China's JinkoSolar shines on shipments

BANGALORE Mon Feb 28, 2011 11:59am EST

BANGALORE (Reuters) - JinkoSolar Holding Co's (JKS.N) quarterly results beat market estimates as shipments soared by two-thirds, and the Chinese solar company forecast a sequentially higher revenue for the first quarter as sales pick up ahead of subsidy cuts in Europe.

Solar companies such as First Solar (FSLR.O), Yingli Green Energy (YGE.N) and JinkoSolar saw record shipments last year as customers rushed purchases before new tariffs set in. But fading support for renewable energy have raised fears that margins could be hit in 2011.

Shares of the company rose 10 percent to $32.20 - their highest in three months - before paring some gains to trade at $30.68 in late Monday morning on the New York Stock Exchange. The WilderHill Clean Energy index .ECO eased 0.17 percent.

"The sector will likely trade on what comes out of Italy," Wedbush Securities analyst Christine Hersey said, referring to reports the country could soon cut subsidies on solar power.

JinkoSolar, like others, plans to diversify into Israel, Australia and India, and raise sales in the United States.

JinkoSolar expects Italy to make up 25-28 percent of its sales in 2011, from about 50 percent in the fourth quarter. With about 9-10 percent, the United States' contribution to its sales would double, a company executive said on a conference call.

He said Average Selling Prices (ASP), which had risen in the last two quarters, may fall 5-8 percent in the first quarter and remain flat in the second.

JinkoSolar -- which also counts Germany, France, Spain and Belgium as its main markets -- saw fourth-quarter gross margin sliding to 28.5 percent, from 33.5 percent in the third.

Margins fell mainly due to an increase in the average cost of polysilicon -- the key raw material in photovoltaic modules -- and an increase in the purchase of silicon wafers and solar cells from third party suppliers in order to meet demand.

In a bid to control costs, solar firms have been increasing their production of polysilicon and JinkoSolar intends to raise in-house production capacities of silicon wafer, solar cell and module by half to about 900 MW each by the end of this quarter.

The company expects polysilicon prices to remain flat in the first quarter and then fall through the course of 2011.

It sees in-house capacity reaching 1,500 MW by the year-end, against earlier estimates of 1,000 MW.

"Given the fact that the Chinese module manufacturers have access to low cost of capital credit lines from Chinese banks, I would expect if ASPs stay high in the first half of the year, other companies may add capacity," analyst Hersey said. "They are in sort of a race (to add production)."

For January-March, JinkoSolar sees shipments of 155-160 MW, with revenue of $280-$290 million.

October-December profit at JinkoSolar, which went public in May 2011, came in at $2.36 per American Depositary Share. Total revenue was $267.7 million, with shipments of 162.6 MW.

(Reporting by Krishna N Das; Editing by Don Sebastian and Gopakumar Warrier)

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