JinkoSolar Holding Co., Ltd. (JKS) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co., Ltd. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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, Ms. Stella Wang, JinkoSolar's Investor Relations Manager. Please proceed, Stella.

Thank you, operator. Hello, everyone, and thank you for joining us today for JinkoSolar's Second Quarter Earnings Conference Call. The company's results were released earlier today and available on the company's IR website at ir.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. Xiande Li, 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, CEO of JinkoSolar Company Limited. Mr. [ Zhu ] will discuss JinkoSolar's business operations and company highlights followed by Mr. Miao will provide an update on sales and marketing. And then Mr. Pan Li, who will go through financials. Management will be available to answer questions during the Q&A session. 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 the applicable law. Let's now site to turn the call over to Mr. Xiande Li do CEO of JinkoSolar. Please go ahead, Xiande.

Hello, everyone. This is Xiande Li do, and thank you for joining JinkoSolar's Second Quarter 2026 Earnings Call. It is honored to take the role of CEO I appreciate the trust the Board of Directors and the management team have pleasing me. Sharing this milestone of our 20th anniversary as we embark on the next stage of the development. I look forward to working closely together to further enhance our operating performance and strategic execution to drive sustainable, high-quality growth. I will begin by reviewing our operational performance in the second quarter and then outline our key priorities going forward. In the second quarter, module shipments increased sequentially to approximately 16 gigawatts. Supply and demand imbalances across the PV industry remain dynamic. These pressures were further compounded by shift in domestic and overseas policies. With prices across the supply chain and industry profitability remaining under pressure. As the cost of ramping up, our high-efficiency products remained evaluated during the quarter. together with impact by delivering certain low-value orders, gross margin decreased sequentially during the quarter, while our net loss expanded. Facing this operating pressure we optimized our order book and geographic mix, rationally manage utilization rates and continue to expand the proportion of high-efficiency products within shipments while introducing technologies that lower cost. These measures are driving a gradual recovery in profitability. The underlying pattern of TV industry competition is gradually shifting from capacity and shipment scale to effective supply product value and earnings quality. The mandatory new national standard on energy efficiency for modules and inverters released in July will take effect in January 2027. The new standards and level free energy efficiency as a minimum [indiscernible] for market access. Products that [indiscernible] to meet these minimum threat holes will not be permitted for production or sell. Placing high-efficiency products in a stronger position for large-scale renewable energy project tenders. Meanwhile, the implementation of market-based pricing for renewable power is pushing customers to increasingly focusing on energy yield reliability and lifetime value of modules. These changes are beneficiary to industry leaders with advanced manufacturing capacity, technological expertise, global delivery and long-term service capabilities. which will accelerate the fit-out of inefficient production capacity. By the end of 2026, we expect to have 140 gigawatts of TOPCon 3.0 production capacity. Based on the new standard threshold, these products are expected to meet Level 1 energy efficiency requirements and strengthen our analyzed production capacity for high-efficiency products to lead the industry. We continue to advance our product portfolio and build a solid base for next-generation technologies based on our TOPCon technology road map. In June, we unveiled our newest next-generation TOPCon Tiger Neo 5.0 modules. By optimizing multiple core technologies, the Tiger Neo 5.0 achieved mass produced efficiency of 25.91%, and power output of over 700 watts, setting a new benchmark for TOPCon product performance once again. ESS shipments in the first half of the year were 3.1 gigawatt hour, increased significantly year-over-year. Benefiting from our presence in high-value market, gross margin improved year-over-year in the first half of 2026. Due to uncertainties in timing of project delivery and other factors, recognized revenue remains in ramp-up stage. Approximately 1.5 gigawatt hour were recognized revenue in first half, including more than 1 gigawatt hour in the second quarter as project deliveries increased alongside ongoing enhancement of our in-house PCS, EMS and other capabilities, we will continue to boost efficiency of both revenue recognition and profit realization. Driving high-quality growth for our ESS business. Now I will move on to our guidance for the third quarter and full year of 2026. We expect our annual integrated production capacity to reach approximately 100 gigawatts by year-end 2026, including approximately 14 gigawatts from overdue facilities. Considering demand dynamics in certain markets, we will place greater emphasis on balancing shipment volume, profitability, cash flow and order quality going forward. and adjusting guidance for full year 2026, module shipments to between 60 gigawatts and 70 gigawatts and high-efficiency products accounting for over 60%. We expect module shipments to between 15 gigawatts and 17 gigawatts in third quarter of 2026. For full year 2026, we expect our energy storage system shipments to more than double year-over-year. As we continue to strengthen the competitiveness of our core solar and energy storage businesses, we are also building an investment sample through disciplined capital allocation and professional investment management that will act as a complementary driver for long-term value creation. Over the past several years, leveraging our deep industry expertise and long-term perspective on technological trends we have made selected investments directly or through fund platforms, focusing on strategic synergies, technological innovation and long-term value creation. Our early investment primary focus on solar and storage value chain. In recent years, as AI drives demand for computing power and electricity demand, we have selectively expanded our investment scope to the AI ecosystem and other frontier technologies. To date, we have invested in more than 40 companies in total. As of June 30, 2026, we have invested an aggregate of approximately RMB 1.86 billion in cash, the original cash cost of the investment remaining in our portfolio is approximately RMB 1.5 billion with a fair value of approximately RMB 1.99 billion as of the same date. Our investment portfolio has generated cumulative value appreciation of approximately RMB 880 million comprising of approximately RMB 410 million in realized gains from exit and approximately RMB 470 million in unrealized fair value from remaining investments in the portfolio. During the first half of 2026, our portfolio generated gains of approximately RMB 490 million, comprising approximately RMB 10 million in realized gains and approximately RMB 380 million in unrealized fair value gains. In the first half of 2026, we divested a substantial portion of our equity interest in LAPLACE Renewable Energy Technology Company Limited, receiving over RMB 300 million in cash proceeds since our initial investment in LAPLACE the cumulative realized gain on visible disposal exceeded RMB 250 million. This gain was recognized of multiple carriers through fair value adjustments following its IPO in late 2024. With over RMB 100 million recorded in change in fair value of long-term investment upon settlement in the first half of 2026. In addition, Hangzhou Gold Electronic Equipment Company Limited successfully completed its listing on ChiNext Market of Shenzhen Stock Exchange during the second quarter, creating an additional pathway for future value realization. Looking ahead, we will continue to maintain a disciplined approach to capital allocation, supporting the long-term development of our cross solar and energy storage business will remain our top priority. At the same time, we will continue to evaluate our existing strategic investments based on the operating performance strategic synergies and the long-term value creation potential of each portfolio company while remaining disciplined and selective in pursuing new opportunities. Through strengthening our core businesses, realizing porfolio value and improving capital utilization efficiency, we remain committed to creating sustainable long-term value for our shareholders. This concludes my remarks. I will now turn the call over to Gener.

Thanks, Xiande. Total shipments were 32.9 gigawatts in the first half, which showed a market shift in accounting for over 90% leveraging sales network covering nearly 200 countries and regions and 35 service centers globally. We continue to optimize our geographic mix and the customer structure overseas. . In the first half shipment to the overseas markets accounted for over 70%, mainly across Asia Pacific, Europe and emerging markets. In the second quarter, the proportion of high-efficiency product shipments improved sequentially. Our TOPCon 3.0 series continued to command a premium of approximately [ USD 1 ] per watt over conventional products. We also began to ship a small number of scenario-based product in the second quarter and gradually expand to increase deliveries in the second half. Those products already command a premium of approximately USD 0.5 to USD 1 per watt over commercial products. Following the launch of IDC and other scenario-based module products in the first quarter, we recently released the Sunny 365 smart solar story system. This comprehensive series of integrated PV storage solutions cover several scenarios such as retail supermarkets, AEC and the manufacturing sector. Especially the AIDC solution execute around our Tiger Neo 3.0 module platform technology and the [ Sontara ] energy storage system capable meeting the demand from data center for power supply reliability, energy economics and a sustainable low carbon development through the coordinated control of energy storage system. PCS, EMS and smart operations and maintenance. We recently received the highest AA bankability rating in the Q2 2026 bankability rating report for module manufacturers released by [indiscernible]. Since first participation in the evaluation in 2014, we have maintained a grade rating for 12 consecutive years. Also, we were recognized as a Tier 1 energy storage provider by BNEF for the tenth consecutive quarter. This rating reinforced our bankability project implementation capabilities and long-term delivery capabilities for the international market. impacted by the market-based pricing mechanism for renewable energy and the pace of project investment, domestic installation demand has slowed. Yes, we observed the positive signs of shifting structural demand with national level large-scale renewable energy-based projects led by the central and state-owned enterprises maintaining a steady pace of progress. The share of tenders for high-efficiency modules has increased significantly in the centralized procurement and the criteria has shifted from simply pursuing lowest bidding price to greater emphasis on module efficiency, life cycle power generation performance, reliability and long-term delivery capability. High-efficiency modules have already commanded a reasonable premium in tenders. At the same time, the distributed generation market is transitioning from scale-driven growth towards a focus on scenarios and operational value. Brand reputation, channel, local services and the scenario adaptabilities are becoming increasingly critical. This trend benefits enterprises with global channel established brands and differentiated products which enable conversion of technology and product power into more stable price relationship and product value. Looking to work forward to 2027, as the electricity pricing marketization policies are gradually absorbed and the mechanism based of pricing and project ROI models become clear. several projects that were delayed due to insufficient returns are expected to gradually resume large-scale renewable energy-based product direct in power connection and the distributed scenario-based application will continue to drive domestic demand. The overseas market is expected to maintain some growth resilience benefiting from energy security, growing power demand and improved the solar plus storage economics. Leveraging our global sales network, leading high-efficiency products and continuously expanding solar plus storage solutions. We will capitalize on the opportunities arising from a change in demand structure and expanding application scenarios. We will continue to optimize our market and product mix and leverage our technological advantages to strengthen our presence in high-value markets enhance product value and improve the quality of our operations. With that, I will turn the call over to Pan.

Thank you, Gener. Leveraging our leading position and the high-efficiency products, we optimized our sales mix during the quarter. resulting gross margin reaching 4.2%, up 1.3 percentage points year-over-year. We also continued to optimize our capital structure and cash flow management and generated positive operating cash flow during the period, a significant improvement compared to last quarter. Our asset to liability ratio declined by approximately 1.5 percentage points from the beginning of the year. For the remainder of the year, our focus will be on balancing scale and earnings quality while carefully controlling cash flow. We expect full year operating cash flow to improve compared to '25. Looking at our second quarter financials in more detail. Total revenue was $1.82 billion, up 0.9% sequentially and down 31% year-over-year. The sequential and year-over-year changes were mainly due to the fluctuation in the shipment volume of modules. Gross margin was 4.2% compared with 8.3% in the first quarter and 2.9% in the second quarter last year. The sequential decrease was mainly due to lower average selling price of solar modules by the year-over-year increase was primarily due to the higher ASP. Total operating expenses were $287 million, up 21% sequentially and 2% year-over-year. The sequential and year-over-year increases were mainly due to higher expected credit losses in the second quarter this year. Operating expenses accounted for 15.8% of total revenues compared to 13.1% in the first quarter this year and 10.6% in the second quarter last year. Operating loss margin was 11.6% compared with in the first quarter this year and 7.7% in the second quarter last year. Moving to the balance sheet. At end of the second quarter, our cash and cash equivalents were about $2.5 billion compared with about $3.3 billion at the end of the first quarter this year. [indiscernible] was [ 113 days ] compared with [ 1 to 8 days ] in the first quarter of '26. Inventory turnover was 1 to 5 days compared to won for 2 days in the first quarter this year. At the end of the second quarter, total debt was about $6.6 billion compared to about $6.8 billion at the end of the first quarter of '26. Net debt was $4.1 billion compared to $3.5 billion at the end of the first quarter of '26 million. This concludes our prepared remarks. We are now happy to take your questions. Operator, please proceed.

[Operator Instructions] Your first question comes from Brian Lee with Goldman Sachs & Company.

This is Tyler Bisset on for Brian. ASPs declined pretty meaningfully sequentially. So curious how you're viewing ASP so far in Q3. And how much of an impact you could see from greater shipments of Tiger Neo 3.0 modules?

So yes, for the ASP side, we expect, firstly, apple-to-apple, we are expecting the price goes up a little bit in Q3. And if we look into the average prices, it will go up as well. Firstly, the first reason is to be course from the current market situation as the price is going up because of different reasons, but ball market goes up. So most of the DG prices are following the spot market. So we are expecting the price of Q2 goes up. The second reason is because the mix of different products. Our 3.0 product, which is a premium product ratio in Q3 will be definitely higher than Q2, which will be helpful to lease up the ASP in Q3 as well.

Super helpful. And we have seen pricing for wafers and cells increased pretty meaningfully over the past month. We've also seen futures prices for poly also increasing following some industry self-regulation. So I wanted to see how you're thinking about your input costs over the near term and whether you're expecting any impacts from some of these recent moves and input costs?

So you are talking about the increased cost [indiscernible]. We believe it's a kind of healthy rebound, including polysilicon, glasses and a couple of materials. And that is why I think we the industrial player and increased module price. We don't believe this is going to have a next impact on the customer side. And if you look at the landscape and the solar is the cheapest energy sources. And now these are huge demand for storage and solar plus storage will be the nominator of the energy diversification for most of the ratings.

Okay. And just one more from us. Can you provide any more details on how you're balancing shipment volumes and profitability and how that weighed on your shipment volume guidance for the year? Like are there certain markets that you are prioritizing or deemphasizing?

We guided on the shipments, right, to 60 to 70. That's where clear methods and we don't believe it's the right time to focus on the scale and the profitabilities and the operating cash flow is a key. So we do a lot of optimization of the structures, not only the markets as well as the products and pace even our employee resources and particularly if you look at in the demand in China is 30% to 40% lower than last year. So definitely, we have less and less exposure in China, and China is still relatively competitive and pricing is one of the lowest of the markets. But what we are doing is not only the country by country as well as the customer by customer. And on top of that, we -- because we are slowing out the tiers, and that is one of the key markets and residential markets and particularly for the premium markets in United, including Europe. So that is one of the area we like to penetrate more market share. and to get relatively good profitabilities. Yes. So I'd just like to take it out to I think we invested in our call and this kind of quarter meaning earnings is relatively different and the loans and the U.S. companies, we like the repositioning the companies on strategies. And firstly, JKS is kind of a cantonal China with the company, which is the focus on integration of the solar plus storage. But now JKS has more capabilities in the last 5 years. We built up a very, very strong strategic investment teams and invest dozens of investments, a lot of investment we were successful and in the last 5 years, we focus on solar storage-related upstream, downstream turn out very high growth potential companies to make the financial investment and to get investment returns and as well as get some synergies for Jinko China. On top of that, because China is more kind of more competitive on the new technology like the AI content and computing, robotics and the team is shifting the focus to more kind of strategic board industries, particularly the next generation. So we think the decade is kind of shifting to both on the console of the Jinko China and focus on range. And on top of that, the JKS U.S. companies who are shifting more capabilities to invest on the higher growth opportunities. China is the second most powerful countries, there's a lot of massive opportunities and we are able to -- our teams are able to take the advantage. So we would like to the investor gradually to have communication with our IR teams and 1 what is the progress, particularly for the strategic investment we are planning and we have made, which we believe will be a very strong return for the JKS in the next 2 or 3 years. And Again, we think it's good for the valuation of takes. If you look at purely the China versus U.S. due to a very big valuation gap that the U.S. is just 20% to 30% of regulations. And plus, we have a lot of portfolio investments and unique investment which we are able to monetize. And so I'd like to take it out to bring this key topic and have the investor understand, okay, what we're going to do in the future. Thank you.

Your next question comes from Phil Shen with ROTH Capital Partners.

[ Xiande ], Nice to meet you. Congratulations on the new position. I wanted to check in with you guys on the Section 232 specifically, given your recent transition and sale of your U.S. assets to FH Capital, can you talk about the impacts of the 232 on that JV, what kind of -- how do you expect module pricing to be impacted? And then ultimately, do you expect the landscape of manufacturers to shift as a result of the Section 232?

In general, we believe it's kind of very good for Jinko strategy to divest our manufacturing shifting to from entities in the United States. And specifically, I think JVs because we are the financial minority investors were not in a position to discuss the platform joint ventures because the majority shareholder takes the leadership, and we are not involved in any operations. But for the 232 in general, we believe that is consistent with [indiscernible] to bring manufacturing back to the United States, not only the module capacity as well as wafer polysilicon and solar sales capabilities. And we have expectation anticipation the 232 will be coming in the early year has come a little bit late, but we have some kind of diversified the potential supply chain to minimize the impact. But anyway, we believe that is going to be increased the cost of the solar modules. That is going to have the impact to solar development cost we believe because of it's a little bit a significant increase for the potential solar module price, but it not have a significant impact for the solar farm investment returns, given the U.S. PPA prices in recent years, gradually increased relatively compare but a little bit higher level. So back to your question, and we think it's anticipated, but it's a little bit exceeding expectations because the input price tax rate is a little bit higher, but it's not is not so high to make the industry demand to actually go down. We still believe U.S. is a good market next few years. And [indiscernible] minority interest and the joint venture will panic the U.S. market to take the opportunity in the U.S. market.

Okay. Charlie. So would you expect pricing to kind of go to $0.42, $0.44 in the U.S. You guys are a JV minority owner now, but I got to imagine you have some views on pricing. So what's your sense of where module pricing goes in the U.S.?

If I look at the minimum plant [ 38 ], right? 15% tariff. It's -- I think the market is evaluating the potential impact and customers evaluating how they are going to raise proceed their project plan. And I think we don't have a definitive answer from customers, but the initial feedback is most projects will continue even under the kind of 232 policy disruptions. That is my initial preliminary information.

Okay. Great. That's very helpful. And then as it relates to -- you just mentioned 2 elements of the 232, the minimum import price and then the 15% adds alarm tariffs. There's also a third part, which is the tariff rebate program that is based on U.S. CapEx would you expect your JV to qualify for that tariff rebate program?

It's still the JV question. I'm not in position, but based on interpretation of policy, my understanding is first is the kind of new capacity expansion. Secondly, it should include wafer sale and maybe polysilicon, right? It's a new capacity addition. It's not included in the solar module is not included. And it looks like it's targeting for the wafer sale and as well as product silicon.

Right. That's true. It's based on new capacity, but it can support manufacturers to expand capacity. So okay, I'll pass it on.

Your next question comes from Rajiv Chaudhri with Sunsara Capital.

I have a few questions starting with -- can you calibrate for us the size of the market that you expect globally this year in 2026. And then break it down between the total size in China and international?

So you mean the total demand, right?

Yes.

Yes. So I think 2026, we are expecting a low year because of the sharp drop of the China domestic demand. If you are looking number-wise, we are thinking around module it will be roughly 600 gigawatts or slightly below that. That will be our expectations. And if you break them into different categories, you will find out. For example, in China, you will find out is mainly demand to disappear from the utility market. But the distribution markets are still strong or robust during the first half. And if you look at the non-China market demand, you will find out the European market has some up and downs during the first half. But if you -- we look into the total numbers because of the first quarter rush of the VAT policy change in China. Most of the non-China demand is almost in line with the expectations, even higher than last year. So that's what we had for the first half and our expectation for this year. And for next year, we believe there will be some recovery in the utility market in China. So we are expecting a better 2027 demand than 2026. So if you want to quantify that, we will look at roughly 600-something between 600 to 650 gigawatts in 2027 versus around 600 gigawatt or slightly below 600 gigawatt in 2026.

Okay. So if the 2026 is around 600 that means that you're now looking at your market share globally going down from last year because your market share would be about 11%, right?

Yes, there are some reasons behind it, right? First one is we call a classical market is reducing, right? So there are certain sizable market is introducing more and more strict barriers, trade barriers or policy barriers, which is not easy to access, right? So the second reason is because the competition across the manufacturers, where some of the Tier 3, Tier 2 players, they are playing low-price strategy, sacrificing the quality asset to attack the market or even protect their own cash flow. Which is not what Jinko can do. So Jinko is still taking care of the long-term reputation and the quality. So that's why we have to give up some of the low-priced deal and protect our own interest. So breaking it down, when you said about some markets becoming less easy to access, I assume you're talking primarily about the United States. Can you give us a sense of what you expect out of that 65 million that gigawatts that you expect this year, roughly, what percentage will be the U.S. And what you think going forward, longer term, your U.S. sales will be as a percent of...

Yes. Sorry to jump in, but not only U.S. for example, Europe, they have this kind of rule for all the EU funded projects or financed projects cannot use China-based or Chinese actor factories. So for India, it's a kind of technical barrier. But for China-based manufacturing is not accessible at all as well. together with some other need more side of the market as well, like Turkey, like other markets. So I won't name all of them, but definitely, U.S. is 1 of them or 1 of the big ones. But it's not the only one. There's many more because of different reasons, geopolitical or security is.

I see. Okay. Moving on to another question about credit losses. Can you elaborate on what you mean by that and what happened actually in the second quarter.

[indiscernible] about [indiscernible] for accounts receivable are by that?

Yes. Can you just give us more details on that?

So you mean kind of provision impairment or whatever you're looking at, right?

Yes. You mentioned in your comments that one of the reasons for higher operating expenses in the second quarter was that you experienced some credit losses, and I was just looking for some elaboration. Was it some particular customers who -- when delinquent? .

So Rajiv, [indiscernible]. But based on my understanding, it's the kind of we didn't have any kind of deteriorated credit from customers and it's kind of accounting prospective based on the agents. And actually, if you look at the operating cash flow, we delivered positive RMB 600 million in the first half of the year. And the healthy operating cash flow is one of the key focus from a management perspective. And we don't see any significant bad debts or whatever from a customer perspective.

Okay. Another question is on -- you mentioned that the cost of production of the newer product line that remained elevated. Can you explain some of the reasons why? Because we were expecting actually the cost to start to come down as you ramp up? What happened?