JinkoSolar Holding Co. Ltd.

JinkoSolar Holding Co., Ltd. (NYSE: JKS) is one of the leading as well as most innovative solar module manufacturers in the world.

Q1FY21 Result Performance (For the Quarter Ended 31 March 2021)

The company has reported quarterly shipments of 5,354 MW (4,562 MW for solar modules, 792 MW for cells and wafers). Notably, its solar module shipments increased by 33.7% YoY. However, the total revenues reduced by 6.4% YoY to RMB7.94 billion (US$1.21 billion). Finally, net income reduced by 21.7% YoY to RMB221.1 million (US$33.7 million).

Financial Snapshot (Source: Company Report)

Filed Application for IPO

The company, on 28 June 2021, declared that its principal operating subsidiary, Jinko Solar Co. Ltd. ("Jiangxi Jinko"), has submitted the application documents for a potential initial public offering and listing of the shares. In the month of September 2020, JinkoSolar made an announcement about the intention to list the shares of Jiangxi Jinko on Shanghai Stock Exchange's Sci-Tech innovation board (the "STAR Market").

The proceeds would be utilised for: 1) Construction of the company's production lines in Haining for 7.5 GW high efficiency solar cells as well as 5 GW high efficiency solar modules. The total capital expenditure is anticipated to be ~RMB5.6 Bn and Jiangxi Jinko intends to allocate ~RMB4.0 Bn for this project from the proceeds, 2) Construction of the company's R&D center in Haining. The total capital expenditure is anticipated to be ~RMB749.8 Mn and Jiangxi Jinko intends to allocate ~RMB500.0 Mn from the proceeds and 3) Additional working capital of ~RMB1.5 billion.

Recent Update

JKS announced that its holding subsidiary, Shangrao JinkoSolar Industry Development Co., Ltd. intends to deploy RMB315 Mn of the monetary capital in order to increase capital as well as shares in Inner Mongolia Xinte Silicon Materials Co., Ltd., a wholly-owned subsidiary of Xinte Energy Co., Ltd.

Outlook

The company has guided of achieving total shipments between 5.1 GW to 5.3 GW (solar module shipments to stay in the range of 4.0 GW to 4.2 GW) in Q2FY21. Further, it expects total revenue to remain between US$1.2 billion to US$1.25 billion in Q2FY21 and also estimates gross margin to be between 12% and 15%.

For FY21, it projects of achieving total shipments (including solar modules, cells and wafers) in the range of 25 GW to 30 GW.

Key Risks

Its growth plans and profitability hinges on the demand for and the prices of solar power products and the development of the photovoltaic technologies. Also, shortage or disruption of the electricity supply could adversely impact the business.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Technical Chart:

Weekly Chart

Note: The yellow color line in the chart shows the trend line and the purple color line represents RSI (14-period).

JKS prices are trading in a symmetrical triangle pattern on a weekly chart. Prices have witnessed significant rally in the ongoing week. Prices are now finding stiff resistance at the upper band of the symmetrical triangle pattern that indicates that prices might take downward correction from the resistance levels. RSI (14-period) is hovering near to ~57 levels that indicates positive price momentum for the stock. Immediate support levels are $43.71 and $37.80 while immediate resistance levels are $56.55 and $76.47.

Stock Recommendation

The stock of the company rose by ~39.9% in 9 months and by ~36.1% in 3 months. It has made a 52-week low and high of $17.03 and $90.2, respectively.

We have applied EV/EBITDA multiple based relative valuation (on an illustrative basis) and the target price reflects a fall of low double-digit (in % terms). We have applied a slight discount to EV/EBITDA Multiple (NTM) (Peer Average) considering the risks associated as well as lower ROE and ROIC.

Considering the aforementioned factors and the associated business risks, we recommend a ‘Sell’ rating on the stock at the current market price of $52.85, up by 22.91% on 28^th June 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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