Welcome to the today's First Quarter 2020 JinkoSolar Earnings Conference Call. Please note that all participants will be in listen-only mode for the first part of this call and afterwards, there will be a question-and-answer session. Now, I'm pleased to present Ms. Ripple Zhang. Ms. Zhang, please begin.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar's first quarter 2020 earnings conference call. The Company's results were released earlier today and available on the Company's IR website at www.jinkosolar.com as well as on Newswire services. We have also provided a 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. Charlie Cao, Chief Financial Officer; and Mr. Gener Miao, Chief Marketing Officer. Mr. Chen will discuss JinkoSolar's business operations and company highlights, followed by Mr. Miao, who will talk about sales and marketing, and then Mr. Cao, who will go through the financials. 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 the applicable law. It's 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, Ripple. Good morning, and good evening to everyone, and thank you for joining us today. Total shipments of solar modules during the first quarter were 3,411 megawatts excluding the impact of the disposal of overseas solar power plants. This quarter generated total revenues of $1.03 billion and the gross margin of 19.7% all within in our guidance range for the quarter. The COVID-19 pandemic impacted the solar industry, creating numerous challenges from difficulties, obtaining supplies of raw materials to logistics and transportation disruptions. Despite all these challenges, we are still successfully achieving the highest historical shipments in the first quarter which we believe demonstrate our strong ability to execute and incorporate flexibility to carefully navigate and adapt to our difficult global economic environments. Thanks to containment efforts across the country. All our factories in China have reached full production in much. The major challenges so far during the first -- second quarter has been overseas demand. The pandemic had impacted logistics to varying degrees and that caused project delays in most overseas markets. In Malaysia, we immediately implemented measures to ensure the healthy and safety of our employees while at the same time complying with government containment measures. This rapid response has brought our production back to normal safely by the end of April. We replicated this healthy and safety measures for our employees in the U.S., and we're able to keep production running smoothly throughout the pandemic with the global demand falling significantly and the price of raw materials declining as a result of the pandemic. We focused our attention on coordinating production logistics and sales to issue or recruit to fulfill new orders while carefully controlling inventory levels. Shipments of epidemic prevention materials continue to be made from China to our Malaysia and the U.S. facilities.…

Thank you, Mr. Chen. The total shipment of solar modules reached 3,411 megawatts, the historical high in Q1 despite the challenges COVID-19 created for our sales and production. Over the past few months, we have been carefully monitoring industrial developments, real-time market trends and firsthand client feedback, which provided us with a detailed understanding of how the pandemic is impacting our clients and allow us to offer better support. At the same time, we launched the emergency response mechanism developed from our experience facing previous challenging and unpredictable market hurdles, which provided us with a flexible and pragmatic tool together navigate during the crisis. The impact of the pandemic is expected to shrink global market demand by approximately 25% in 2020 to 110 to 120 gigawatts. Nevertheless, our high quality products remain in strong demand and reaffirm our finance of annual shipments in the range of 18 to 30 gigawatts. With our order book for the year growing and shipments rolling out, we continue to drive growth. The China market was oversupplied in Q1. Some of the delayed projects from 2019 are now under pressure to complete installation before the June 2030s deadline, which is helping to stabilize market prices lately. New bidding rounds for utility plants in 2020 are expected to start construction in the third quarter, reaching peak installation in Q4. In 2020, great capacity of the solar power connection will reach 48.45 gigawatts. Ultra-high voltage projects are being extensively promoted by the government as a strategically important source of energy integration and power transmission from China's west to the coastal coal regions over the long run. According to the latest policy from China's NDRC, each province is required to set the lowest non-hydro renewable generation ratio ranging from 5% to 25%. In addition, reforming policies in electricity…

Thank you, Gener. Results in the first quarter were in line with our guidance, key financial indicators including total revenue, gross margin and net income have increased significantly year-over-year. This is due to the continued increase in the integrating production level. By the end of March, we'll close the sale of the two solar power plants with a combined capacity of 155 megawatts in Mexico, which reduced the total debt by about $421 million. On a wafer capacity reached to 18 gigawatts in April, which will support our expected total shipments of 18 to 20 gigawatts for the full year. Going in to the details, excluding the sales of overseas solar power plants, total revenues were $1.03 billion, an increase of 25% from the first quarter 2019. Gross margin improved to 19.7% compared to 16.6% in Q1 last year. EBITDA was $100 million, compared to $49 million in Q1 last year. Non-GAAP net income was $32 million significantly increased year-over-year. This translates into non-GAAP diluted earnings per ADS of $0.65. Excluding the sale of overseas solar power plants, total operating expenses accounted for 12.6% of total revenues compared to 11.9% in the fourth quarter of 2019 and 12.5% in the first quarter 2019. The sequential increase was primarily due to an increase in shipping costs as a percentage of total revenue associated with a higher percentage of shipments through the overseas markets in first quarter 2020. Moving to the balance sheet, our balance of cash and cash equivalents were $678 million compared to $895 million at the end of last year. Accounts receivable turnover days were for 66 days compared to 94 days in Q1 last year. Inventory turnover days were 110 days compared to 120 days in Q1 last year. Total debt was $1.8 billion compared to $1.9 billion last year, in which $162 million was related to international solar projects. Net debt was $1.1 billion compared to $1 million at the end of Q4 2019. Total CapEx for 2020 is expected to be around $350 million, which is used for the 5 gigawatts certain phase of mono wafer compared to this and additional new 9 gigawatts mono [audio gap] of module capacity. This concludes our prepared remarks and we are happy to take your questions. Operator.

Thank you. So ladies and gentlemen, we will begin a question-and-answer session. [Operator Instructions] Our first question is from Philip Shen of Roth Capital Partners. Please go ahead.

The first one is on pricing. So, we calculate an implied module ASP of about $0.30 per watt in Q1 on a blended basis for you. And I think based on the guidance the pricing might be closer to $0.262 for Q2. So, this is just maybe a 13 percentage point of decline. Are we accurate with these numbers? And perhaps you can comments on what we might be missing? Specifically, how much in Q1 did you have from module-only revenue for example?

Yes, Philips, it's Gener. Thanks for the question. Yes, for the Q1, the ASP compared with Q1 and Q2, we are seeing because of market turbulence and also the pandemic impacts, the market price dropped by around, let's say, 10%. So, if we look into our Q2 pricing, so I -- yes, I think we around that range as well. So, compare with Q1 ASP, Q2 ASP, we're expected to drop by approximately a high single digit range.

Okay. And then, how do you expect that lending pricing to trend in Q3? Do you expect another drop as well? Or do you see the stability more in Q4? How would you see ahead? Thanks.

Yes, sure. Our strategy is always to follow the market, so we're not against the market. When we see the market price is dropping, definitely our pricing will drop. That's our strategy. I think everyone will follow that, not only Jinko. So, the number wise, it's hard to define right now, what's the exact numbers for Q3. It's still too early to talk about the Q3 final pricing. But from the observation of the market price size, we did feel the expectation from all the customer in fact they expect the market price continue to drop compared with Q2. But actually when we look into the whole year pricing, I still believe, there will be some bounced back as late Q3 or even early Q4 because expected strong demand in China rush by the year end and there will be shortened supply by that time.

And then from a housekeeping standpoint, can you share what the CapEx depreciation was, if you want?

Yes, Philip, the depreciation -- no, the cost roughly per quarter, roughly $40 million, and the CapEx is roughly $100 million for the first quarter.

Okay, thanks Charles. And then one bigger picture question. In your prepared remarks, you've commented that the dropped IIT policy should drive capacity lower. Can you comment a little bit more on how you expect this policy to work? And how do you expect this to impact the industry? I can see marginal capacity expansion going away, but I was wondering if you could just comment more on what you see as the impact in this policy and when you expect it to be beneficial? Thanks.

Phil, you're talking about ITCs, right?

No, I'm talking about the Ministry of Industry policy to force the industry to have higher efficiencies in the capacity expansion.

You mean the China manufacturer, let say, the industry standards in, right?

That's right, yes.

Yes, Phil, I think this is a national standard and which is continued to encourage the latest technology adoption and there's a lot of thresholds which is a minimum threshold. And if the industry participants want to expand the capacity, I think all-in-all, I think it's a very positive for the industry consolidations and particularly the Tier 1 companies given their technology advantage, and we'll lead the capacity expansion to meet the anticipated sustainable growth and in the near future. And for the Tier 2, Tier 3 companies and it's under pressure. And it's not only from the customer perspective, right. A lot of the Tier 1 companies is leading this product and we are promoting over 500 watts modules, and Tier 2, Tier 3 companies, and they're under pressure. And from the supply perspective and the government want to build with policies, which is -- it's a positive for the leading companies, but negative for the Tier 2, Tier 3 companies.

Our next question is from Tony Fei at BOCI. Please go ahead.

Thanks management. It's Tony from BOCI. I have two questions. First is regarding on the order book front. So among the 4.2 to 4.5 gigawatt shipment target for Q2, could you give us some color regarding how much of that will come from domestic orders and how much from overseas? And how about that mix movement in the second half maybe?

Yes. So, you're talking about future numbers, right. So, I will assume your question is mainly about the China mix during the Q2 and also the rest of years of shipment or plan, right. From my observation, so Q2 number for the shipment mix, China will occupy not a significant number. What we're -- the number range we're looking at is around, let's say, 10% to 15%. So, however, it will rapidly going up, especially when the China market starting to boom by the second half. We expect the ratio will be higher. Even by the peak time of Q4, we're expecting the number could be even 30% even plus. For the total year, our targeted China market, we're still taking a pretty, I'd say, a fair ratio compared with all the other regions we are having, so approximately once a quarter of our total shipment is expected to ship in China.

And my second question is regarding the financials. So looking at your results in Q1, actually, all the revenue and the gross profit quite in line with your previous guidance, but the net profit was dragged by the change in fair value of some derivative products. So, in the second quarter, actually, we're seeing the RMB is still weaker year-on-year. So should we expect more kind of losses or fair value change changing in a quarter? Thank you.

The change of fair value into two parts, one part is linked to the our international projects, the interest swap and that is a significant next impact in first quarter because of order low, even close to zero, the U.S. treasury rates. And I think it's a long time. And it's, the long-term, the U.S. treasury rates is rebounding to standard level. And for the currency, the currency forward currency to lock our sales orders and because the RMB, it is unexpected to be depreciated in first quarter, particularly given the recent tensions between the U.S. and China. And now, the RMB is stabilized and relatively appreciated. So, we don't expect significant impact in the second quarter. And for the financial instruments, I mentioned with two items and we don't expect significant impact in the second quarter.

[Operator Instructions] Our next question is from Brian Lee at Goldman Sachs. Please go ahead.

Maybe just a follow-up little bit on an earlier question just on the gross margins. You're getting down about 250 basis points at the midpoint for the second quarter versus the first quarter. Pricing really started falling in late March and April. So, we've heard from other companies that a lot of that volume could flow through more in 3Q opposed to real time in Q2. So, is it fair to assume gross margin is down again, sequentially in 3Q? And then, how should we think about the cadence from there?

The decline on gross margin, second quarter reflected the slowing -- the wage demand, particularly from the international market in the second quarter. And factories -- we discussed ASPs in downward trends and given the market situation, recent market situation for ASP is continuing downward. But, however from the cost perspective, we are improving at the same time. So given the third quarter, I think, the second half year, the gross margin continues to be under pressure that's where we are targeting to achieve relatively stable gross margin compared to the second quarter. And because particularly from the -- and we rapidly expand our capacity on mono wafer and we are expecting to improve our integrated production costs soon after the challenge period, and which will offset the net impact of the ASP in the downwards in the second half year.

Okay. That's helpful. And then, Charlie, just a question around the inventory, I know, past years, you successfully have a pretty big move up in inventory from 4Q to 1Q. It seemed a little bit bigger this year. And at the same time, accounts receivable was pretty flattish. So, this is just a shipment timing issue, I would have thought they kind of moved together. So, are you seeing some cancellations on our modules? Now, you haven’t kind of remarked those. Can you give us some sense of what's happening between the AR and inventory balances here at the start off here?

Because we have -- we target 18 to 20 gigawatts, right. It's quarter on average. We are planning 4 gigawatts to 5 gigawatts. So, the inventory levels will be in nature -- by nature, the inventory level will increase and slightly quarter by quarter. And the first quarter, the inventory level is relatively higher because last time we disclosed because the China, the supply challenge, and we have 400 megawatts, 500 megawatts shipped to the second quarter. And throughout the second quarter given the challenge of international demand, we proactively manage our operation and including control the inventory levels. And based on order cancellations or delays, as we swiftly shift our production, particularly to the customers or new customers and reading with less impact from the virus, so in general, I think the inventory levels will be a healthy level. And by given our target 18 gigawatts to 20 gigawatts, we are expecting the inventory level will increase a little bit in throughout the next two quarters.

Our next question is from Karl Liu at CIBC. Please go ahead.

I have two questions. The first, could you please give us some color on the order visibility in the three quarter and the first quarter? And so, how would we see if we can see it further like the project which delay or something canceled in the second quarter due to the coronavirus, will it move through the like second half or maybe first half in the next year, so how we look at these things? And the second question is that. We are seeing some strong demand in Mainland China. That's coming from the dual-glasses modules and maybe other way off of high efficiency. So could you give us some more color on our, maybe both the product mix, what we will have in maybe the second quarter? Or how was our mixed coming from the higher efficiency modules and how from the maybe the remaining the normal efficiency modules. Can we have a percentage done that? Thank you.

So, this is Gener. Thanks for the question. Firstly, about your question about the order visibilities, I think we have developed a very strong order book, over compare with -- I think, I'd say three quarters, older book has been fulfilled. So, we are very confident to achieve our target in 2020. I think that's part of the reason why we keep our guidance in 2020, as 18 gigawatts to 20 gigawatts, as without any change. For the possible market delay, we have seen some of the -- some regions or some countries has showed the tolerance to delay part of the project into, let's say, two quarters even three quarters, especially for some regions like or countries like, especially like India, which was expected to have a installation of over 10 gigawatt in 2020. But with the current lockdown prolonged, we believe the market size will be less than 10 even somewhere around a 5 to 6. For sure, those projects have not been canceled. Majority of those projects will get delayed into 2021. That’s why I think in our previous, let's say, especially our previous speaking, we also show our confidence about the strong demand in 2021. That's also part of our reason why we continue to expand our high efficiency capacity. So, your second question about the China demand, especially the double-glass demand, we see double-glass or dual-glass, the product has, certain I'd say, advantage, especially in some environments. But we do not -- personally I do not see such products have become a universal standard or industry standard product yet. When I look into our Q1 book, we see less than 5% of our total shipment is double-glass. And which is, let's say, very, very few number compared with total shipping with China demand picking up in the second half. We believe the ratio will be higher, but honestly speaking, I do not believe such product will become a standard production in short-term. But in long run with more technology challenges to be solved. And I believe such product has a promising future.

Yes, yes. I have two follow-up questions. The first is that you like, for example, the order from the India is delayed for like two or three quarters. So will that be renegotiating on our module's price? Or we will order this or ship this on previous setting price? That's my first follow-up question. And the second is that, maybe I should rephrase my question. So I would just make an example on the dual-glass modules in China have high demand. But actually, what I want to ask is that we kind of see a kind of structural demand increase in high-fusion modules. Maybe in China, it is double glasses; maybe in the overseas, it's like a other kind of products. So we also have like Swan, right? It's not double glasses, but it's more lighter. So in generally, how will we see in the low -- high-efficiency modules? Will we see much more higher demand growth than the normal efficiency modules? So how we see that and the percentage change in the first quarter and maybe second quarter? Yes.

Thank you for your follow up question about project sign, contract signs. So, I think from what I see -- over 95% of the contract signed has been honored. We both parties respect the contractual obligations and we continue with the execution of the contract even we have some academic impact on it. And for sure, very few contracts, that has to be renegotiated or even canceled because of this, we call the force majeure. But we still believe, it's is not, because customer want arbitrage on the market price chain, is really because of what is happening for their project and/or from their homeland. Your second follow-up question about double-glass, we believe that demand in China for the double-glass production is increasing, that's very obvious. Sorry to say, I don't have that presentation number on my hands. We can't give you some feedback after our call.

Thank you. That's all for today's conference call. Thank you all for your participation. You can disconnect.