From CS yesterday:
Jinko Solar
(JKS)
1Q12 shipments below guidance; lowering our 2012 margin estimates
Bottom line.
JKS missed 1Q12 shipment guidance and consensus EPS, but reiterated 2012 shipment guidance – management attributed the 1Q12 miss to a conservative approach with US tariffs and low inventory preventing higher European sales with higher than expected demand there. Like other China manufacturers, JKS lowered its YE12 non-silicon cost guidance from 57-58c/W to 50c/W, translating to low 60c/W total module cost. CSIQ, TSL, YGE, and JKS all have guided year end 2012 module costs to ~60c/W or lower (excluding ~5c/W for warranty and freight), putting pressure on FSLR to accelerate their own cost reductions below 2012 average cost guidance of 70-72c/W or YE12 ~70c/W including warranty and freight. We have lowered our estimates for JKS ASP and margins (as we have done for other companies after 1Q12), leading to a new CY12 EPS of $(1.97) from $0.80 and CY13 to $(1.38) from $1.84. Our JKS TP of $4 represents ~0.3 P/tBV, adjusted for 80% utilizations.
1Q12 Review.
Revenues of $168.3mm (down 11.6% q/q) were above CS at $164.4mm (down 13.6% q/q) and consensus at $156.8mm (down 17.7% q/q). Pro-forma EPS of $(1.28) below CS at $(0.58) and consensus at $(1.12), excluding a provision of $3.0mm for preliminary U.S. countervailing and antidumping duties and provision of $20.6mm for advances to suppliers. GM was 2.4% (up 680bps q/q, below CS at 6.6% (up 1,100 bps q/q), excluding preliminary U.S. countervailing and anti-dumping duties. Opex % of sales was 17.3% (down 90bps q/q), excluding a $20.6mm provision for advance to suppliers. OpM at (14.8%), up 770bps q/q, below CS at (9.7%), up 1,280bps q/q. Total solar product shipment of 249MW (up 9.7% q/q) were above CS at 221MW (down 2.6 % q/q). Module shipments of 157.1MW (down 7.1% q/q) were below CS at 180MW (up 6.4% q/q). Module ASP declined ~15% q/q to 83c/W. Non-Si cost declined 6c to 58c/W. Silicon cost fell 11c to 16c/W. Total module cost declined 17c to 74c/W.
2Q12 and FY12 Guidance.
Company guided 2Q12 total module shipments to 200- 240MW in line with prior CS est. at 220MW (up 40.0% q/q). Cons 2Q12 rev/ EPS is $221.6mm/ ($0.71). Company guided CY12 total module shipments to 800-1000 MW, up 18.4% y/y at mid-point. Pre result 2012 cons rev/EPS est were $956.0mm/ ($2.55) and we were at $1,083.6mm/ $0.80. Company expects to maintain its current in house wafer, cell and module production capacity at 1.2GW. 2012 opex % of sales was guided to 10-12%. Non-silicon cost is guided to decline to ~$0.50/watt by YE12. Poly purchases have been in the range of $28-29/kg and management opined poly prices may decline to range of $20- 21/kg by YE12. Management guided silicon cost to decline to ~$0.10-0.12/watt by YE12.
Positives
1) YE12 non-Si cost guidance lowered from 57-58c/W to <50c/W.
JKS has lowered its cost guidance in line with other low-cost, China manufacturers.
2) Geographical diversification away from Germany and Italy.
40-45% of 1Q12 shipments to Germany and Italy are down from 70% in 1Q11. Germany and Italy have both discussed FiT cuts.
3) Access to capital.
While this is a positive for JKS, access to cheap capital in China is a negative for industry oversupply. JKS is waiting for approval on an additional RMB 800m long term note. Other China companies have issued RMB notes for 6-7% interest, well below the YTM of 15-85% of US-listed, China company convertible notes. The company has a line of credit as of 1Q12 with additional availability of $860m.
Negatives
1) Module ASP declining faster than expected.
2Q12 ASP guidance of 73-76c/W and 3Q12 at 70-75c/W is below our previous estimates of 81c/W (a similar trend with other solar companies). Note that the lower JKS ASP than peers is in part due to regional mix, module efficiency, and brand. Only ~3% of shipments went to the US, a high ASP region, leading to a relatively small US tariff provision of $3m vs competitors ~$20m. Note the company has guided for US shipments to increase in 2H12. JKS sells a higher mix of multicrystalline silicon modules than many competitors, again leading to a lower ASP.
2) Missed 1Q12 shipment guidance.
Module shipments of 157MW were below guidance of 170-190MW. However, wafer shipments were abnormally high in the quarter at 80MW.
3) Days of sales outstanding have increased due to unwillingness to pay of some customers in Italy.
Management opined that 80-90% of customers have no issues paying on time, but the remainder may need to file for insolvency.
4) Banks have reduced lending and cancelled some funding for projects in Europe.
This is not new news, but it is a concern worth watching.
Companies Mentioned (Price as of 25 Jun 12)
Canadian Solar (CSIQ, $3.64)
First Solar (FSLR, $15.20, NEUTRAL [V], TP $20.00)
Jinko Solar (JKS, $3.96, NEUTRAL [V], TP $4.00)
Trina Solar Ltd (TSL.N, $6.77, NEUTRAL [V], TP $6.50)
Yingli Green Energy Holding (YGE.N, $2.82, NEUTRAL [V], TP $3.00) |
