JinkoSolar posts another profit as solar markets recover

Mon Nov 18, 2013 11:05am EST

(Reuters) - Chinese solar panel maker JinkoSolar Holding Co Ltd (JKS.N) reported a second straight quarterly profit, helped by its fast-growing solar power plant business, amid signs of a recovery in the industry after a four-year downturn.

JinkoSolar shares rose 16 percent in early trading to $34.26, their highest in about three years.

The company, like bigger rival Canadian Solar Inc (CSIQ.O), is pushing into the more profitable business of developing solar farms, to cut its dependence on sales of low-margin panels.

The company, which started developing solar projects in 2011, said higher electricity revenue from solar projects contributed to strong third-quarter results.

JinkoSolar, unlike many of its Chinese rivals, is profitable because of its project business, said Raymond James analyst Pavel Molchanov.

"Project work adds a layer of margin above and beyond pure manufacturing," Molchanov said.

JinkoSolar said gross margins in its solar project business were in excess of 60 percent.

These margins — coupled with improving panel prices — helped JinkoSolar report overall gross margin of 22.3 percent in the third quarter, compared with 5.8 percent a year earlier.

JinkoSolar, which has 105 megawatts (MW) of projects connected to grids, said it expected to connect another 108 MW during the current quarter and 300 MW more by the end of 2014 with the support of financial partners such as China Development Bank CHDB.UL.

Canadian Solar, which reported results last week, swung to a profit after eight straight quarters of losses, driven by the solar power plant business.

JinkoSolar said it began to recognize revenue from the sale of power in the quarter after the Chinese government announced a series of policies aimed at streamlining and standardizing subsidy payments for electricity revenues from solar projects.

China plans to nearly quadruple installed solar power capacity to 35 gigawatt (GW) by 2015.

JinkoSolar will consider holding some projects instead of selling them, and may spin them off, an executive said on a conference call with analysts on Monday.

Canadian Solar and SunEdison Inc (SUNE.N) have announced plans to spin off some power plants as listed companies to lower the cost of financing solar projects.

HIGHER SHIPMENTS

JinkoSolar raised its full-year panel shipment forecast to 1.7-1.8 GW from 1.5-1.7 GW. The company said it expected to ship 500-530 MW in the current quarter.

JinkoSolar's total solar product shipments jumped 55 percent to 518.9 MW in the quarter ended September 30.

The company, like its rivals, is also pushing into new solar markets to cut its dependence on Europe, where there are anti-dumping tariffs on panels made in China.

JinkoSolar, whose plants have been running at full capacity, has said that it has had to expand its manufacturing capacity gradually to keep up with growing demand, especially in China.

The company is also on the lookout for distressed assets that it can buy cheaply to add to its cell and wafer manufacturing capacity, an executive said on the call.

Chinese solar companies have struggled for the past four years, hit by excess manufacturing capacity and withdrawal of subsidies in top market Europe, prompting many to scale back or shut production altogether.

JinkoSolar has 1.5 GW of wafer manufacturing capacity and 1.5 GW of cell manufacturing capacity.

The company also wants to raise panel production capacity to 2 GW by the end of the year from 1.8 GW, the executive said.

JinkoSolar said it was also seeing strong demand in Japan, the United States, South Africa and India.

The company achieved net profitability for the entire year a quarter ahead of schedule, Chief Executive Kangping Chen said in a statement.

JinkoSolar reported a profit for the second quarter after seven straight quarters of losses, becoming the first Chinese solar panel maker to return to the black.

Net income attributable to JinkoSolar shareholders was $16.9 million, or 72 cents per American depositary share (ADS), in the third quarter, compared with a net loss of $8.7 million, or 39 cents per ADS, a year earlier.

Revenue rose nearly 45 percent to $320.7 million in the three months ended September 30.

Shares of JinkoSolar have risen nearly five-fold this year, valuing the company at about $920 million.

(Reporting by Swetha Gopinath in Bangalore, Editing by Joyjeet Das, Maju Samuel)

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