Harvard Financial Analyst Club | Fall Comp 2019 Finalist | Jinko Solar
1. Long: JinkoSolar
1-Year Price Target: $23.21 (25.0% upside) by February 2021
Malik Khalil, Mohammad Mobashir, Ibraheem Khan, Jacob Khan
Harvard University
HFAC Stock Pitch Competition
Current Price: $18.57
2. JinkoSolar Overview
Company Description
Financial Summary
Share Price (12/3/2019) $18.60
52 Week Range $11.37 - $18.60
% of 52-week high 34%
Fully Diluted Shares (MM) 40
________________________
Equity Value ($ MM) $5216.78
+ Net Debt (MM) -$1181.31
________________________
Enterprise Value $4035.47
● Based in Shanghai, China, JinkoSolar (NYSE: JKS) is one
of the largest and most innovative solar module
manufacturers in the world.
● The company has built a vertically integrated solar product
value chain, with an integrated annual capacity of 14.5 GW
for silicon wafers, 9.2 GW for solar cells, and 15 GW for
solar modules.
● It has shipped about 40 GW of solar modules to customers
in 108 countries around the globe, integrating advanced
polycrystalline solar PV technologies to optimize the entire
power plant.
Key Statistics
Balance Sheet Summary
Short-term Debt (MM) $1916.90
Long-term Debt $284.19
__________________
Total Debt $1632.70
Cash & Equivalent -$451.4
__________________
Net Debt $1181.31
+ Equity Value $5216.78
__________________
3. Products
Product Offerings Past Services
● Silicon wafers
($82,502,000)
● Solar cells
($42,358,000)
● Solar modules
($3,503,845,000)
● Solar system EPC
● Revenue from
generated electricity
Shangrao Economic Development Zone
12 Locations Worldwide
1
Yilin,Xinjiang2
Yuanhua Town, Haining3
Penang, Malaysia4
Shangrao Economic Development Zone5
Yuanhua Town, Haining6
Penang, Malaysia7
Yuhuan, Zhejiang8
Yuanhua Town, Haining (x3)9
Jackonsville, Florida10
Type Up to 335Wp
Output Up to 19.49
Junction
Box
IP67
Weight 19.5 kg
Temp.
Coefficients of
Pmax
-.36%/C
4. Investment Thesis
•We recommend longing Jinko Solar [JKS] because it is undervalued by
25%, and its stock price could increase significantly in the next 6-12
months.
•Investment Thesis: The market has incorrectly penalized the company
for earnings misses in FY 18 as the firm discontinued its service oriented
offers. However, the company’s focus towards growing its product line will
serve greatly to its growth in the industry. The incorporation of mono
wafers solar panels will increase their earnings in the next quarter.
6. Comparables
● Canadian Solar (NASDAQ:CSIQ) is the only other
manufacturer of similar size, but its chief business is
assembling modules. It has 12.2 GW of module capacity
and 9.3 GW of cell capacity, but just 5.0 GW of wafer
capacity, so its manufacturing model is a little different
than JinkoSolar.
● That scale has allowed JinkoSolar to cut its costs and
remain competitive in the global solar business. It is still
subject to the fluctuations module prices go through,
which is why it's gross margin and net income dropped in
2018. The fact that it has survived as many of its
competitors dropped out of the business, though, speaks
well of the company's long-term position.
7. Risks
- High Short term Debt
- Current U.S. Administrations Tariffs on Chinese
manufacturing
- Access to Rare Earth Metals
8. Catalysts
- Technology transformation largely complete – 18GW mono wafer
capacity by 2Q 2020E
- Mono based high efficiency products will make close to 100% of
shipments in 2020E
- Record gross profit and income from operations in Q3 2019, despite
push-out of China demand
- Signed agreements to sell two solar power plants in Mexico with a
combined capacity of 155MW, which will lead to deleveraging of balance
sheet by c. US$133mn. The final closing is subject to customary
approvals.
9. Moats: Efficient Scale
● Currently the world's largest solar panel manufacturer,
shipping 11.4 GW of modules in 2018 and has the
capacity to purchase any new market entrants.
● Gross margin reset driven by shift towards integrated
mono capacity, leading in-house integrated production
cost, new premium products and global footprint.
10. Gross Margin and Cost-Reduction Increasing with Mono-Capacity
Integration