JinkoSolar analysis: an undervalued player in the solar energy field
Another solar company is JinkoSolar. Compared to its peers, it is relatively inconspicuous. But it could have so much more potential! Couldn't it? Let's take a look at it together.
Basic overview
JinkoSolar Holding Co., Ltd $JKS-0.3% is one of the largest solar panel manufacturers in the world, based in China. The company focuses on manufacturing and selling solar panels, solar systems and solar energy solutions in China and abroad. JKS has high annual sales of more than US$5 billion. In recent years, the company has seen an increase in sales and profits due to the growing demand for renewable energy.
In 2020, the company achieved revenues of USD 5.1 billion and net income of USD 213 million. That's an 18% increase in revenue and a 135% increase in net income from the previous year. In the first quarter of 2021, the company achieved sales of $1.2 billion and net income of $38.2 million, an increase of 7% and 229%, respectively, from the same period of the previous year. We will look at the most recent results later.
Risks
Risks associated with investing in JKS include fluctuations in the price of raw materials such as metals and silicon, which are used in the production of solar panels. Changes in regulations and political changes may also affect the demand for solar panels and therefore the Company's revenues and profitability. There are also, of course, political risks. JKS operates in China, which means the company faces risks associated with political changes such as changes in tax laws, regulations and political relations between China and other countries. For example, in the past, tariffs and quotas have been imposed on solar panel exports from China.
JKS has to adapt to regulations regarding solar energy and environmental measures both in China and abroad. For example, changes in tax laws, the establishment of renewable energy quotas and other regulations may affect the demand for solar panels and thus the Company's sales and profitability.
Competition
The solar industry is generally considered to be a very promising sector with great growth potential. JKS has excellent solar panel manufacturing technology and a strong financial performance, which enables it to become a key player in this industry. However, competition in the solar industry is very high and depends on many factors such as government programmes, the economic situation and the evolution of energy prices in the market.
With the growing interest in renewable energy and reducing carbon dioxide emissions, solar energy is expected to play an increasingly important role in overall electricity production. Research and development of new technologies and products will be key factors in keeping companies in this sector competitive.
However, it is important to recognise that the solar industry can have a negative impact on the environment if the waste and chemicals used in the production of solar panels are not handled properly. It is therefore important that companies in this sector take a responsible approach to environmental protection. The solar industry is very competitive and companies have to deal with competition from other solar panel and solar solution manufacturers. These include:
- First Solar, Inc. $FSLR-1.4%
- Trina Solar Limited
- SunPower Corporation $SPWR-3.1%
Current Outlook
The latest figures show that Jinko Solar's earnings could even accelerate a bit - a trend that could continue this year thanks to an expected drop in the price of silicon, the main ingredient used to make solar panels.
On an adjusted basis, the company's earnings grew even more in 2022, up 371% to 427%, according to the latest announcement. By comparison, adjusted earnings grew 418% in the first three quarters of the year, meaning that growth on an adjusted basis likely slowed in the fourth quarter. So there are somewhat mixed signals on how growth has evolved in the fourth quarter.
In addition to strong global demand for their products, they are also likely to see a significant reduction in silicon prices in the coming months, which should help to reduce their costs. After rising sharply over the past two years, silicon prices finally peaked in the second half of last year. By early January, prices were already more than 50% below their peak in August last year.
Only! The declines are related to polysilicon bought on the spot market and that JinkoSolar and other major panel makers have longer-term supply contracts whose prices are more stable. Well, let's see.
Q4
Its Q3 sales rose 128% to 19.5 billion yuan, while its profit almost tripled to 550 million yuan. The company forecasts Q4 module shipments of 13 to 15 GW, which would imply an increase of 30% to 50% from a year earlier, a rather large slowdown from the 117% increase in Q3 shipments.
Despite the higher valuation (which is typical in this sector), the company appears to be slightly undervalued. It definitely deserves a closer look from investors looking for a favorite in this sector.
Disclaimer: This is by no means an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.
