JinkoSolar Holding Co., Ltd. (JKS) Q1 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2013 JinkoSolar Holding Earnings Conference Call. At this time all participants are in a listen only mode. There will be a presentation, followed by a question-and-answer session. (Operator Instructions). I must advise you that this conference is being recorded today, Friday, the 7th of June, 2013. I would now like to turn the call over to your speaker for today, Mr. Sebastian Liu, JinkoSolar Director of Investor Relations. Thank you, Mr. Liu, please go ahead.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar's first quarter 2013 earnings conference call. The company's results were released earlier today and are available on the company's IR website at www.jinkosolar.com, as well as on Newswire services. We have also provided supplemental presentation for today's earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Arturo Herrero, Chief Marketing Officer; and Mr. Zhang Longgen, Chief Financial Officer. Mr. Chen will discuss Jinko's business operations and the company's highlights, followed by Mr. Herrero, who will talk about the company's business strategies; and then Mr. Zhang will go through the financials and guidance. They will all be available to answer your questions during the Q&A session that follows. Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under applicable law. Please be noted that to supplement these consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles, or GAAP, JinkoSolar uses certain non-GAAP financial measures. The company believes that the use of non-GAAP information is useful for analysts and investors to evaluate Jinko's current and future performances, based on a more meaningful comparison of net income and diluted net income per ADS, when compared with its peers and historical results from prior periods. These measures are not intended to represent or substitute numbers as measures under GAAP. The submission of non-GAAP numbers is voluntary and should be viewed together with GAAP results. It is now my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar. Mr. Chen will speak in Mandarin and I will translate his comments into English. Please go ahead Mr. Chen.

Thank you, Sebastian. Good morning and good evening to everyone, and thank you for joining us today. We are pleased with the substantial progress we have been making, executing other strategy and regaining profitability during the first quarter. We continue to maintain our leading position in the global PV market, in the face of a continuing module oversupply, and with global economy growth. I am encouraged by the progress we have been making to reduce our costs and expanding our geographic reach, and with our industry leading cost structure and improving ASPs, we reached a 12.7% gross margin, which I am proud to say is among industry's highest for PV product manufacturers. Total module shipment grew in both volume and geographic reach, with 338.6 megawatts shipped during the first quarter, including 282.4 megawatts of solar modules, which represents a year-over-year increase of 36% from 249 megawatts during the same period of 2012, total revenue during the quarter were $187.3 million, a 9.7% increase from the same period last year, that this quarter should result; demonstrate the effectiveness of the measures we have taken to adapt to our diverse customer base, and the improvement in our operational efficiency in a rapidly changing solar power environment. Following the RMB800 million we issued in corporate funds during the first quarter of 2013, we received another RMB360 million loan from China Development Bank, which has gradually improved our working capital position and cash reserves. We believe this support from respected institutions and the financial markets appeal vote of confidence in our long term growth potential, and sustainable business developments. We are eager to use these resources to extend our geographic presence and project developments pipeline, as we are now committing more than ever to (inaudible) our strategy through. In addition to our improved working…

Thank you, Mr. Chen. Good morning and good evening to all of you. After one of the industry's worst periods, characterized by continuous reduction in subsidies, the slowing demand and price competition, we have began to see a substantial improvement during the first quarter, as global PV markets recover. More importantly for Jinko, has been the demand coming from emerging solar markets such as India, Japan, Thailand and South Africa, JinkoSolar has successfully established a presence in each of these markets, and is among the top leaders now. We have seen improvement in overall ASPs, after more than two years of continuous erosion in prices. We are analyzing the potential impact of the preliminary and affirmative anti-dumping determination announced by the European Commission on June 4, but are confident that the European markets will rebound again. We believe the preliminary announcements to be both unfair and unfounded, as our CEO mentioned before. These would unfortunately not help the industry, and it will negatively impact demand, increasing prices for the end user and delaying European renewal energy targets. Our shipments during Q1 2013 reached 338 megawatts, consisting of 284 megawatt of modules, which represents an increase of 12% versus previous quarters, and 36% versus a year before, representing a new record of JinkoSolar. Gross margin has improved also significantly, thanks to better demand, better ASPs and the fact that we are entering into emerging solar markets and selling at higher prices. Higher shipments in Q1 2013, resulted preliminarily from a strong growth in the Asian Pacific Region, with countries such as India, Japan and Thailand, representing almost 100 megawatts, 35% of the total shipments. Demand for European customers also improved, especially (inaudible) company doing business overseas. Demand in China was much lower than in previous quarters, due to its rough winter…

Thank you, Arturo. Good morning and good evening to everyone on the call. First, I would like to walk you through our financial results. For the first quarter of 2013, followed by our second quarter and full year 2013 guidance, I would like to highlight that JinkoSolar sales contracts in China, typically differ from those used in other international markets, as they incorporate retainage terms. JinkoSolar customers in China are allowed to withhold payment of 5% to 10% of the full contract price, as a retainage for the entire durations of the contract; which typically range from one to two years, given that the company recognized a significant amount of its revenue from China during the third and fourth quarter of 2012, and first quarter of 2013. JinkoSolar has limited experience with respect to the collectability of the retainage amount of the contract. The total amount of retainage contract, that were not recognized as revenue, were RMB9.5 million and RMB62.0 million for the first quarter of 2013, and the fourth quarter of 2012 respectively. As of March 31, 2013, the cumulative amount of retainage, that were not recognized as revenue was RMB131.3 million. Moving on, total solar product shipments in the first quarter of 2013 were 338.6 megawatts. Total revenues in the first quarter of 2013 were RMB1.16 billion, down 0.3% sequentially and up 9.7% year-over-year. The year-over-year increase was primarily attributable to an increase in the shipment of solar modules, which was offset by the decline in ASP of solar modules. The sequential stability in the revenues was primarily attributable to the decrease of revenues from system integration projects, for which the company provides EPC services, as the company recognized EPC revenues in the fourth quarter of 2012, and did not recognize such revenues in the first quarter of…

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions]. Your question from the line comes from Philip Shen from Roth Capital. Please ask the question.

Good evening. This is Matt on the line for Phil. Thanks for taking my questions. Just wanted to start by exploring the effective -- the anti-dumping duties, and its effects, specifically on your gross margins, because of the strong gross margin this past quarter. Maybe you could share with us sort of your expectations for the remainder of the year in terms of gross margins and how the EU duty factors into it, how does it affect your gross margins?

I think you are speaking of the European Anti-Dumping tariff and to affect our gross margin. And as everybody knows that, the news come out in June 7, right? I think the temporary anti-dumping rate is 11.7% until August the 4th. I think that, we do not believe that will affect too much on the gross margin, because that tariff will be trade off by the ASP price, maybe a little, go up. So from August, I think any sales to Europe depends on negotiation between the Chinese governments and to the European, I think Commission Committee. So basically, we cannot forecast in the future, the -- I think the tariff will affect our gross margin. But we do think, Jinko is already -- takes the strategy -- is I think shipping more to other emerging markets. So the whole year, our original forecast is around 20% -- our sales is developing. To reduce the effect, the impact by the tariff. So we do not think that will affect us -- the guidance, whole sales guidance and the gross margin too much.

Okay. Just to follow-up on that briefly, I think last call you guys had guided to about 30% of the mix of your shipments going to Europe and now are you saying its 20% for the remainder of the year?

Well for the year, it is around 20%, yeah.

Let me add here Sam, the CMO. Mainly what we have been very lucky, is that mainly our European customers are also entering into emerging markets, so when we are selling to most of these big companies, they are also distributing these containers, these megawatts into markets outside Europe. So [we have] that to reduce our exposure into Europe, even if we are keeping the same customers. Then at the same time, we are obviously entering not new customers, and right now we have more than 250, worldwide, and a lot of them are within these new emerging markets.

Okay, great. That's helpful. Then just one more if I may, given some of the shifts in the market that you guys are going to, and the change is caused by the EU Anti-Dumping, can you just talk about how do you expect OpEx to trend for the remainder of the year, it'd be helpful maybe if you could give it to us on a quarterly basis?

I think you are talking about operations expenses, right?

Yeah, that's right.

Okay, I follow your question. Again basically, if you look at -- the first quarter and our total operation expenses are around 26 million and account for the revenue, around 14%, that's the theory for the first quarter, even we are not accounting for too much the EPC revenue. So we believe, on the second quarter, so where shipments continue, as you can see the guidance, if you go to 450 megawatts to 470 megawatts, plus other revenue continue to increase -- as the revenue continues to increase, the absolute expenses, we don't think it will increase too much, around the 26 million, 27 million, but the percentage definitely I think will down. So, basically, for overall the whole year, where we will stay in line between 13% to 15%.

Great that's helpful, and that's it for me. Thank you guys.

Your next question comes from Amy Song from Goldman Sachs. Please ask the question.

Hi. Thanks for taking my question. I just have a few questions. First is the follow-up on the Europe anti-dumping temporary tariff. You said you expect the impacts -- the tariff to your customer. So what is the common practice right now, what happened in the supply chain in the past couple of days? What is the most common way people are dealing with that? Is it passing to all the way to the customer, or is somebody willing to share the kind of cost? I guess, there is some [competitiveness] within there as well, right, or your strategy, want to profit, no shipments? What's your philosophy of dealing with this uncertainty here? So this is my question. Then the second question is, if you raise price, what would the European demand look like? Is it going to contract demand? I guess there, we don't see a very lucrative IRR in Europe right now. So you did not forecast any Europe's demand for declining based on that, even with a tempered rate. So can you give me some background or your thoughts on that, then I have a follow-up question on [spot] price. Thank you.

Okay, just to answer your first question.

I will answer your first one, or you want to go ahead, Zhang?

Okay let me answer the question first, and I think maybe Arturo can comment on more. To answer your first question, I think from the beginning of June 7, the news come out, we do not think that the news release, anti-dumping were affecting on the tariff side. From June 7 or August the 4, whatever, that period right now, the temporary 11.7%, we believe okay, I think as this moment we cancelled the order, rush order from Europe, we think we can transfer that into the ASP. So to answer your second question I think you know, with after August the 4, and you may be impacting the tariff -- the real tariff to 41%, I think without any good result come from between Chinese governments and EU. I think that is a good question. We do not believe you can transfer that whole 41% tariff go to ASP. So that's why I think it's a very, I think a [negative] impact on the, I think Chinese manufacturer, if that really happens.

Okay.

Arturo?

To complement the comments from our CFO from the market perspective and to answer your question, we are in constant touch with most of our loyal customers, the ones that have been growing with Jinko and we are in a position to negotiate with them and to reach an agreement, in the way that according to the situation right now, we have exactly one month, in order to produce as much as we can, and unfortunately we are almost sold out, so it's not so much volume. But still we can catch-up and show an increase on price, with the demand that we are seeing in the short term, very strong. After that, after the 47% is implemented as a preliminary, because probably there will be a lot of discussions and finally will be clear, with our expectation. But in the meantime, we will need to have a lot of negotiations, and it's always on a case-by-case process.

Okay. Thank you. All right. Then my second question is on your product price. You reported polysilicon costs per watt basis of $0.09 in line with the same, as when you reported in the fourth quarter. But some portion -- just some number doesn't match spot price here. Spot product price hiked roughly 20% in the first quarter. Why is your polysilicon costs not hiking at all?

To answer your question, Amy? Hello?

Yeah. Go ahead.

Okay. I think the silicon price, our average purchase price cost in the fourth quarter, actually $70 per kilograms. So our cost of 9.3% per watt. In the first quarter, our average cost is $16 per kilograms. Actually, our average cost go down, because inventory continues consuming. So our cost is $0.09 per watt. I think that's our price. Of course I know, the spot price may be a little up. I think domestic, it is still under $16 to $17 per kilogram, imported maybe around $18 to $19. So because at Jinko, we didn't have any long term contracts, we buy the inventory, buy the silicon from the market. So that's our cost.

So should I assume that in the second quarter you will put a little bit higher cost per watt basis, because your costs -- moving average are going to be increased?

It depends on the silicon price. Right now, we are thinking, we still can buy the domestic, around $16 to $17. So we don't think that at least right now, the silicon price will go up too much.

Okay. Can you give me a percentage of split between poly purchased from domestic and overseas? What's the percentage split?

I think -- I cannot give you exactly, but right now, we think we can buy domestic around at $16 to $17, and import may be $1 or $2 extra.

Yeah, yeah, I mean, the quantity, what's the percentage split.

We think 80% is domestic and 20% is import.

Okay. So given your margin improving, is your domestic vendor asking for more price at this point, because they are not making money at all?

But the oversupply situation is still there.

But the policies on tariff is on the [wafers], right?

We don't have.

But that's on the news. I think that there is a tendency from supply channel. Why are you making money, they are not making money, right? Doesn't make sense?

I don't know. Because this is -- I cannot answer the question. You have to ask Chen's comments.

I just want to ask the tendency from your vendor? Is there any sentiment from there?

I think, I do not think that will happen, even from Chen's comments. Especially right now, trying negotiations with EU, the quarter and the minimum price. So I think it's a long time to come in, from my personal experience.

Okay. Great. Last question on Japan market. You say you are going to do 15%, second quarter or whole year? I didn't get that number right at the beginning?

I think we are referring to the second quarter and then expanding from there, we will be seeing increase on volumes in the Japanese market. We already released and we have 100 megawatts already contracted.

Okay. All right.

And we got also an office and a team there. So we will see the expansion quarter-after-quarter increase though.

For China market, you are expecting to be -- the whole year is going to be what percent of shipment, and then also, second quarter? Or maybe second half, I didn't get that early, sorry. That discount (inaudible)?

In China market we are seeing a big-big boom. Q1 was slow, because of the winter season. But Q2 is extremely good. We are not going to release the number, but we have already contracted over 300 megawatts, and then quarter three, probably will be even more than that.

Amy, for the whole year, we maybe kind of -- around the China market around 40%.

40%, okay. Is it second half loaded or first half loaded?

I think second half would be higher than the first half.

Okay. Second half was like (inaudible) or the utility scale manner, right?

The utility scale.

Do you see like a rush order right now, because it's going to adjust any way, may be some time at the beginning of next year, do you see a rush order for utility scale from China?

We think it is stable so far.

Stable?

Yeah.

All righty. Thank you so much for your time. That's all my questions.

Thank you, Amy.

The next question from the line comes from Satya Kumar from Credit Suisse. Please ask the question.

Hi, this is Brandon Heiken speaking on behalf of Satya Kumar. Thanks for taking the question guys, and congratulations on the gross margin and cost reduction. Can you talk about your gross margins in different markets, and can you talk about how you have achieved these cost reductions, particularly on the non-silicon costs, and where you think those cost reductions could go for the rest of the year please?

Okay, I think let me answer your second half, I think maybe Arturo can add, the gross margins come from which market, to compare with it. I think first of all, this quarter, we continue to reduce the costs, the non-silicon costs per watt its $0.42 right now. The major cutting is the module size, we have reduced to $0.28 per watt right now, and then plus the silicon costs, $0.09, the total cost is $0.51. So we believe, I think that we will continue cutting on the -- because through the sizeable and also inclusive technology and continuous cutting on the non-silicon cost side. But there is not too much room to go, because really, we think right now as the materials price and supply, we make efforts I think to continue cutting. For the different area, the gross margin, overall, our gross margin is around 12.7%, and I think if you ask me, majority comes from which market, I think it depends on the ASP selling in different markets. We believe, I think if something -- I think Arturo maybe can add more. So if the ASP, overall ASP, it's easy for you to do calculation. I already gave you gross margin, I already gave you the cost. So I think you can do the calculation of ASP is how much. I think Arturo may be can add which market, maybe the gross margin, ASP maybe is a little higher than compared other markets.

What we are seeing in Q1 this year -- first quarter is that we started our shipments to chosen countries, like South Africa. In South Africa specifically, the ASP is higher than in the rest, and the same for Japan. Japanese market has higher ASPs, also because of the feeding tariff, (inaudible) very generous there. For Asia-Pacific, India, and Thailand, normally they have an average in this space, so it is not much higher than Europe. But I think, we have good customers also, that they are also (inaudible) and giving some extra price because of the quality and good performance of our quality of our modules. So it's not so much on a geographical basis, apart from Japan and South Africa, but is more on the level -- by the level of the customer that we are willing and we are dealing with. But also let me say that USA, also the price is slightly higher, because of the use of the -- sales from day one.

On that, for Taiwan, how has the Taiwanese sell price trended because of U.S. tariffs and then now with discussion of Europe tariff, how has the Taiwanese sell price changed?

It's increasing slightly. But I think we have rate under control. So it's slightly higher than our sales in China. But we have good suppliers that we are dealing with them, and negotiating for volumes on a deal by deal basis.

Okay. Do you expect that to increase with European tariffs further?

Well, obviously the U.S. market will be very interesting for Jinko and for the solar industry, especially if there is the anti-dumping tax in the European countries. But again, we are very keen on having a very good distribution, geographical distribution in not only USA, but other markets, like in Asia Pacific, like in South America, are complementing each other. So even if the cost of Taiwanese sales is high, also, ASP is higher in USA. And other markets, we can sell our normal standard products, that is high performance, high quality, but lower cost.

Okay. Then last question on Japan. I know that the shipments to Japan were 1.7 gigawatts for the total industry in the first quarter, but I believe installations were less than that. Can you comment on channel inventory in Japan, and how you expect that to change, please?

Well Japanese is essentially booming. It has been, as you said, 1.7 gigawatts. I have this numbers in front of me. This high feeding tariff probably will remain very strong. The point here, I am not so sure how much stock [released] in China, I don't think so there is too much. Also because they are having a very strong rate of installations for the residential market, commercial roofs, but also for large scale projects that we will be seeing in the next coming quarters. For Jinko, we get a little bit late because of our focus in other markets, but we are considering Japan very strategic, and this is why we are having all the success right now. In the very short-term we foreclosed and we invested enough to get the people locally, and also to have our certifications and to get ready to sign more megawatts than the contracts already announced.

Thank you very much.

Welcome.

Your next question comes from Emily Liu from Arete Research. Please ask the question.

Hi, congratulations on the gross margin improvement, and a very successful cost reduction. I actually have two questions, first of all, I wonder whether you can give us some guidance on the annual CapEx, and how the CapEx will be spent, especially on efficiency improvement? And my second question is on Japan, I wonder whether you can give some color on your strategy in Japan, what kind of segment do you focus on, it's on residential or projects, and how -- I wonder whether you have a guidance for your target in your shipment to Japan?

I think, let me answer the first question and Arturo maybe answer the second question. For the over -- for the first quarter, I think, Jinko's CapEx is around $5.4 million, and eventually, we are not going to increase the capacity -- from wafer cell and modules. So majority of the CapEx is maintenance. So our planning is for the whole year, the CapEx is around $15 million for this year.

Do you have a plan on improving efficiency, maybe on wafer or cells upgrading some of the equipment for efficiency?

Basically, most of those is [technology side yet] on (inaudible), and with substantial money. But we do not think that we have a large CapEx on that. Just like you see, we already announced the Eagle II. So we do not think we will spend a lot of money to do that.

Just a question on Japan. I just wonder if you can be more --

This is Arturo the CMO. Let me give you some idea on our strategy. We started in Japan with a focus on -- first understanding with our business development team, the different players, and which is the segments that are going to be picking up very fast, and which ones are slowing. So what we have seen is that, the [destination] market at the beginning was faster. However the quantity of megawatts is in a small quantity of systems, so it's mainly under the distribution channel. So we are entering into some distribution partnership with local companies that they do distribution for Jinko. But immediately, we saw some commercial roofs that are bigger sized and also its helping us to increase volumes. This is why for Q2, we are doubling the quantities for Q1 in Japan. Then also, we are in some larger scale projects, that will be coming from now on, from Q2, Q3 and Q4. So we are targeting the three major segments. The important thing is to get into Japan with the right product, higher efficiencies, and also very well received, and also the price is higher because the subsidies are much better.

Okay. So do I assume that Jinko enters Japanese market with its own brand, and can you give me the exact number on this quarterly shipment to Japan, if possible?

Well, I can give you a range. Definitely, we are selling under JinkoSolar brand, and a little different from our competitors. But also we do have couple of customers that they use their own brand. But mainly, we will be focusing much more on promoting and doing marketing on JinkoSolar brand. But it will take also obviously a time, right. Then, for the target of this year for Japan, we are targeting around 100 to 150 megawatts, or (inaudible). So far we have already constructed, in this year more than 80 megawatts already constructed. So we believe that there is good room for reaching 150 in 2013.

Okay. Thank you so much. Thank you.

You're welcome.

Your next question comes from Dan Ries from Maxim Group. Please ask the question.

Hi. Thank you for taking the question. Lot of my questions have been answered. Maybe I can ask a little bit more about China. I suspect that -- is the second quarter rise in shipments, which seems to be well above your capacity, is that driven largely by China, and if so, could you discuss maybe how China prices have trended in recent months, as to where all the capacity seems to be getting a little tighter? The impact that China is having on gross margin, in other words, as it goes up, a lot of the volume in the second quarter, wouldn't that put some pressure on gross margins? But it doesn't seem like you are indicating that? Then how do you think about the third quarter, if Golden Sun ends? You said the second half is bigger, what's picking up the slack, is it just the utility projects, or is there something, has distributed generation started to take off as well for this second half of the year?

Arturo, you want to answer the question, or you want me?

Okay, I can answer now. So this is again Arturo. From our conversations and our internal discussions, it seems that the Chinese market is strong, stable but going up, especially for a leader like JinkoSolar, that we have become -- the second half of last year, and this coming quarter, we are currently the leader in this market. But main thing is that, we are seeing also a rebound or an increase on the currency of the Chinese renminbi. So it's helping to improve the ASP in the Chinese market. So compared to European market before the anti-dumping preliminary announcement, the prices were more or less, more as I said, maybe slightly lower. But going forward, we will see how much is the rush in order to fulfill all the installations that in the pipeline, before there is any more rumors on [paying] tariff. So we definitely expect this year to be very strong, and we will see up to -- at least to have a stable pricing.

Okay. With gross margin now in the double digits, and I guess expected to remain there, you are going to ship well above your capacity in 2Q. What would it take for you to consider additional capacity? Is it something that is possible by the end of the year, if things were to continue -- particularly with being a leader in China, if China starts to maybe even be a bigger market in 2014 and 2015, wouldn't you want to have capacity to serve that and remain a leader?

Dan, let me answer your question. First of all, I think as a gross margin, we think that we can continue to keep double digits. Maybe you think you know, because shipments is -- the China shipments is more and more percentage. But due to, we are thinking of selling in China, A, is reduce the risk of the country, on the collectible side. Second is, because of retainage contracts, our ASP actually is not lower, frankly speaking, because of the fact that 5%, 10%, will not recognize revenue, we may be recognize it later, when we collect it. So that's to answer your question. Second part, the second quarter, our guidance right now is, I think 450 to 470. Major shipments partially come from the inventory at the end of the first quarter. Secondly is, we are also outsourcing some cells and wafers, even power module capacity actually can be -- easily to increase a little, use the existing capacity. The normal design is, 1.2 gigawatts, but we can increase to -- easily increase it to 1.2 gigawatts a little more. So we believe, I think the second quarter -- I think it's already on schedule basically. And we will continue to do that, because -- even increase, if the markets are really good, well may be increase on the module capacity, you know, to another 50 megawatts, but it does not cost the CapEx too much, because -- actually its nothing. Maybe $1 million.

So you are going to use partners for the initial that you have -- demand in excess of your capacity partners would be used in the early days?

Yeah.

For the sales? Okay. That's great. Thank you very much.

Thank you, Dan.

Your next question comes from Paul Strigler from Esplanade Capital. Please ask the question.

Hey guys. Can you just provide a little more detail on how much EPC or non -- I guess, non-module cell and wafer revenue in volume you recognized in Q1, and how much you expect to recognize over the rest of the year?

Let me give you first of all revenues. I think, from revenue -- we have -- first quarter total revenue is 187 million, of which wafer is 5 million, cell is 8 million, module is 168 million. For the first quarter, we didn't recognize any EPC revenue. So from maybe in the second quarter, even (inaudible), we possibly have revenue from EPC, then also from sales of the solar projects, solar power plants. So that's possible.

And so for the entirety of 2013, is there a number you guys -- you mentioned in your guidance, I think touched that, how many megawatts you intend to build? But I guess, how many megawatts do you intend to recognize for EPC and plant sales?

We give guidance -- okay, we will sell module for whole year 2013 is 1.2 gigawatts to 1.5 gigawatts. We also where -- construction or maybe -- construction of the size for the power -- solar power plant, is between 200 megawatt to 300 megawatt.

Is that what you intend to recognize in terms of revenue, or that's what you intend to build?

No, it's intended to build. So by the end of this year, maybe we have some finished projects on hand installed, or we have maybe some under construction. So overall, the whole year, it's around 200 to 300 megawatts. For example, right now, by the end of the Q1 -- right now, we are running like 140 megawatts projects -- solar projects right now, finished and under construction.

Great. And one last question on ASPs, so my math suggests you had about a $0.59 in Q1. That was well below your peers. I mean, it seems like ASP for you guys, even with the 40% of your volumes going to China in Q2, should increase. I guess, with that, you mean, obviously that you are not going to comment exactly on ASPs, but is it possible your ASPs could sort of hit the mid to low $0.60 range, sometime in the near future?

Okay. First of all -- your calculation is correct, I think. Second is already explained, why Jinko, I think the ASP maybe cannot comparable to other company, because when we sell to China, the contracts, the retainage contracts, and the people in the whole accounting method, will be revised by PWC, asking for that 5% to 10% retainage, cannot be recognized revenue, until we collect it. So by the end of the first quarter, we have different, one is [RMB31 million] grant right now, we now recognized. So that may be affect our ASP. Second is, we believe, I think especially right now, the European tariffs, temporary tariff has come in. We believe second quarter, the ASP will be slightly up. Arturo maybe also can comment on that.

Sure. This is again, Arturo. Mainly the ASP is depending on different factors. The first one I think is very important, if you compare to our peers, is that we produce mainly polycrystalline modules. So we don't have so much shipments on monocrystalline, and mono is much more cost in introduction, but also higher ASP. So this is one big difference from our competitors. Even our efficiencies are at the same level as monocrystalline modules, with the polycrystalline. It is a very tiny difference. We ship most of our contracts in polycrystalline modules. Second thing is that most of our shipments are on CIF basis, so we deliver to the port. As you know, because of the anti-dumping situation, a lot of our competitors were shipping on a DDP basis, because the customer didn't want to have or to share to get the risk on the anti-dumping tax. So most of our shipment has been so far on CIF basis, most of them. So this is also lower in terms of price. The third point is the market distribution. We are entering into the U.S. market, but probably not so strongly in terms of megawatt than some of our competitors. So in this case, we don't have to buy so many Taiwanese sales, but at the same time, we don't have so many volume -- megawatts already sold in the U.S. during the Q1. So then the ASP is not so high, in this market. The same as Canadian market, where the ASP is higher, and Japanese market, where we are entering, and we will see much more volume coming in the next quarter, where the ASP will be higher. So mainly, these are the three aspects that makes the ASP different from our competitors. Part of the comments from our CFO regarding the 5% to 10% that we cannot recognize from the Chinese projects. Going over the next coming quarter, we will see an improvement on the ASPs, and price will be higher -- slightly higher, because of this new sales into these big markets, where ASP is higher.

Great. That's perfect. Thank you so much guys, have a great weekend.

You are welcome. Thank you. Same to you.

Thank you.

Your next question comes from Dion Chu from D.E. Shaw & Co. Please ask the question. Dion Chu - D.E. Shaw & Co.: Hi. First congratulations for the results. I have a couple of questions. The first one is -- according to my calculation, it seems like the average selling price in Q1 was 7% higher than Q4; because in Q4 you had like 13 million of EPC revenue, but in Q1 there is no EPC. So the shipment sales are slightly higher, so the average ASP actually is 7% higher than Q4. So what's the reason for that? It seems all the ASPs seem to be very stable in Q1?

If I can answer, or you go first?

Yeah, I will answer first. Total revenue is I think flat, almost compared to Q4. Just as I explained in the -- I think the meeting -- because in Q4, we recognized some EPC revenue. So basically, the module shipments go up, the ASP also goes up. But to the total revenue go flat, because I think it partially is reduced by -- we didn't have any EPC revenue to recognize. But you are right, the ASP -- Q1 compared to Q2 has increased. Dion Chu - D.E. Shaw & Co.: Okay. So is it simply because they have better demands, or some country mix change that's selling more products to the country, that has a higher ASP?

Yes, I said before, this is Arturo again. There is both, and there are several valuables that are affecting, and one of them, improvement on the demand in overall -- we have seen Q1 much better market than Q4 last year. So when there is demand, and we see that all our lines of production has been almost -- 100% full, then obviously, we have a need to sell at lower prices, and we are, at the same time seeing that in some markets, what we are entering right now, like South Africa market, or like Japan market, we are seeing higher price than in markets like in China, for example. Dion Chu - D.E. Shaw & Co.: I see. So my next question is about the guidance. Do you have like the gross margin guidance for Q2 or by the end of the year, and -- the gross margin by the end -- I am and shipments for the full year?

I think that we just gave out the shipment guidance, as you know that. For the 2013, our shipment is between 1.2 gigawatt to 1.5 gigawatts, I think, on the module shipments. Then we also, I think on the solar power plant, the size between 200 megawatts to 300 megawatts. And for the module gross margin, we cannot give you guidance, but we believe, the selling price ASP from Q2, even Q3, were slightly up. But on the cost side, we do think that Jinko has the ability to keep it stable or even go down further. For the total revenue, I think the expectation or projection, I cannot give guidance, because all the other parts of revenue were coming, actually the three, major three. One is EPC revenue. Second is the solar power plant that we sell. Third is the retainage we collected. So I cannot give you guidance for the whole year revenue. Dion Chu - D.E. Shaw & Co.: Okay. Thanks.

Your next question comes from Wei Feng from Luminus Management. Please ask the question.

Hey Zhang. Thank you for taking my question. Good job on cost cutting, very impressive. Just one the 200, 300 megawatt projects, under construction probably this year, are they all Chinese products or is there products from other markets? And can you comment on the gross margin? Also, I think cash payment is most important, just wondering how the cash payment, for those product sales, and do you have the buyer first, before you start construction, or you start construction with PPA and then looking for buyers? Thanks.

I think that's a good question. First of all, we give guidance around this 200 to 300 megawatts. I think the majority, I think most is Chinese projects. So far, I only can tell you here, is we have four years under construction and finished, and today is around 140 megawatts. And (inaudible) of this already, I think generally (inaudible). As you know that, all Jinko's products, when we started, and we all got a PPA, and everything you know, the approval, everything. But you know, all these projects are right now in China, as you know that. I think we have approved feeding tariff, but the collection still is in the -- the government still here I think has not finalized. But we see, I think with the leadership, everything is changing right now. I think by the end of this month, we will see the clear, the money, the payments -- will streamline all these payments, and all these things. So we believe, as far as all these settle, first of all, I think the feeding tariff, the payment is on time. Second is, I think, if they are not -- any electricity generated by the solar power plant to sell to -- I think feeds into the -- I mentioned no grid. The IRR on those projects right now, we believe, generally speaking, the IRR is around 10% to 15%. So even if you use the leverage, the banking loans, I think the returns will be higher. So basically, we still believe, I think, invest on the solar power plants. I think the returns or gross margin will be higher than on the module side.

Got it. There is a lot of speculation on the new feeding tariff on NDRC by the end of the month. Can you give us your view on the potential feeding tariff level and scheme?

I think you are talking about the -- like two steps. It is two steps, right?

Right.

I think that -- I think we already have $0.45, $0.35, all arguments there. I am not sure I am that (inaudible); because we still think that the Chinese government is -- definitely is very supportive on the whole industry, as you can see there. But so far, our solar power plant, I think is most -- is $1 per KWH feeding tariff, and one project is 1.15 billion hour, I think -- 15 megawatt -- 20. 230 megawatts on the (inaudible). But in the [partial] is $1.16 and the [partial] $1.

You mean, RMB1 not $1.

If $1, then I can't sell you with the gross margin of 100%.

Yeah.

So basically I think that the government will continue, I think support on their side. As you can see their right now, the bureaucrats in China right now, everything, land, license, everything, per watt cost maybe around renminbi, is around RMB9 to RMB9.5. So in some areas, like [Shingxa] I think, definitely, I think IRR is higher. So the only thing is waiting for the government to make everything clear, and the payments, everything, streamline everything. So I think the value -- the full year value is there.

Thank you. That's all for me.

Thank you.

There are no further questions on the line at this time. I will now like to hand back to Mr. Sebastian Liu for closing remarks.

On behalf of the management of JinkoSolar, I would like to thank you to everyone for joining us today, and if you have further questions or concerns regarding today's conference call, please contact us with our IR website. Have a good day. This concludes today's conference call. Thank you, operator.

Ladies and gentlemen that does conclude our conference for today. Thank you for participating. You may all disconnect.