Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co. Limited Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode, and after management’s prepared remarks, there will be a question-and-answer session. As a reminder, today’s conference call is being recorded. I would now like to turn the meeting over to your host for today, Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella.

Thank you, operator. Hi, everyone. Thank you for joining us today for JinkoSolar's fourth quarter 2021 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. Li Xiande, Chairman of the Board of Directors and Chief Executive Officer of JinkoSolar Holding Co. Limited; Mr. Gener Miao, Chief Marketing Officer of Jinko Solar Co., Limited; Mr. Pan Li, Chief Financial Officer of JinkoSolar Holding Co., LTd; and Mr. Charlie Cao, Chief Financial Officer of JinkoSolar Co., Ltd. Mr. Li will discuss JinkoSolar's business operations and the Company highlights, followed by Mr. Miao, who will talk about the sales and marketing, and then Mr. Pan Li, who will go through the financials. They'll also -- 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. It is now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holding. Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li.

We were very pleased to close a very challenging 2021 versus excellent results. We were able to swiftly respond to supply chain volatility and logistic challenges. Thanks to our competitive advantages in supply chain management and the comprehensive advantages of our global network. Revenues and insurance grew significantly in the fourth quarter as a result of the increasing proportion of the in-house large-sized production capacity and large-sized product sales. Our integrated costs declined further, and our profitability further improved. Sequentially, operating profit quadrupled and non-GAAP net profit increased by approximately 13x. In the first quarter of 2022, our principal operating subsidiary, Jiangxi Jinko completed its listing on the Shanghai Stock Exchange Science and Technology Innovation Board. The capital risk provided greater momentum for the development of our state-of-the-art technology and business. Our ability to successfully compete in the future rest on our comprehensive strength, we will continue to increase our competitiveness in technology, global marketing network and also the comprehensive measurement scales. Despite a challenging 2021, the demand from end users keep increasing compared with 2020, more flexible business models and a lower price sensitivity are helping the distributed generation business achieved rapid growth. China's installation capacity reached 55 gigawatts for the full year of 2021, with DG contributing more than half of new installations due to its higher economic returns. We hope this trend to remain the driving force for newly added installations in 2022. We are highly optimistic about the development prospects in distributed generation market, and we continue to grow our brand influence in this market. With the strategic needs for energy transformation and energy security in major world economies, we expect that PV industry to continue its strong growth momentum in the coming years. Advanced and high efficient on-time products will support the continued growth of…

Thank You, Ms. Li. Total shipments in the fourth quarter were 9.7 gigawatts, of which module shipments were 9 gigawatts, a significant increase compared with the third quarter of 2021 and the same period of 2020. ASP outside the North America improved sequentially, thanks to the sales of high-efficiency products in high-end market. In terms of regions, module shipments in Asia Pacific and emerging markets increased sequentially and year-over-year. China outpaced all other countries by contributing the largest portion in the fourth quarter from less than 10% in the first half of the year to nearly 34%. As distributed generation gradually becomes the main driving force for newly added installations in China, the sector is expected to increasingly contribute to incremental market volume, encouraged by incentives from the one and policy framework that guides the country's climate action and action plan on peak emission and other policies. We are optimistic about China demand will exceed 100 gigawatt in 2022, and we expect the shipments in China market to further increase in the 2022. In Europe, one of the most developed PV market, clients have accumulated matured awareness for PV and have a higher acceptance of new products such as Tiger Neo Modules. By end of 2021, we had shipped our products to more than 30 countries across Europe. Europe become one of our top contributors for in 2021. With increasing electricity prices making solar energy more economical and strategic necessarity of energy transformation and energy security, Europe is expected to maintain strong growth momentum. We are confident in maintaining our competitiveness in European market by leveraging our local network and the next-generation N-type ultra-efficiency module Tiger Neo. We launched the next generation N-type Tiger Neo Module in the fourth quarter of 2021 and increased the global promotion and the sales,…

Thank you, Gener. Our fourth quarter results expectations. Total revenues grew significantly quarter-over-quarter. We continued relentlessly to take effective management of integrated production costs and operating expenses. Sequentially, gross profit doubled, operating profit more than quadrupled and non-GAAP net profit increased by 13x. Operating efficiency improved as a result of our efforts to closely align inventory management with market supply and demand dynamics. Let me go into more details now. Total revenue was $2.57 billion, an increase of 91% sequentially and 74% year-over-year. Gross margin was 16.1 percentage compared with 51 percentage in the third quarter this year and 16 percentage in the fourth quarter last year. Excluding anti-dumping and countervailing due to its reversal benefit, gross margin was 14.3 percentage. Total operating expenses nearly doubled year-over-year due to a substantial increase in motor shipments during the fourth quarter, which increased shipping costs. On one hand, we increased shipments to China to reduce the impact of shipping costs on profitability. And on the other hand, we leveraged our long-term agreement with major shipping companies to obtain more competitive prices compared with the rest of market. In general, the impact from changes in shipping costs on profitability was relatively under control. Total operating expenses accounted for 13 percentage of total revenues in the fourth quarter this year, flat sequentially and slightly improved compared with 15 percentage in the fourth quarter last year. Operating margin was represented in the fourth quarter of 2021 compared with 1.3 percentage in the third quarter and 0.8% in the fourth quarter last year. EBITDA was $183 million doubled compared with $89 million in the third quarter of 2021. Non-GAAP net income was $34 million, an increase of 13x sequentially, resulting in diluted earnings per of $0.67. Now, I'll brief you on our 2021 full year financial…

[Operator Instructions] Our first question comes from Brian Lee with Goldman Sachs. Please go ahead.

I guess maybe just to start off on the guidance. I appreciate you giving the views for shipments here in Q1 and for the full year. I think customarily, you've given gross margin guidance, not for the year per se, but at least for the out quarter. Any reason, I might have missed this, but did you provide the gross margin guidance and revenue guidance for Q1? And if not, kind of what's the rationale? And I guess, what are the puts and takes around the outlook for those metrics in Q1?

Brian, this is Charlie speaking, and you're right. In terms of guidance, we make some small changes compared to the couple of the quarters before, and we plan to only give the guidance for shipments. And in terms of gross margin revenue in range and firstly, we want to be consistent with because our subsidiaries in China has been invested in Chinese capital markets. So we want to make a consistency with the regulations in China, which the entities did not provide any gross margin guidance as well as the revenue range. Second one is in terms of gross margin because the supply chain is so volatile, and we don't believe it's -- at this stage, to give the level the gross margin range is still in challenge.

Okay. That's fair enough. Maybe at a big picture level, gross margins came in sort of right above the high end of the range for 4Q so kudos to you for good execution on that. Are you saying that the supply chain/margin environment is more uncertain in Q1 2022 than what you saw in Q4 '21?

The part is still -- the polysilicon part is still well above our expectations. So in terms of gross margin, we expect some pressures from that perspective. But from the long-term perspective, we think probably the price will return to a more rational level, particularly with more supply production volume from poly producers in the second half year.

And then for Q4, there was a good amount of non-module shipments. What was your kind of gross margin delta roughly between modules and non-modules? Were they same range or higher on the non-modules? And if higher, what sort of percentage or basis points difference?

You mean the Q4 last year or Q1 of this year? Sorry.

Asking about Q4 and then I guess the follow-up to that would be what's embedded in your shipment guidance for '22 and Q1 in terms of wafer and non-module versus module?

Okay. So for the 2022, the guidance for Q1 as well as the full year, the majority partly is a module. So you can take the guidance as the module shipments. And regarding the Q4 last year, we did have some 600 megawatts for the wafer and cell shipments. It's for the low efficiency wafer sales. So, the margin is roughly very low. And I think if you -- excluding the wafer and the sales margins, the module margins will be a little bit better than the total amount.

Last two housekeeping ones and I'll get back in the queue. The CapEx guidance for 2022, I might have missed that, but do you have a CapEx range or a number for this year? And then, I noticed the tax expense was much higher than usual in Q4. Maybe what was the driver of that? And should we be modeling a similar tax rate in 2022? It seems like it was high 20%, sort of close to 30% in Q4?

Yes. When it comes from...

Yes. Please go ahead.

Yes. For CapEx for last year 2021, it's approximately $1.3 billion, and we expect some new capacity in this year. So it might be in around $1.8 billion to $1.9 billion.

And just lastly, on the tax rate?

Yes. The tax rate, it's in the range of 15% to 20%.

Our next question comes from Philip Shen with ROTH Capital. Please go ahead.

Just wanted to revisit the margin question for Q1. There are just three days left in the quarter. So you guys probably have a sense for where margins are? What do you think could still drive or change be a material kind of impact versus your view, given how late in the quarter we are? And what do you think -- can you give us a sense for how do you expect margins in Q1 to be flat versus Q4 or potentially weaker as a result of the higher poly price?

In terms of margin first quarter, I think it's roughly be flat quarter-over-quarter and maybe slightly lower because of the polysilicon plants and as well as the R&D, it's the appreciation numbers, particularly in January and February.

Okay. And shifting back to some comments, I think Gener made about Europe and the demand there. I was wondering if you could provide a little bit more color on how demand has changed over the past four weeks to the European market? You also serve the European market from your Southeast Asia facilities any kind of color there would be really helpful.

Thank you, Philip. This is Gener. For the global demand of '22, we are pretty optimistic about the global demand, especially what happened in the last, say, three, four weeks time in Europe. We have observed quite a -- let's say, we observe a stronger-than-expected demand coming from Europe plus rush in India and also the recent strong push from China side. So adding everything together, we are looking at the global demand at the range of around 240 to 250 gigawatt range. And for regarding Europe, we believe European market will beat 30 gigawatts pretty soon as a whole. And currently, we still supply European market from China manufacturing base. Our non-China base is mainly the region for U.S. market right now. I hope that answered your question.

Yes, Gener, that's great. As it relates to the capacity expansion, I think last quarter, you guys were expecting wafer cell module to be 40 gigawatts, 40 gigawatts and 50 gigawatts, respectively, and now you're expecting it to be 50, 40 and 60. And so I wanted to see if you could help us understand what drove that meaning -- what's driving that meaningful increase in capacity? It seems like it could be related to the stronger demand, but I was wondering if you might be able to share more there. And then, can you talk about if you expect 2022 to be, call it, 35 gigawatts to 40 gigawatts, how much of that is booked already for the year? You often have bookings well in advance. And so, do you think that's 50% booked or possibly even more?

Phil, I think let me briefly talk about this topic. And for the capacity expansion, yes, we have seen a stronger than expected demand. But mainly, we are holding the conference about the long-term momentum of the stronger global demand. And that is very important. The reason why we -- one of the important reasons why we expand our capacities. Meanwhile, we noticed that lots of capacity we will release in the second half, even year-end. That might help our -- to meet the demand not only in '22 but also in '23 and '24 even. And also for the booking side, I think we are looking at our bookings. We are more or less around half bookings based on our plan, and we are trying to build more. And very important note here is that we are seeing -- we are witnessing a stronger-than-expected demand for the anti product. So, that's, I think, the key highlights we try to expand our capacity. The focus will only be the expansion on the anti-product.

Great. One last question for me. As it relates to the shipments from Vietnam and Southeast Asia into the U.S., have you guys been able to get new volume of shipments into the U.S.? I think you guys have non-China poly going into modules. And if so, when do you expect those shipments to arrive at U.S. shores without being impacted by the Guangxin?

For that, I think we have seen some positive feedback in the last couple of weeks, and we have seen some smaller volume net samples are being accepted and passed through the CGP inspection. And we are expecting to build a trust oversea tracking system to make sure that all the shipments going to U.S. market will be fully compliant with the CGP and the requirements. So, with that we re-launch or we started our non-China production, I think, in the one last month or two. And back to your question, we haven't got any massive, let's say, 100-megawatt level of shipment arrival in U.S. border yet, but we're still holding the positive views about the future shipments to U.S. market. For sure, there are still some concerns on this recent feelings about this anti-coalition stuff, but we will keep a close eye on it. But in general, I think we have one of the best solutions in the industry with our vertical integrated non-China production basis.

Our next question comes from Alan Lau with Jefferies. Please go ahead.

Thanks a lot for the management for holding the meeting and congratulations on the good results. So my first question is about the new TOPCon product. So on a per what basis, what do you expect the premium of TOPCon products versus PERC products?

Thank you for your question. This is Gener speaking. And regarding the premium, it's hard to justify a general numbers, but we are building the business model based on profit sharing business model with our customers. In some cases, we might share -- we might have got a bigger premium. In some cases, we might get a smaller premium based on different markets, different radiation conditions, different system designing or et cetera. So it's very slow. But in general, we are seeing the anti-premium in the current stage, we are seeing anti-premiums stay around $2 to $3, but we expect that may become up and down a little. So -- but we still are pretty optimistic about this stronger-than-expected demand about the untapped product.

So, it's around $0.02 to $0.03. And I wonder in terms of the margin, would this be better compared to PERC products?

Yes. This is Charlie speaking, is for sure. And the new product in time, we can get the PERC premium as well as were on the progress to ramp up our capacities to make the cost -- integrated production cost is competitive with traditional PERC product.

Next question relates to the European markets because they were ambitious installation targets with the repower EU initiative, et cetera. But at the same time, actually, euros are depreciating. So meaning that probably more module prices is increasing to them. So, I wonder if the Company sees still strong demand from the European market in second quarter versus the first quarter. Do you see quarter-over-quarter growth with probably higher module prices?

Okay. This is Gener. I'll take this one. The European demand is stronger than expected, especially in the recent three, four weeks' time. We can feel the stronger-than-expected demand mainly coming from the -- not only from the distributed generation market segment, but also coming from the utility side as well. But we have seen quite several, let's say, headwinds around the stronger demand from Europe. One of the challenges just mentioned by you is currency exchange rate, but the other challenges are like the logistics cost. The shipping costs continue driving up, which is a big impact factors and as well as just the cost of raw material, like polysilicon, like aluminum, et cetera. So -- but having said that, because the local electricity cost is higher, so we can expect that even with a slightly higher-than-expected module or solar system cost, the solar system or solar electricity from solar system is one of the most competitive electricity contributors across the whole Europe. I think we are still -- that's the reason why we are holding a very big confidence on the European demand not only for the next coming quarters, but also for the next coming even three or even five years' time. Did that answer your question?

Yes, that's very comprehensive.

[Operator Instructions] Our next question comes from Rajiv Chaudhri with Sunsara Capital. Please go ahead.

First of all, I want to congratulate you on an amazing fourth quarter as well as on a very successful IPO. Those are big game changers for JinkoSolar going forward. The question I wanted to ask you, I have several questions. The first question is about operating expenses. You had noted that the big change from quarter-to-quarter in the operating expenses, which was almost $100 million was because of shipping expenses. And yet when I look at the line items, the G&A went up from $60 million in Q3 to $122 million in Q4. So, is there any shipping expense included in the G&A? Or what is the -- can you just explain why G&A went up so much and what the components are of that and how sustainable that is on a go-forward basis because G&A has been trending at $50 million to $60 million for several quarters now and all of a sudden, it has jumped up 100% in one quarter? So that's my first question.

This is Charlie speaking. And regarding the G&A expenses, it's because the increase in the fourth quarter is particularly some T&E expenses, it's relating to the employee year-end bonus as well as we have incurred additional expenses relating to the major company listings. So it's -- some of the parts are not recurring. And looking -- I think is important looking to 2022, and we plan a significant increase of revenue shipments 35 gigawatts to 40 gigawatts, which is 25 gigawatts. In terms of operating expenses, including everything, we think, it's -- we are going to benefit from the leverage of the large scale and operating expenses versus the total revenue will continue to drop quarter-by-quarter.

So absent the employee bonuses, would you say that at least in the first few quarters of the year, G&A will drop back to the $60 million range and then the employee bonus will kick in at the end of the year, I assume?

No, it's -- I think the major parties in course the part, the majority part is the IPO expenses as well as the legal expenses. We are doing a lot of legal related work, particularly, for example, the in the U.S. and the litigation with the patent. And for the year-end bonus, we did accrue quarter-by-quarter. And because we have better performance, particularly in the fourth quarter and so the employee, the bonus is relatively higher in the fourth quarter because it's passed down better than expected year-end performance.

Okay. Charlie, my next question is about shipping costs. Are you, at this point, it has become very clear that shipping costs will stay higher for longer than was originally thought maybe a year ago. Are you having any success in passing the shipping costs and the risk of changes in shipping costs to the final consumer or you are still having to follow that cost and its volatility by yourselves?

Sure. Shipping costs -- first, the shipping costs will continue to maintain a high level throughout 2020 -- 2022. But given the solar energy is very competitive, a lot of markets are highly demanding for the solar modules. So, we are seeing flexibilities from the, let's say, the customer acceptance for the higher module price, including the shipping cost. So, we -- based on our experience with customers, we are -- I think we are able to pass through the majority part of the shipping costs cards to our customers.

So Charlie, as you're looking out at Q1 is almost over. Q2 and beyond, it's clear that at least for now, polysilicon costs have also been higher and may stay higher for longer, especially in the second quarter. Does that mean that module prices will continue to go up? Would you say that module prices in Q1 were higher than Q4 and Q2, they will be higher than Q1?

Last year in Q4, the module price, market price is reaching to extremely high, almost over RMB2, some cases. But it's lower a little bit in the first quarter. But given the high polysilicon price, particularly in the first half year, we are expecting strong demand and relatively shortage on polysilicon. We are expecting the module price were relatively stable and may have upwards pressure. But in the second half year, given more, I think the polysilicon supply, we are relatively optimistic for the downward trend for the polysilicon.

But are you giving yourself some pricing flexibility in the way you're writing your long-term contracts? So in case silicon prices stay higher for longer, you are not squeezed by that?

I see we have different arrangements for some of our customers. Some of the customers, the module prices they have something kind of linkage for the spot market polysilicons. Some of the contracts are fixed.

But the ones that are variable are those going up as a percent of total contracts?

Speak again.

The number of contracts where module pricing is variable based on the spot price of polysilicon, is that kind of contract gaining in popularity right now?

Just depending on different ratings, different customers. So it's hard to see, but some customers like to -- based on their estimations, they are more pessimistic or optimistic for the polysilicon price. So some of our customers, they are more confident on the projections of polysilicon price, they may like to have the variable arrangements with us.

Okay. And a final question is on the N-type. You mentioned that you have about 16 gigawatts of N-type operational right now. But you also mentioned that the target for capacity for N-type cells at the end of 2022 is also 16 gigawatts. So, I don't understand. You're not increasing the N-type cell capacity at all this year?

The N-type 16 gigawatts. 16 gigawatts is getting online in the first quarter, but it's in the ramping of states. So by the end of this year, we didn't have a plan so far to increase our game. So that is -- the N-type 16 gigawatts is new for '22, but it's really in first quarter. So that is why when we gave the guidance by the end of the year, the N-type capacity is 16.9 gigawatts.

So, you're saying right now, it is not 4 gigawatts a quarter?

Sorry, let me expand. We get 16 gigawatts N-type TOPCon capacity online in the first quarter. The 16 gigawatts is annual capacity and it's ramping up stage, and we expect the capacity will reach to full capacity by, I think, by the end of second quarter. So far, we have already got 16 gigawatt capacity for the N-type.

But the goal for end of the year is also 16 gigawatts N-type? Out of the 40 gigawatt cell capacity, the target is only 16 gigawatts N-type or did I read that wrong?

You're right. You're right. Because last year, we had only, I think, 24 gigawatts cell capacity, the additional new 16 gigawatts this year to get total number 40 gigawatts.

Our next question comes from Tony Fei with Bank of China. Please go ahead.

This is Tony Fei from BOCI. I have two questions. First one is also a follow-up on the N-type products. So I understand the new clients are still ramping up, and you may not have the final color on the cost side. But maybe can you speak of the kind of by design. These are new N-type products to there are they think compared to per product so they consume that poly?

So Tony, can you repeat your question? Regarding the N-type poly, you mean the...

The wafer and sale their thickness, they think that compared to their modules, so they consume kind of less polysilicon. So, it will help on your production cost side?

Yes, you're right. And we have the advantage for the N-type, not only the TOPCon production as well as we are doing the N-type wafer N-type modules for the on-time wafer, it's have advantage of the wafer, right, compared to the P-type. And we think it's going to -- from the -- I think that perspective N-type wafer could get some advantage from the consumption -- less consumption of the polysilicon.

Got it. So you just said that you are not going to add new N-type capacity this year. So in the coming quarters, we see the premium of the N-type product is certainly not. So do you think you'll continue to invest in the future and early retire your existing P-type cell capacities?

For the next stage, the capacity expansion plan, we are still evaluating. If we will -- let's say, if we plan to invest additional more, let's say, solar cell capacities, it's 100%. It's a top N-type sale capacity. But at this stage, we are still in the evaluation stage.

So my last question is around your product mix. So last year I guess your DG shipment should be around 30% to 35% of the total market shipment. So in this year, do you think the share of DG products should be higher than last year? And how does it have the margins because some of the new DG sales should be coming from China market. So we do see higher maybe still shrinking sales expenses on the price?

I think in the prepared remarks by Gener, and we mentioned the DG roughly will increase around 40% versus 30% to 35%, and it will -- we will focus not only in the overseas markets as well as China digi markets.

Okay. So do you think the DG -- kind of in the margin side, do you think the DG project is higher than the regular utility scale projects?

Yes. It's helpful. DG the customer sensitivities for the price is more is better. So we expect to get more higher margin and from the DG perspective.

Thank you. This is the end of today's call. Thank you all for participating. You may now disconnect your lines.