Hello ladies and gentlemen and thank you for standing by for JinkoSolar Holdings Co. Limited Fourth Quarter 2023 Earnings Conference Call. At this time all participants are in listen-only mode. 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's call, to Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella.

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's fourth quarter 2023 earnings conference call. The company's results were released early 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 and CEO of JinkoSolar Holding Company Limited; Mr. Gener Miao, CMO of JinkoSolar Company Limited; Mr. Pan Li, CFO of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, CFO of JinkoSolar Company Limited. Mr. Li will discuss JinkoSolar's business operations and 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. We 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 US 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 findings 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. 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.

[Foreign Language] We are pleased to have achieved very impressive operational and financial results in a challenging year by leveraging our advantages in N-type TOPCon technology, globalized operations, and integrated capability. Thanks to strong execution by our team, our module shipment for the full year increased 76.4% year-over-year to 78.5 gigawatts, back to the top position in the industry. Benefiting from our efforts in cost optimization, our profit ability for the full year improved significantly year-over-year, with growth margin at 16% compared to 14.8% in 2022. Net income was $485.8 million, up 4.56 times year-over-year. Adjusted net income was $573.8 million, up 1.93 times year-over-year. Module shipments in the fourth quarter was 26.3 gigawatts, exceeding our guidance. As module prices fell more than expected in the fourth quarter and nearly 50% of our modules were sold through the Chinese market at lower prices. Gross margin for the fourth quarter was 12.5%, a significant decline from 19.3% in the third quarter. [Foreign Language] In China, newly added PV installations reached 216.88 gigawatts in 2023, up 148.1% year-over-year to a historical high. At the same time, excess supply in various links of the industrial chain led to price decline. Tender prices for modules at the year-end decreased over 40% to below RMB1 per watt. Compared to the beginning of the year, export volumes of PV products in 2023 increased significantly year-over-year, whereas export volume fell slightly as a result of a decreasing prices. In January and February 2024, seasonality combined with extreme competition from certain manufacturers intensified the market panic and irrational prices. We remain cautious and irrational in the face of abnormally low tenders. In addition, while some manufacturers without competitive cost or advanced products reduce or suspend production, we maintained our leading utilization rates in the industry as a result…

Thank you, Mr. Li. We are pleased to have achieved a historical high in quarterly and annual module shipments, thanks to our excellent global marketing network and the power of our products. Total shipments were 27.9 gigawatts in the fourth quarter, with module shipments accounting for approximately 95%. Annual module shipment increased 76.4% year-over-year to 78.5 gigawatts. And both module shipments in the fourth quarter and the full year 2024 ranked the world number one. We continued to improve product quality and build our customer service network to expand the influence of our brand. By the end of fourth quarter, our accumulated global module shipment exceeded 210 gigawatts, covering more than 190 countries and regions. In terms of a geographic mix, China and the Asia-Pacific became our major shipment regions in the fourth quarter, accounting for approximately 70%. For the full year 2023, shipment to Asia Pacific and North America grew significantly more than doubling year-over-year. As we continue to expand our footprint in overseas markets and the use of integrated capacity, we move on to invest in North America and emerging markets. Based on our business conditions and market trends, China and Europe will continue to be the major contributor to the shipment in 2024, with North America, emerging markets and Asia Pacific expected to flourish. On the product front, the competitive high-efficiency Tiger NEO accounted for 70% of the shipment in fourth quarter, with average premium of RMB0.10 per watt versus P-type modules. And the Tiger NEO accounted for approximately 60% of annual global shipment, achieving the goal we set at the beginning of the year and accelerated its market penetration globally. Currently, the power output of Tiger NEO modules is more than 30 watt peak higher than that of the similar P-type module, providing our customers with…

Thanks to the solid execution, our operations and management strategies, as well as successful efforts in cost optimization, we delivered excellent financial performance. For the full year, key metrics such as total revenues, gross margins, income from operations, and net income, all significantly increased year-over-year. We also improved working capital efficiency and optimized operating cash flow. By the end of the fourth quarter, we had cash and cash equivalents of $2.75 billion. And our net debt decreased by over 20% year-over-year. In December, we announced the extension of our existing share repurchase program. And by the end of February this year, we had repurchased nearly 1 million ADS in aggregate amount of approximately $28 million. With our advantages in N-type TOPCon technology, globalized operations, and integrated capacity, we are very confident in our growth prospect and will continue to improve working capital efficiency and achieve sustainable growth in operating cash flow. Let me go into more details now. Total revenue was $4.6 billion, an increase of 3% sequentially and more than 9% year-over-year. Gross margin was 12.5% compared with 19% in the third quarter and 14% in the fourth quarter of ‘22. The decreases were many due to the decrease in average selling prices of solar modules. Total operating expenses were $526 million. The increases were mainly attributed to loss of disposal on PPE and expense in relation to settlement of a dispute with customer. Operating margin was 1.1% as compared with 2% last year. Excluding the impact from a change in fair value of the notes and long-term investments and share-based compensation expenses, adjusted net income attribute to JinkoSolar Holding Company ordinary shareholders were $65 million compared with $45 million in the fourth quarter last year, up 73% year-over-year. Now I'll brief you on our ‘23 full-year financial results.…

[Operator Instructions] Your first question comes from Philip Shen with ROTH MKM. Please go ahead.

Hi everyone, thank you for taking my questions. First one is on pricing. Was wondering if you could share with us the Q4 ASP. Sorry if I missed it. And then what do you expect that ASP to be in Q1 and Q2 and as we get through the year? Thanks.

Hey, Gener, would you like to answer the question?

So I'm traveling, so I didn't get all of your questions, but I heard it's about pricing, right? So the pricing -- actually the pricing significant drop happens across December to January. So that means if we compare the ASP between Q4 and Q1, definitely there will be a big gap in the course of the market price changes. So detail number wise, I don't have that with me for -- sorry about that.

Okay, yeah, hey Gener, thanks for that. So can you share what the ASP was in Q4 for modules? And then can you quantify how much lower Q1 might be? Thanks.

Charlie, can you take that? I don't have the number with me now.

Yeah. Philip, I think the most important thing is we believe it's kind of the panic sales, the module. Let's say two quarters, and we don't believe the price, particularly in China, is sustainable. And we are expecting, as well as the market, expecting the module price has been stabilized and maybe up a little bit. And back to the pricing, depending on different markets, the US is pretty significantly priced premium and Europe is a little bit better than China and different segments, DG versus utility has different price difference. But to answer your question, I think you want to explore is, for sure, if Q1, Q2 versus Q4 last year, we think the ASP is still in the downward trend, but it's not dramatically, but slightly, and we think it's reaching to the bottom in the first half of the year, 2024, for the ASP.

Okay, so do you have the average selling price for all the regions for Q4, right? Can you share that price for Q4?

No, we don't disclose, but you can calculate the [indiscernible] if you take the total revenue with this module shipment. And typically we have 95% of the revenues coming from module business.

Okay, thank you. So it sounds like the bottom could be Q1 or Q2. And -- or do you think the bottom is more Q2 or more Q1, in terms of module pricing?

I think different companies have different mix, but I think it's relatively stable Q2 versus Q1. Maybe a little bit lower, but it's not significant. And yes, that's what we are looking at. And the most important thing is we think China’s demand is exceeding the expectations. China demand is very, very good and Europe, the destock has been completed and they are picking up the stock. So we think there's a kind of the improved outlook from the demand side. Still some oversupply situations. For Jinko, we have more, 90% is N-type and global sales and manufacturing capabilities. And we think we are relatively better than the other peers. But it takes time for the low inflation, say, capacity, Tier 2, Tier 3 companies face out, but it takes time. But we think the most important thing is to focus on our added revenues throughout the relatively challenging year.

Okay, thanks, Charles. Shifting over to margins, so you've given us a little bit of a framework for how to think about pricing trends through the year. How do you expect, like, what do you expect your margins to be for Q1? I know you haven't given official guidance, but just relative to Q4, maybe you can say a little bit up or down or something, and then as it relates to Q2, like, when do you see a bit of a recovery of the margins? Thanks.

We estimate the Q1, Q2 first half of the year, it's a little bit lower, slightly lower, which is Q4 last year. It's not dramatic lower for the Q4, which is Q3 last year. It's slightly lower throughout the Q1, Q2. But we believe there's opportunities and for a certain half year, maybe preferably they will -- to expand.

Got it, that's very helpful. And then finally, I think in your slides, you talked about 2 gigawatts of integrated US capacity. Again, sorry if I missed this, but does that mean you might do wafer cell and module in the US? Can you share if so, like, what the locations are? And then, so I'll leave it there and I have one follow up on that topic next.

Yeah, the US capacity, we started the construction last year, and it's getting ready. I think we work quickly in March or April to start the operation. It's a 100% module, 2 gigawatts, no way for sale. And by the way, we have integrated capacity in South East, Vietnam, Malaysia, the capacity roughly 12 to 14 gigawatts. And in the combinations with the 2 gigawatts, the module capacity in the US, I think we are in a good position. And on top of that, we have separate, independent supply chain from the poly, everything to the module. And we have very good traceability systems and proof record rather than the last year. So we think this year is a -- we can -- we have more market opportunities and to catch up for the next two or three years for the US market.

Got it. Okay. So it's only 2 gigawatts of module. Well, it is 2 gigawatts of module. The way it was written on the slide, Slide 6, it sounded like 2 gigawatts of integrated capacity could be in the US. But my follow-up here, and then I'll wind it down, is, what is, and this might be a bit of a tough question, but what is your view of the discussion around the foreign entity of concern language, which a lot of people are talking about could be added to the 45X manufacturing PTC, which might make it more difficult for you guys to add or to receive the PTC. You're ramping up your facility basically now, if not maybe in a month in April. To what degree does that concern you? Are you following that topic at all? Thank you.

I'm not, first of all, I'm not familiar with the topics you are talking about. The [indiscernible] regulations updates, but we will follow up after the call. But I think, I'm not sure you're talking about, like the semiconductor, the sensitive technology, but we think solar is more pervasive and very common for each country to develop and it's not data sensitive. But anyway, we will follow up on the topic you are talking about, but not for many reasons, the progress.

Okay. Thank you, Charlie. I know I asked a lot of questions. Appreciate it. We'll pass it on.

Thanks.

Thank you. Your next question comes from Alan Lau with Jefferies. Please go ahead.

Thank you for taking my question. So I would like to know, because there is a very detailed capacity expansion plan, and I just would like to ask a bit on the details. So by the end of 2024, it would be 120, and then 110, and 130 gigawatts for wafer cell modules. So my question is mainly on the cell. Because the company has 70 gigawatts of TOPCon by the end of 2023 and supposedly the remaining 20 gigawatts is PERC, so -- and then by the end of this year it's 110. So, will it be 100 gigawatts of TOPCon plus 10 gigawatts of PERC? If that is the case, then do you mean you would impair the 10 gigawatts of PERC this year?

The answer is we will phase out the 20 gigawatts of PERC capacity throughout the year. That's the plan. And we have one -- everything we have discussed by the end of the year, the capacity is 100% N-type. It's not -- no P-type capacity. The sale capacity is 110 and the major part is the 28 gigawatts, the Shanxi, [super factories] (ph) plus what we are talking about the Vietnam 4 gigawatts. As well as we have some improvement of production, the volume, existing capacity. So total is 110 for the entire TOP capacity. We did have 28 gigawatts PERC capacity and we don't have time to upgrade and we think it's not economic, it makes sense. And the most important thing is we have depreciated the capacity over five years. So we don't believe we have significant burden for the 20 gigawatts, the PERC. And we focus on the new technology and new PERC. That is, I think that is the smart decision.

Actually -- so just to confirm, basically for the 20 gigawatt of PERC, they are fully depreciated. So basically they were built in 2019 and then by now they are fully depreciated. So you do not see major impairment risk this year, right?

Yes, roughly, yes. And we did have some kind of residual value but it's not significant. Most of the assets have been depreciated.

Yes, I think that's impressive because a lot of peers in this industry might have a lot of impairment this year. So my next question is what is the new signed ASP for the contract that you are signing in the US market because I have been hearing different feedback saying that prices for utility projects in the US are declining from $0.30 to below $0.30 since 4Q. So I'd like to learn your view on this front.

Yeah, there's a [indiscernible] index and for the US, the price range is a little bit, I think a little bit big, high 20, low 30, that kind of the range. And it looks like it's in the downward trend, but relatively stable. And the different customers, different preference. And we think we are in good position because we have traceability and we have separate poly and wafer through the modules. And we think we can still relatively know the price premium with our peers.

Thanks. So you have mentioned overseas polysilicon. So we would like to have an update on the overseas polysilicon price. Is it rebounding or is it still trending down?

I think in recent three months, it's relatively stable because the polysilicon out of China is around 100,000 metric tons. It's known new capacity are expected in the next 1.5 year. The other thing is maybe some China party -- but I think there is a relatively risk, and there's a very complicated compliance. So we don't see significant downward and relatively stable.

I see. So switching gear to the European market, because you have mentioned destocking has basically completed. So we would like to follow up on this. Are you receiving orders in a normalized manner? Like, how about -- is it from the residential market or it's maybe from the utilities market in Europe?

I think both. In the recent quarter, I think the majority is the DG and the market. But we see both, utility and the DG will grow year-over-year.

So you don't see inventory as an issue even in the DG market anymore because last year it was a huge issue.

Yeah, yeah. And last year, the first half year, [indiscernible] for the DG distributors and de-stock. So I think five or six months. And it looks like, on top of that, even not only in the European market as well as other markets, the customers, they are waiting to the bottom of the module price. It looks like stabilized. I think the price is not sustainable. A lot of customers accelerate the purchase decisions, as well as the de-stock. The stock level is going back to the normalized level in Europe. And the past logistic issue, Red Sea issue, so we see the rebound from the European market and the second quarter, pretty sure, is strong quarter for the European market.

Sure. And in your PowerPoint, I think it's the first time that you have officially put ESS into the whole price release. So we'd like to know, do you have any quantitative shipment target on ESS? Because I know you have capacity for more than 10 gigawatt hour. So we'd like to know on that one.

For storage -- storage and we build up the capabilities, the teams, products, capacities, and the majority from last year. And the key focus is we develop our R&D capabilities and products and focus on some key markets. And so far it's in a relatively early stage, but we are confident we will discuss maybe the full year, the guidance, and later this year, maybe the second quarter, third quarter. But this year we think it's a good opportunity to catch up the markets and build a strong foundation for the next few years. So that's the key focus, not the focus for the shipment of this year.

Thanks. Thanks a lot for the comprehensive information. So I'll pass on. Thank you.

Thank you.

[Operator Instructions] Your next question comes from William Grippin with UBS. Please go ahead.

Excellent. Thank you very much. My first question was just on your 300 plus patent portfolio. I was wondering if you could provide a little more color on where those patents are granted. Are any of them international? And, one of your peers is out there asserting their IP rights related to some TOPCon technologies. Just maybe, how are you thinking about that? How do you view that relative to your patent portfolio? Thank you.

The patents and that, we put a lot of R&D efforts in the recent couple of years and we developed and discovered over 300 TOPCon patents which we developed ourselves. On top of that, we have additional more TOPCon patents by acquisition from others. And the patent is our key differentiator and the key strategy is -- and we licensed to one of the top 10 module company and one of the top five solar cell companies. And it's illustrating how we're strong and capable our R&D teams and the cutting edge technology.

Okay, yeah, appreciate that. And then just on the 26% mass production N-type cell efficiency that you referenced in the press release, how do you expect that to translate into mass production module efficiency and when do you think that would ultimately be realized in mass production? Thank you.

26% sale capacity, we have reached to that level, the mass production and our target is end of this year, 26.5%.

All right, appreciate the time, Thank you.

Sorry, sorry. I think that for the standard, the 182, I think, we are targeting roughly 610 to maybe 620 watts for standard 182 modules.

[Operator Instructions] Your next question comes from [Rajiv Chaudhary] (ph) with Intrinsic Edge. Please go ahead.

Yes, good morning. I have a few questions. First of all, just in terms of housekeeping, can you tell us what the depreciation number was in the fourth quarter and what you expect it to be in 2024?

So sorry, could you repeat again?

Yes. The question was about depreciation in the fourth quarter and what the expectation is for 2024?

Oh, depreciations. It's roughly, I think, [RMB16 billion to RMB17 billion] (ph) for 2024. So each quarter roughly RMB1.5 billion to, I think, RMB1.8 billion.

Sorry, can you repeat that? RMB1.5 billion to RMB1.8 billion?

RMB. Yes, depreciations.

And that's in 2024. What about the fourth quarter?

Last year, right?

Yes, ‘23. Yes, sorry.

Yeah, similar amount. It's not significant difference.

So around RMB1.5 billion in the fourth quarter?

Yeah, roughly.

Okay. And then what was the total CapEx, capital spending in 2023, and what is the expectation for 2024?

For CapEx, yeah. Let me go into some details. For the 2023, our total CapEx is around RMB18 billion. And we expect a range in 2024 is from RMB11 billion to RMB15 billion, depends on the market.

I see. Okay. And out of this RMB11 billion to RMB15 billion, is it almost 100% related to the module business or is there anything related to the storage business as well?

It's related to our integrated solar manufacturing.

Okay. The next question is about the charges that you had in the operating expenses. You mentioned that the write-down of assets as well as the settlement with the customer. If they had not happened, then the total operating expense would have been the same as the third quarter. So by my calculation, that is about RMB60 billion or about $85 million. Is that -- sorry, RMB0.6 billion or about $85 million. Is that the correct number?

You're right. We did have some kind of special one-time items in the fourth quarter last year. One is some kind of customer dispute. It's around $30 million, which is we have some impairment for the equipment around $10 million. So we did have $40 million, I think one-off items you can excuse. Non-recurring items.

Okay. And comparing your cost structure to the Tier 2 manufacturers, can you give us an idea -- my calculation is that your cost structure in the fourth quarter was about 10 percentage points better than the Tier 2 and Tier 3 manufacturers. So for example, if you did 12.5% gross margin, the Tier 2 and Tier 3 were operating at 2% to 3% gross margins. Can you comment on that?

We are confident that our cost structure is leading and we have advantage. By the way, we don't comment on detail numbers and different company has different situations. But you're right, if we are, let's say, making low profit levels, I think a lot of companies doing a similar business will lose the money. That is we're very confident. And again, I think it takes time to face out the Tier 2, Tier 3 companies. And after the consolidation and the face off, then we think we can get more market share and make decent probabilities. But it takes time.

Do you think at this point your cost structure is better than other Tier 1 manufacturers?

I don't do 100% guarantee but we are confident.

So you're confident that your cost structure is already equal to or better than other Tier 1 manufacturers?

Yeah, we are confident that our cost structure, capacity, technology is leading.

Can you elaborate on the expected cost improvements that are likely to happen as a result of the integrated production that you are going to roll out next year of the Shanxi plant? How much of a cost advantage are you going to create as a result of the integration and everything happening in one location?

It's not purely cost advantage. It's -- the Shanxi super factories, it's digitalized and automated and the ESG traceability is low carbon, everything and we integrated a lot of advanced equipment and streamlined a lot of the even phase out some production phase stage and have significant workforce efficiency and very high turnover ratios and very good locations to serve the customers in the West China as well as the global market customers. So the cost structure is reflecting the advantage and it's a big amount, we believe, but we don't disclose. We think it's a big advantage with its existing production structures for the industry.

And finally, I want to confirm a number that I think Gener gave. The total volume of shipments of N-type in the fourth quarter, was it 70% of total shipments?

That's 70%, yes. 70%.

And did he say that in the first quarter it will be 85%?

Full year. Let's say it's full year, it's around 90%. So gradually from 70% to 95% quarter by quarter, and this year. So Q1, this year I think is roughly 80%.

Okay. So in terms, going back to the gross margin, so you are suggesting that the first quarter gross margin should be slightly lower than the fourth quarter. So are we still looking at a number around 12%?

You mean the absolute number?

Yeah, the actual gross margin.

Yeah, we don't disclose that, but I said [indiscernible] slightly downwards, but not dramatically. But we think it's bottom and it's reaching the bottom for the first half of the year.

So if the gross margin is around 12% in the first quarter, and the prices stabilize from March, April onwards, is it reasonable to think that gross margin could improve in the second quarter because your costs will keep on coming down and also your shipments to the US which are higher ASP will go up?

We think we have more likelihood to improve in the second half year. The improved outlook, the demand outlook, and you are talking about US shipments in the second half year, low risk. And I think roughly maybe let's say 60%, 65% shipments in the US in the second half year as well as the Shanxi super factory is doing the highest production in the first half year. That will be 100% operational by the end of the third quarter. So everything, together, we think the margin expansion is likely to -- in the second half year.

And what do you think the impact of, you mentioned that in the fourth -- by the fourth quarter, you expect that Tier 1 companies or top 10 manufacturers will have as much as 90% of the market. That basically means Tier 3 will have shut down and Tier 2 will be selling much lower output than they are selling right now. What do you think that does to pricing by the fourth quarter?

The fourth quarter this year, right?

Yes.

It's difficult to estimate, but I think that should be stabilized. And on top of the most important things, I think by the end of the fourth quarter, I believe a lot of industry players for Tier 2, Tier 3 and as well as the companies, they never in the solar industry but entered in the recent one or two years, those guys are going to -- the capacity will be phased out [indiscernible]. So that's my estimation.

Okay, great. Thank you very much and good luck in 2024.

Thank you. There are no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.