JinkoSolar Didn't Exactly Kill Earnings, But It's Doing Better Than SolarCity

Daiwa’s Scott Chui maintained an Outperform rating on JinkoSolar Holding Co., Ltd. JKS, with a price target of $28.50.

Strong 2015 Results

The company reported its FY2015 results on March 1, with net profit rising 2 percent year-on-year and the adjusted net profit broadly in-line with the estimate.

However, JinkoSolar’s gross margin declined to 20.3 percent in 2015 from 22.4 percent in 2014, despite robust shipment volumes.

Analyst Scott Chui mentioned that the company “attributed the deteriorating margins to: 1) slightly softening of solar module ASPs, and 2) weak power generation especially in 4Q15, given the severe curtailment issues in Western China.”

The analyst expects the robust shipment momentum to persist into 2016, following a total of 4.2GW of solar modules being shipped to third parties in 2015, marking a 74 percent year-on-year increase.

Management guided to 1.3-1.4GW of solar modules being shipped in 1Q16, representing a 78 percent year-on-year increase. For FY2016, “management reaffirmed that 3rd party module shipments could reach 5.4-5.7GW, which implies another 32 percent YoY volume increase if the guidance is met,” Chui stated.

Module ASPs, however, declined through 2015, and the analyst expects further declines, given the falling production costs.

“For 2016, management expects stable wafer and cell pricing in 1H16, and then a gradual decline in 2H16 on more capacity landing,” the Daiwa report said.

JinkoSolar intends to add 500MW of wafer capacity in 2016, with cell capacity of 1,000MW and module capacity of 2,000MW. The expansion is expected to be completed in 1H16.

Solar Stocks Plunge

Apart from JinkoSolar, solar stocks were badly hit on Wednesday. SolarCity Corp SCTY led the decline, falling more than 25 percent to a multi-year low of $18.76. The last time that SolarCity had declined to these levels was in April 2013.

SolarCity reported better-than-anticipated 4Q results on Tuesday, while issuing disappointing guidance.