Jinko Solar Is Best Positioned In A Challenging Environment, Says Morgan Stanley

The Solar industry faces overcapacity and a tighter regulatory environment in several key markets, Morgan Stanley’s Sheng Zhong said in a report. She maintained an Overweight rating on JinkoSolar Holding Co., Ltd. JKS, saying that the stock was the preferred choice among Chinese module manufacturers. The price target has been reduced from $35.30 to $27.20.

Best Positioned Among Module Peers

Analyst Sheng Zhong commented that Jinko Solar was the cost leader in the solar industry, with the lowest costs and largest production capacity outside China, as compared to its Chinese peers. This would enable the company to sustain margins and strong earnings, despite pricing pressure.

Jinko Solar had achieved the status of being the world’s largest solar module supplier in 1Q16 in terms of shipment volume. The company aims at maintaining its leadership in the main solar power countries, and targets reaching at least 10 percent market share in these nations.

“We expect Jinko to keep its lead throughout our forecast period through 2018, given its cost leadership,” Zhong wrote. She added that Jinko Solar could also improve its balance sheet improvement by spinning off of its downstream business.

Despite these positives, the stock was at a significant discount to its peers and the share price was pricing in “an overly bearish operating environment,” the analyst pointed out.

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