below cash cost, leading to decreased utilization rates across the industry. We find these irrationally low prices unsustainable. Additionally, governments and industries have introduced control policies to support the healthy development of the solar sector. Financial institutions are becoming more selective, focusing on strong companies with technological innovation, cost control capabilities, and brand advantages. We believe these changes will accelerate the elimination of outdated capacities and drive industry integration. Companies with robust sustainable operations are expected to strengthen their leadership. The ongoing adjustments in the industry present both challenges and opportunities. We will focus on improving our management efficiency, enhancing our globalization advantage, and overcoming industry challenges with our resources and innovations. Thanks to our global presence and product competitiveness, we have over 80% visibility in our order book for 2024. We maintain leading utilization rates in the industry, particularly with nearly 100% for N-type cells. We have achieved record cell efficiencies, with lab efficiency for our N-type TOPCon-based perovskite tandem solar cell reaching 33.24%, a significant increase from last year's 32.33%. The mass-produced efficiency of our 182 TOPCon cells surpasses 26.1%. We firmly believe that TOPCon offers the best economic performance regarding cost, mass production yield, intellectual property protection, and customer acceptance, and there is still potential for further cost reduction and efficiency improvements. We aim to maintain our leadership by gradually adopting new technologies while considering both efficiency and economic returns. We have continued to optimize our supply chain to meet the demands of global clients for low-carbon, clean, highly efficient, and reliable products. In the first quarter, we introduced Neo Green panels produced in our Zero Carbon Factory, certified by TUV Rheinland. We have received positive feedback, reaffirming our commitment to clean manufacturing and product innovation. Our expanding globalization capabilities are becoming increasingly important. Recently, we announced a strategic partnership with a renewable energy localization company to establish a joint venture in Saudi Arabia for the production of 10 gigawatts of high-efficiency solar cells and modules. This initiative marks our shift from global sales to global manufacturing and is a significant milestone in our globalization strategy. With years of experience overseas, we plan to build a localized solar ecosystem with partners to synergize resources and enhance our competitiveness in the global market. We are actively working to clear out P-type capacity to optimize our capacity structure and expect our production capacity for mono wafers, solar cells, and modules to reach 195 gigawatts and 130 gigawatts, respectively, by year-end. We anticipate that our advanced capacity structure will continue to lead the industry. We maintain our guidance for module shipments to be between 100 and 110 gigawatts for the full year 2024. We will actively pursue market opportunities and mitigate risks through our globalization strategy and expect module shipments to be between 23 and 25 gigawatts for the third quarter of 2024. By year's end, we aim for net produced N-type cell efficiency to reach 26.5%. Overall, our cash flow remains healthy, and we will continue to optimize our asset and liability structure to strengthen our risk resilience.

Thank you, Mr. Li. Total shipments were 25.3 gigawatts in the second quarter with module shipment accounting for approximately 94%. We are pleased that we continue to rank number one in the world for the market shipments as we are increasingly recognized by global clients for our highly efficient and reliable products and services. In terms of geographic mix, approximately 60% of our module shipment went to overseas markets in the second quarter with Asia Pacific and Europe accounting for the majority. Sequentially, shipments to the US were relatively stable and shipments to Europe increased by 40%. Thanks to the continuous improvement in Tiger Neo product strength, Tiger Neo shipments accounted for 85% of total shipment in the second quarter, a steady increase from nearly 80% in the first quarter as these modules are increasingly accepted by price, particularly in China, Europe and North America. Currently, we lead the industry as the first solar company in the world to reach cumulative N-type module shipments of 100 gigawatts. They continue to enjoy a premium in the global market with premiums in some markets like Europe, US and the Middle East, especially high. On the strength of our extensive global sales network, we will continue to optimize our shipments and the product portfolio. We were recognized as a top performer across all reliability categories in the PV Module Reliability Scorecard published by Kiwa PVEL for the tenth consecutive time. And we topped the PV Tech 2024 Q2 ModuleTech Bankability Report with the highest AAA rating. This is a continuous recognition of our commitment to quality, innovation and R&D over the long term as well as clients' long-standing trust in our product quality, bankability and reliability. Recently, we became one of the few companies to have won both Tier 1 energy storage provider and the Tier 1 PV module manufacturer by Bloomberg. These orders are not only a testament to the power of our outstanding brand but also an affirmation of our proactive contribution to global energy transformation. As the economics of solar energy become more apparent, we expect demand in the global market to stay around 600 gigawatts in 2024 and grow steadily in 2025. In addition to mainstream markets like China, US, and Europe, emerging markets such as the Middle East and some countries in Asia Pacific are also showing strong growth potential. With our accumulated experience in global sales and a growing industry trend footprint, we are confident we will seize the opportunity brought about by the growth in global market demand more rapidly and more efficiently, and optimize overseas supply chain to effectively cope with changes in international trade policies. We will continue to optimize our products and services, constantly enhancing our competitiveness globally through strategic market positioning and outstanding client relationship management. With that, I will turn the call over to Pan.

Thank you, Gener. We are pleased to report sequential growth in module shipments and total revenues in a very challenging second quarter. While module prices declined, we reduced costs through supply chain optimization and technology upgrades, improving the operating efficiency of our optimized assets and liability structure. Gross margin was relatively flat sequentially and our asset liability ratio was down by one percentage point compared to the year beginning. Despite the challenging situation in the industry, we did not stop returning value to our shareholders for their long-term support. At the beginning of August, we announced a cash dividend of $1.5 per ADS, which was paid today as planned. In addition, as of today, we have repurchased a total of 5.6 million ADS in an aggregate amount of over $130 million in the open market, under our share repurchase program announced in July 2022 and the extended share repurchase program announced in December last year. Let me go into more details now. Total revenue was about $3.3 billion, up 4.4% sequentially and down 21% year-over-year. The year-over-year decrease was mainly due to a decrease in average selling price of solar modules. Gross margin was 11.1% compared with 11.9% in the first quarter this year and 15.6% in the second quarter last year. The year-over-year decrease was mainly due to the decrease in average selling prices of modules. Total operating expenses were about $525 million, up 24% sequentially and up about 18% year-over-year. The sequential and year-over-year increases were mainly due to the write-off of the net book value of the equipment resulted from the fire accident in Shanxi Province, which was partially offset by estimated insurance proceeds from the fire accident in the second quarter this year. Total operating expenses accounted for about 16% of the total revenues in the second quarter compared to 13% in the first quarter and about 11% in the second quarter last year. Net loss attributed to the JinkoSolar Holding Company Limited ordinary shareholders were $13.9 million in the second quarter this year. Excluding the impact of the change in fair value of the convertible senior notes, fair value loss related to the investment in solar supply chain companies, share-based compensation expenses and net loss resulted from a fire accident in Shanxi, adjusted net income attributed to the JinkoSolar Holding Company ordinary shareholders was about $52 million. Moving to the balance sheet. At the end of the second quarter, our cash and cash equivalents were $1.91 billion compared with $2.4 billion in the first quarter this year. AR turnover days were 89 days compared with 100 days in the first quarter this year. Inventory turnover days were 82 days compared with 89 days in the first quarter this year, as a result of improving operating efficiency. At the end of the second quarter, total debt was $3.86 billion compared to $3.66 billion in the first quarter. Net debt was $1.95 billion compared with $1.22 billion in the first quarter of this year. This concludes our prepared remarks. We are now happy to take your questions.

Your first question comes from Philip Shen with ROTH Capital Partners.

Hi, this is Matt Ingraham on for Phil. Thank you for taking our questions. Looking into the back half of the year and 2025, how do you see module pricing trending? And then on gross margins, what is it going to take to return to the mid-teens margin levels? And do you think this could be achievable in 2025?

Thanks for the question. This is Gener. I think in general, market price will stay at a relatively low level for a while for most of the market. It's really because in general the oversupply situation is quite obvious across the industry, but for sure margin-wise it depends on the cost, how fast the cost reduction can catch up with the low price situation right now. So we, at least from what we are seeing right now, quarter by quarter or month by month, the cost reduction is happening almost every day. So hopefully with the improvement from the cost control and also all the actions we are taking or the whole industry is working on, the margin could go back to at least a healthy level as early as possible.

Okay, great, thank you. And then kind of on supply and demand, with module prices so low for so long, is that resulting in any demand elasticity? And if so, which countries or regions could we see upside surprise in demand? And then on the supply side, when do you think this oversupply situation across the supply chain gets resolved? Does this happen in the next few quarters, next 12 months, or longer?

It's really difficult to forecast the exact day the market will turn upside down. But we see everything gradually going in that direction. From the demand side, no matter if it's the US, Europe, or China or other emerging markets, we still foresee healthy growth year-over-year. Meanwhile, when we see the supply side, for sure we have seen some newcomers that have dropped their plans to give up what they planned to do previously. And also from the policy-wise, we see some China government policy initiative, which is trying to control the new expansion of the capacity, which shows a pretty strong signal to constrain the capacity supply side as well. So, adding all those factors together, we hope in several quarters, the things will get back to a rational level.

Great, thank you. I'll pass it along.

Thank you.

Your next question comes from Alan Lau with Jefferies.

Thank you for taking my question. This is Alan from Jefferies. So first of all, the results are actually quite impressive, especially during the backdrop of a very challenging market environment. So I've got a couple of questions I would like to check with the management. First of all, what is the US shipment amount and the expectation for US shipments in the second half of this year? And what is your view on the policy risk in the US market, especially with the recent filings of critical circumstances?

So for the US, it's a very special market. We see the market is, firstly, for Jinko, we are gradually regaining our market share after the efforts we have taken in the last two years. So if you look into the total shipment numbers, we have provided the range of 5% to 10% as the annual shipment range. But if we look into Q4, it's roughly 5% to 6%. So seasonally, a change is required. For example, right now, there's a rush before the tariffs kick in. Also, the market demand is picking up. So seasonally, quarter by quarter, there will be some small changes. But in general, I think it's still falling in the range between 5% to 10% of our total shipment in the US. And for the long term, we still believe the US is a great market because of the demand, thanks to the AI driving, the electricity demand is strong and also the IRA act is a strong support to the new capacities both on the manufacturing side and on the utility project development side as well. So in the long term, we are still optimistic about the US solar market, and we believe we will continue to find a stable supply plan to serve our clients in the US. Even if there are some turbulence on the trade policy side, we still have some prepared solutions for it.

For the second, I think you are referring to a technical challenge. It does pose some risk, but we have proactively managed the situation, and based on current regulations, we believe the risk to Jinko is relatively low.

Is it because of the relatively stable volume from Jinko? Like there was no spiking volume, so you think it's actually compliant with the rules, right?

It's a bit complex, but to qualify for the situations, there needs to be an increase in shipment volumes after the filing date, along with certain risks. We actively manage the volume, and while there is some risk, we believe it is low for Jinko.

Thank you for the clarity. We also want to understand the progress in the Middle East, especially after the significant announcement regarding capacity in Saudi Arabia. Could you provide an estimated timeline for that capacity and what kind of policies you believe would be advantageous?

It’s a very strategic move for our international manufacturing. We are collaborating with the Public Investment Fund and regional industries in Saudi Arabia, where we have ambitious plans for energy transitions by 2030. Our goal is to localize the production of advanced capacities to gigawatt levels for module capacities. The Saudi government has a department focused on promoting local production in the country. We anticipate that once our operations are set up in 2026, the modules produced in Saudi Arabia will command a premium compared to those made outside the country. Additionally, the government is providing strong support policies for joint ventures in Saudi Arabia.

So would there be any localization requirement on tendering so that you can ensure all of your modules will be sold and also that even some of your competitors will have to buy your modules because of that localization requirement?

I would like to be more confident. We will have very unique competitiveness in Saudi and for the Saudi market. And Saudi, if you look at the total market size, is roughly 50% to 60% of the total Middle East. And in the Middle East, we are very optimistic in the next three to five years, and I think you want to explore the detail policies. There are some existing policies, but they are going to be developed, I think, by the government as well. The current policies have a 20% local content requirement with some kind of additional penalty. The big issue is in Saudi Arabia, there are no qualified module producers. So most developers at this stage are getting the waiver letter. By my understanding, there are no available local producers. But I think we are in a good position to penetrate the markets with our announced joint venture.

So you will be technically the only qualified producer by 2026. So that might bring you a premium there, right?

I would love to say that. I think we will be the first mover. So we take that along. We will be the first mover here.

I have a question regarding the financials. In the adjusted earnings calculations, I noticed it's approximately RMB380 million. Does that mean it's RMB665 million and you only account for 58% of the loss? It seems you arrive at an $80 million figure.

So you're talking about EPS or really average?

The adjusted net income. So it's shown as RMB378 million. So there's a net loss due to the Shanxi fire accident of RMB380 million. So I'd like to know if this RMB380 million is 58% of RMB665 million in the Asia level.

Yeah, you're talking about the total numbers for Asia is kind of the number you're talking about. And because the US called it 58%, so 58% of that goes to the minority interest, so that amount is consolidated for all the net income to be allocated to the minority interest from the perspective of US.

Understood. Including the loss from the Shanxi province, right? It's also proportionate?

Yes, proportionate.

Yes. Thank you. Thank you. So my final question is, what is the usage of FBR polysilicon now? Can you use 100% of that to save cost?

You mean the polysilicon out of China, right?

I do. FBR. The granular polysilicon. Yeah.

I think we get kind of improvement on utilization levels. And typically, it's kind of 30% to 50%.

Thank you. I’ll pass it on. Thanks a lot, Charlie.

Thank you.

Your next question comes from William Grippin with UBS.

Hi, thanks a lot for the time. Just a couple for me. The first one was on the tandem cell efficiency that you noted in the press release. Could you just talk about kind of where you are in the development process for that technology? And how long before you think we could see something become commercially available?

The tandem is still in the early stage, but we are optimistic about the future commercialization of TOPCon plus tandem technology. However, if you consider the timeline, we believe that in the next five years, it will still be in a laboratory stage. It's possible that after five years, it could be commercialized, but that largely depends on progress. In response to the question, we do not believe it is completely commercially viable at this moment, and the earliest it may be available is after five years.

Got it. Thank you. And then just on the TOPCon side, obviously there's been a lot of headlines and reports of litigation, companies claiming IP around TOPCon, a little bit hard to get a good handle on the patent landscape there. Just wondering if you could speak to how comfortable you are with your position sort of in the TOPCon IP landscape across your key markets and maybe any sort of discussions around licensing or other legal actions that maybe you've been having.

So the patents, if you look at it, Jinko is kind of the TOPCon promoter, the leader of the technology, and in the recent three years, we invested around 5% to 6% of total revenue on R&D. A significant part goes into the TOPCon. So we're very confident about our patents, particularly in TOPCon. If you look at the total volume, if you look at the quality, if you look at the patents, or the spread in different countries, particularly outside of China. So I think at the beginning of this year, we also announced some kind of news. We granted some patents to various companies, including one module company, one sales company. So that demonstrates our strong capabilities in R&D and our patent position.

All right, thanks very much.

Thank you.

Your next question comes from Rajiv Chaudhri with Sunsara Capital.

Good morning. I have a few questions. The first couple of questions are just housekeeping. Can you tell us what the depreciation and capital spending numbers were for the second quarter and what the targets are right now for the full year?

Okay. Thank you for the question. In the second quarter, we reduced the number of CapEx as compared with the first quarter, which was the total CapEx in the first half year would be about RMB4 billion. Our prospective total CapEx for the whole year would be adjusted to about RMB9 billion.

Rajiv, the main point is that the industry is facing a challenging situation. It has struggled over the last three or four quarters. As TOPCon companies, we are focused on helping manage sustainable growth. We are balancing shipments and strengthening our cash flows. Additionally, we have made significant reductions to our capital expenditures this year and next, while also lowering operating expenses and optimizing our operations, which includes training our workforce. Looking ahead to next year, our capital expenditure plans are limited, with the exception of the strategic investment in Saudi Arabia. We understand the current landscape, but after several quarters, while we can't predict with certainty, we have noticed that major players and some smaller ones have been consolidated or phased out during this downturn. Therefore, we believe we are preparing to navigate through this cycle.

So are you suggesting that CapEx in 2025 will be even less than the RMB9 billion in 2024?

Yes, definitely. And Saudi Arabia is very unique. Because we take 40% equity, and really equity will be $100 million next year. So except for that, I think we have some maintenance CapEx as well as some investment in R&D, R&D CapEx. So definitely it's going to be lower next year.

Okay, and what about depreciation in the second quarter?

So each month, roughly, if you want to use your financial model, it's kind of RMB500 million to RMB600 million, you can put in your financial model. Anyway, if you have detailed number questions, I would suggest you can follow up with our IR team for detailed numbers.

Okay. So moving on to the next question. That is on your average selling prices. Your average selling price in the second quarter was down quite a bit. It was down actually more than 10%, 15% from the first quarter. And part of the reason I guess from reading the presentation is that DG was 50% of sales, and most of DG is, I think, in China. So the combination of focus on China and DG led to a pretty sharp decline in ASPs. Now, as you go into the second half of the year and shipments as a proportion of total shift away from China, shift away from DG, will that provide a more benign backdrop for pricing for you?

The spot market price, in the last three or six months, has been continuing to decline, but we think it's going to stabilize at the lowest level. But if you look at financial numbers, because we have different markets, the utility scale, and the DG segment. We have different markets, US, Japan, with varying lead times for signing contracts. So, for the ASP, you're right; I think it's affecting the industry-wide decline as well as market-wide for the modules. Each quarter Q2 and Q1 shows this downward sign. We expect this trend to continue in the third quarter, and to stabilize in the fourth quarter. On the other hand, if you look at the supply chain perspective, the material costs continue to trend.

So can we expect that the decline in ASPs will moderate from Q2 to Q3 relative to what we saw in Q1 to Q2?

Yes, I would like to say, if you look at Q4 versus Q3, it's kind of less or less, modernized.

Okay. But can you say that we are at the point where pricing can be expected to be stable, or we are not there yet?

I think in a time scheme, if you look at the sectors, most of the sectors are suffering cash losses. We don't believe there's a significant zoom further. With the rate of capacity, it should be kind of destabilized. If you look at the solar wafer price in recent weeks, some top players have increased the small market price a little bit. Even product prices have been stabilized. So, step by step, I think you will see stabilizing module and solar cell prices.

I see, okay. Charlie, your costs were down, apart from the decline in polysilicon prices, your production costs were down quite significantly also in the second quarter, and that helped you maintain the gross margin at a double-digit level. Can you break down some of the reasons why the costs were down, and can we expect costs to keep coming down at the same rates that we saw from Q4 to Q1 and then Q1 to Q2? We have had some pretty dramatic declines in cost here, and that is separate from the polysilicon prices.

Yes, there are a lot of efforts we are working on. We continue to optimize our design and the key materials, and the purchase prices have improved. We've increased our working efficiencies, and cut labor costs, as well as optimized our operating expenses. So there are a lot of efforts we are working on.

So does that mean that gross margin can go up in the third quarter relative to the second quarter?

No, I don't believe that, frankly, because I think we are confident that the gross margin is at the bottom and we try to stabilize.

But you're not confident that it can go up from Q2 to Q3 yet?

No, I would like to say stabilize. If you look at our peers, we are in a relatively good position and stabilized, and the phase-out takes time. I think it's not going to take one or two years, but maybe take several quarters. On top of that, we take the average of our global manufacturing and the marketing capabilities and optimize the economics.

Okay, another question is on the N-type market. What do you think the size of the N-type market will be in 2024 this year? I mean, and what will your market share be? If you do 90 to 95 gigawatts?

Hi, Rajiv. Sorry to interrupt you. We will take this as the final question. And for more questions, we can discuss after the call. Is that okay?

Yes.

I think N-type this year is kind of the TOPCon dominance. This is a dominating year for N-type TOPCon. The market penetration for TOPCon roughly I think maybe 70% to 75% and Jinko roughly 90%. So that's, if you look at it, looking for next year, I think it should be a 100% penetration for N-type.

There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.