JinkoSolar Reports Strong Growth in Q2 2024 Amid Industry Challenges

Earnings call: JinkoSolar reports growth amid industry challenges By Investing.com

JinkoSolar (NYSE:JKS) Holding Company Limited (NYSE: JKS), a leading solar module manufacturer, reported a significant year-over-year growth in module shipments during the second quarter of 2024, despite facing industry-wide challenges such as oversupply and volatile pricing. The company's gross margin remained steady at 11.1%, while adjusted net income reached $52.1 million. A strategic partnership in Saudi Arabia and advancements in N-type cell technology were among the key strategic developments. JinkoSolar's second quarter of 2024 results reflect a company navigating through a challenging solar industry landscape with strategic initiatives and technological advancements. The company's focus on expanding its global footprint, particularly in emerging markets like Saudi Arabia, coupled with its commitment to R&D, positions it as a proactive player amidst industry headwinds. With a clear outlook for the remainder of the year, JinkoSolar continues to adapt to market conditions while pursuing growth and efficiency. JinkoSolar Holding Company Limited (NYSE: JKS) has demonstrated resilience in a turbulent solar industry, as evidenced by its significant year-over-year growth in module shipments. The company's strategic moves, such as the partnership in Saudi Arabia and technological advancements, have been pivotal in maintaining its industry ranking. Here are some key insights from InvestingPro to consider: InvestingPro Data indicates that JinkoSolar's Market Cap stands at $962.1 million, showcasing a substantial presence in the market. The company's Price / Book multiple is notably low at 0.34, suggesting that the stock could be undervalued relative to the company's asset value. Additionally, the P/E Ratio (Adjusted) for the last twelve months as of Q1 2024 is at a low 2.46, which could signal that the company's earnings are not fully reflected in its current stock price. InvestingPro Tips highlight that JinkoSolar operates with a significant debt burden, which is an important consideration for investors assessing the company's financial health. However, it is also worth noting that the company is trading at a low revenue valuation multiple, which may attract value investors looking for potential growth opportunities at a discount. For readers interested in a deeper analysis, InvestingPro offers additional tips on JinkoSolar, providing a more comprehensive view of the company's financial performance and market position. There are 13 additional InvestingPro Tips available, which can be accessed for further insights into JinkoSolar's investment potential. In summary, JinkoSolar's current market valuation and strategic initiatives present a mixed picture for investors. While the company faces challenges such as a high debt load and weak gross profit margins, its low valuation multiples and position as a prominent player in the solar industry may offer attractive opportunities for those willing to navigate the risks. Operator: Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co., Ltd. Second Quarter 2024 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, Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella. Stella Wang: Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's second quarter 2024 earnings conference call. The company's results were released earlier today and are 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. They 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 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. It's now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holdings, Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li. Li Xiande: [Foreign Language] We are pleased to announce that, thanks to our leading position in N-type TOPCon technology, competitive products as well as global sales and manufacturing network, our module shipments grew by 34.1% year-over-year to 23.8 gigawatts in the second quarter, ranking first in the industry. By the end of the second quarter, we had led the industry as the first solar company in the world to reach a total module shipments of 260 gigawatts to nearly 200 countries and regions. This again demonstrated the power of our globalization strategy. In the second quarter, prices in several segments of the industry chain declined slightly on a sequential basis. We flexibly adjusted our production scheduling strategy and the utilization rates for different process and also optimized our supply chain strategy to control costs. Gross margin was 11.1% in the second quarter, almost flat sequentially. Adjusted net income was $52.1 million, slightly down sequentially. [Foreign Language] Global demand showed faster growth momentum in the first half of 2024. The newly added installations in China totaled 102 gigawatts in the first half, up 30% year-over-year. From January to June, total solar module exports increased by around 20% year-over-year. At the same time, we saw an increase in capacity expansion projects delayed, suspended, with even some terminated. As to existing capacity, some manufacturers have cut or suspended production. Coming to the third quarter, prices in the industry chain were low and volatile with prices in most segments falling below cash cost. The utilization rates across the industry declined compared to the second quarter to an overall low level. We view this irrationally low prices as unsustainable. Meanwhile, government and industry launched the control policies to promote the healthy and orderly development of the solar industry. Financial institutions became more selective, preferring to favor strong and excellent companies with technological innovation and cost control capabilities as well as brand channel advantages. We believe that all these matters will further accelerate the elimination of the outdated capacities as well as industrial integration. In the future, we expect the companies with robust sustainable operations to reinforce their industry leadership. The in-depth industrial adjustments are bringing both challenges and opportunities to companies. We will continue to improve our management efficiency, strengthen and expand our globalization advantage, taking on challenges in the industry with our resource advantages and innovative capabilities. [Foreign Language] Thanks to our global footprint and the competitiveness of our products, by the end of the second quarter, the visibility of our order book for 2024 exceeds 80%. We have maintained our overall leading utilization rates in the industry, especially for N-type cells, the utilization rate is nearly 100%. [Foreign Language] We kept refreshing our record for cell efficiencies. At the end of the second quarter, lab efficiency of our N-type TOPCon-based perovskite tandem solar cell reached 33.24%, a significant leap beyond our previous record of 32.33% last year. The mass produced the efficiency of our 182 TOPCon cells exceeds 26.1%. We firmly believe that TOPCon remains in the path with the best economic performance in terms of cost, mass production yield, intellectual property protection and customer acceptance and still has room for further cost reduction and efficiency increase. We intend to keep our leading position by gradually adopting new technologies, while consider both efficiency improvements and economic returns. [Foreign Language] We continued to optimize our supply chain to cater to the demands of global clients for low-carbon, clean, high efficient and reliable products. In the first quarter of this year, we unveiled Neo Green panels produced in the Zero Carbon Factory certified by TUV Rheinland for compliance with the relevant criteria and the requirements. So far, we have received positive feedback from our clients. This once again confirmed our commitment to clean manufacturing and product innovation. [Foreign Language] Shifting to the international trade continuing expansion of our globalization capabilities is becoming increasingly important. As recently announced, we have entered into a strategic partnership with renewable energy localization company, a wholly owned subsidiary of PIS and Vision Industries Company to form a joint venture in Saudi Arabia for the production of 10 gigawatts of high-efficiency solar cells and solar modules. This is another step in our innovative transformation from global sales to global manufacturing and an important milestone for our globalization strategy. With years of experience overseas, we are dedicated to building localized solar ecosystem together with other partners to achieve synergy of resources and complementarity of advantages and further grow our competitiveness in the global market. [Foreign Language] We are accelerating the clearing out of P-type capacity to optimize our capacity structure. We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 195 and 130 gigawatts, respectively, by the end of this year. We expect our advanced capacity structure to continue to lead the industry. [Foreign Language] With our advantages in anti-TOPCon technology, competitive products as well as global sales and manufacturing network, we reiterate our guidance for module shipments to be between 100 and 110 gigawatts for the full year 2024, and we will continue to implement our globalization strategy to actively seize market opportunities and mitigate market risks. We expect module shipments to be between 23 to 25 gigawatts for the third quarter of 2024. By the end of this year, we expect net produced N-type cell efficiency to reach 26.5%. Overall, we are holding a healthy cash flow. We will continue to optimize the structure of our assets and liabilities as well as our cash flow levels, strengthening our resistance to risks. Gener Miao: Thank you, Mr. Li. Total shipments were 25.3 gigawatts in the second quarter with module shipment accounting for approximately 94%. We are pleased that we continue to rank number one in the world for the market shipments as we are increasingly recognized by global clients for our high efficient and reliable products and services. In terms of geographic mix, approximately 60% of our module shipment went to overseas market in the second quarter with Asia Pacific and Europe accounting for majority. Sequentially, shipment to the US were relatively stable and shipment to Europe increased by 40%. Thanks to the continuous improvement in Tiger Neo product strength, Tiger Neo shipments accounted for 85% of total shipment in the second quarter, a steady increase from nearly 80% in the first quarter as these modules are increasingly accepted by price, particularly in China, Europe and North America. Currently, we lead the industry as the first solar company in the world to reach a cumulative N-type module shipments of 100 gigawatts. They continue to enjoy a premium in global market with premiums in some markets like Europe, US and the Middle East, especially high. On the strength of our extensive global sales network, we will continue to optimize our shipments and the product portfolio. We were recognized as a top performer across all reliable categories -- reliability categories in the PV Module Reliability Scorecard published by Kiwa PVEL for the tenth consecutive time. And we topped the PV Tech 2024 Q2 ModuleTech Bankability Report with the highest AAA rating. This is a continuous recognition of our commitment to quality, innovation and R&D over the long term as well as clients long-standing trust in our product quality, bankability and reliability. Recently, we became one of the few companies to have won both Tier 1 energy storage provider and the Tier 1 PV module manufacturer by Bloomberg. These orders are not only a testament to the power of our outstanding brand but also an affirmation of our proactive contribution to global energy transformation. As the economic of solar energy become more apparent, we expect demand in the global market to stay around 600 gigawatts in 2024 and a growth steadily in 2025. In addition to mainstream markets like China, US and Europe, emerging markets such as Middle East and some countries in Asia Pacific are also showing strong growth potential. With our accumulated experience in global sales and a growing industry trend footprint, we are confident we will over time, cease the opportunity brought about by the growth in global market demand more rapidly and more high efficiently and optimize overseas supply chain to effectively cope with changes in international trade policies. We will continue to optimize our products and services, constantly enhancing our competitiveness globally through strategic market positioning and outstanding client relationship management. With that, I will turn the call over to Pan. Pan Li: Thank you, Gener. We are pleased to report sequential growth in module shipments and total revenues in a very challenging second quarter. While module prices declined, we reduced cost through supply chain optimization and technology upgrade, improve operating efficiency of optimized assets and liability structure. Gross margin was relatively flat sequentially and our asset liability ratio was down by one percentage point compared to the year beginning. Despite the challenging situation in the industry, we did not stop returning value to our shareholders for their long-term support. At the beginning of August, we announced a cash dividend of $1.5 per ADS, which was paid today as planned. In addition, as of today, we have repurchased a total of 5.6 million ADS in an aggregate amount of over $130 million in the open market, under our share repurchase program announced in July 2022 and the extended share repurchase program announced in December last year. Let me go into more details now. Total revenue was about $3.3 billion, up 4.4% sequentially and down 21% year-over-year. The year-over-year decrease was mainly due to a decrease in average selling price of solar modules. Gross margin was 11.1% compared with 11.9% in the first quarter this year and 15.6% in the second quarter last year. The year-over-year decrease was mainly due to the decrease in average selling prices of modules. Total operating expenses were about $525 million, up 24% sequentially and up about 18% year-over-year. The sequential and year-over-year increases were mainly due to the write-off the net book value of the equipment resulted from the fire accident in Shanxi Province, which was partially offset by estimated insurance proceeds from the fire accident in the second quarter this year. Total operating expenses accounted for about 16% of the total revenues in the second quarter compared to 13% in the first quarter and about 11% in the second quarter last year. Net loss attributed to the JinkoSolar Holding Company Limited ordinary shareholders were $13.9 million in the second quarter this year. Excluding the impact of the change in fair value of the convertible senior notes, fair value loss related to the investment in solar supply chain companies, share-based compensation expenses and net loss resulted from a fire accident in Shanxi, adjusted net income attributed to the JinkoSolar Holding Company ordinary shareholders was about $52 million. Moving to the balance sheet. At the end of the second quarter, our cash and cash equivalents were $1.91 billion compared with $2.4 billion in the first quarter this year. AR turnover days were 89 days compared with 100 days in the first quarter this year. Inventory turnover days were 82 days compared with 89 days in the first quarter this year, as a result of improving operating efficiency. At the end of the second quarter, total debt was $3.86 billion compared to $3.66 billion in the first quarter. Net debt was $1.95 billion compared with $1.22 billion in the first quarter of this year. This concludes our prepared remarks. We are now happy to take your questions. Operator please proceed. Operator: [Operator Instructions] Your first question comes from Philip Shen with ROTH Capital Partners. Matt Ingraham: Hi, this is Matt Ingraham on for Phil. Thank you for taking our questions. Looking into the back half of the year and 2025, how do you see module pricing trending? And then on gross margins, what is it going to take to return to the mid-teens margin levels? And do you think this could be achievable in 2025? Gener Miao: Thanks for the question. This is Gener. I think in general, market price will stay at the, let's say, a relatively low level for a while for most of the market. It's really because in general the oversupply situation is quite obvious across the industry, but for sure margin-wise it depends on the cost, how fast the cost reduction can catch up with the low price situation right now. So we, at least from what we are seeing right now, quarter by quarter or month by month, the cost reduction is happening almost every day. So hopefully with the improvement from the cost control and also all the actions we are taking or the whole industry is working on, the margin could go back to at least a healthy level as early as possible. Matt Ingraham: Okay, great, thank you. And then kind of on supply and demand, with module prices so low for so long, is that resulting in any demand elasticity? And if so, which countries or regions could we see upside surprise in demand? And then on the supply side, when do you think this oversupply situation across the supply chain gets resolved? Does this happen next few quarters, next 12 months or longer? Gener Miao: It's really difficult to forecast the right which day the market will turn upside down. But we see everything gradually going to that direction everyone. From the demand side, no matter it's US, Europe or China or other emerging markets, we still foresee healthy growth year-over-year. Meanwhile, when we see the supply side, for sure we have seen some newcomers that have dropped their plans to give up what they planned to do previously. And also from the policy-wise, we see some China government policy initiative, which is trying to control the new expansion of the capacity, which shows a pretty strong signal to constrain the capacity supply side as well. So, and also the current loss-making market will shake out some of the weak players across industry too. So, adding all those up together, supply side where we see a steady growth year-over-year. And the supply side, we see some action taking. It might take some time, but it's moving on the direction to restrict the supply into more rational levels. So adding those two together, we hope to give it several quarters, the things will get back to a rational level, I hope. Alan Lau: Thank you for taking my question. This is Alan from Jefferies. So first of all, the results are actually quite impressive, especially during the backdrop of a very challenging market environment. So I've got a couple of questions I would like to check with the management. First of all, what is the US shipment amount and also the US shipment expectation in second half of this year? And what is your view on the policy risk in the US market, especially there were recently filings of critical circumstances? Gener Miao: So for US, it's a very special market. We see the market is, firstly, for Jinko, we are gradually getting back our market share gradually after the efforts we have taken in the last two years time. So if you look into the total shipment numbers, we have provided the range of 5% to 10% as the annual shipment range. But if we look into Q4, it's roughly 5% to 6%. So seasonally, a change is required. For example, right now, there's a rush before the tariffs kick in. Also, the market demand is picking up. So season, quarter by quarter, there will be some small changes. But in general, I think it's still falling to the range between 5% to 10% of our total shipment in the US. And for the long term, we still believe US is a great market because of the demand, thanks to the AI driving, the electricity demand is strong and also the IRA act is a strong support to the new capacities both on the manufacturing side and on the utility project development side as well. So in long term we are still a big fan of US solar market. And we believe we will continue to be there to find a stable supply plan to serve our clients in US. Even there are some -- there might be some turbulence on the trade policy side, but we still have some prepared solution on it. Charlie Cao: For the second, [indiscernible] I think you are talking about the [Technical Difficulty]. It's really a little bit of risk, but we have proactively managed the situations and based on the regulations and we think the risk to Jinko is relatively low. Alan Lau: Is it because of the relatively stable volume from Jinko? Like there was no spiking volume, so you think it's actually compliant with the rules, right? Charlie Cao: It's a little bit complicated, but [indiscernible]. So, and if you are going to be qualified for the situations you must be -- the volume shipments after the finding data case and the risks that they form and there should be a significant increase of shipments. So we proactively manage the volume. So that is what I'm saying. But there's still some kind of risk, but we think the risk is low for Jinko. Alan Lau: Thank you, very clear. Also, we'd like to know what is the progress in our Middle East, because there was a huge announcement on the capacity [indiscernible] war in Saudi Arabia. So we would like to know what is the estimated timeline of that capacity and what type of policy you expect would be benefited? Charlie Cao: It's really a very strategic move for our international manufacturing. And it's not only a purely facilities in Saudi Arabia and we are working with the PIF and the region industries. And in Saudi Arabia, we have a very big ambition for the energy transitions by 2030. And we work together to localize the production of advanced capacities to gigawatt for the module capacities. And Saudi, I think the government has a policy department, which is -- the goal is to help to promote local productions in Saudi Arabia. So we wait back after our operational in 2026 and then the modules for Saudi Arabia locally will have a premium compared to the modules out of Saudi Arabia. And on top of that, the government has strong support policies to the joint ventures in Saudi as well. Alan Lau: So would there be any localization requirement on tendering so that you can ensure all of your modules will be sold and also even some of your competitors will have to buy your modules because of that localization requirement? Charlie Cao: I would like to be more confident. We will have very unique competitiveness in Saudi and for the Saudi market. And Saudi, if you look at the total market size, it's roughly 50%, 60% of the total Middle East. And the Middle East, we are very optimistic in the next three to five years. And I think you want to explore the detail policies. There is some policies existing, but it's going to be developed, I think by the government as well. And the current policies, 20% local content space with some kind of additional penalty. The big issue is in Saudi Arabia there is no qualified module producers. So most of the developers at this stage is they get the waiver letter. By my understanding, there is no available local producers. But I think we are in a good position to penetrate the markets and absolutely announce our joint venture. Alan Lau: So you will be technically the only qualified producer by 2026. So that might bring you premium there, right? Charlie Cao: I would love to say that. I think we will be the first mover. So we take that along. We will be the first mover here. Alan Lau: And an accounting question on the financials. Because I saw in the adjusted -- calculations of adjusted earnings, actually it's around RMB380 million. So is it like RMB665 million and then you take [58%] (ph) of shareholding on the loss of that. So you showed that you get to [$80] (ph) million. Pan Li: So you're talking about EPS or really average? Alan Lau: The adjusted net income. So it's shown as RMB378 million. So there's a net loss due to the Shanxi fire accident of RMB380 million. So I'd like to know if this RMB380 million is 58% of RMB665 million in the Asia level. Pan Li: Yeah, you're talking about the total numbers for the Asia is kind of the number you're talking about. And because the US, called it 58%, so 58% so the minority, there's I think a separate line, net income attributable to non-controlling interest, that consolidated all the net income should be allocated to the minority interest from the perspective of US, [Mexico] (ph). Alan Lau: Understood. Including the loss from the Shanxi province, right? It's also proportionated. Pan Li: Yes, proportionated. Alan Lau: Yes. Thank you. Thank you. So my final question is, what is the usage of FBR polysilicon now? Can you use 100% of that to save cost? Charlie Cao: I think we get kind of improvement on utilization levels. And typically, it's kind of 30% to 50%. Operator: [Operator Instructions] Your next question comes from William Grippin with UBS. William Grippin: Hi, thanks a lot for the time. Just a couple for me. The first one was on the tandem cell efficiency that you noted in the press release. Could you just talk about kind of where you are in the development process for that technology? And how long before you think we could see something become commercially available? Charlie Cao: The tandem is still in the early stage, but we are optimistic for the future commercialization of the TOPCon plus tandem technology. But still, it's -- if you look at the time scheme, it's -- we believe in the next five years, it's still in a laboratory stage. And it's possible after five years, it could be commercialized, but it depends a lot on progress. So back to the question, we don't believe it's commercially 100% visibility at this stage. And the earlier time may be after five years. William Grippin: Got it. Thank you. And then just on the TOPCon side, obviously there's been a lot of headlines and reports of litigation, companies claiming IP around TOPCon, a little bit hard to get a good handle on the patent landscape there. Just wondering if you could speak to how comfortable you are with your position sort of in the TOPCon IP landscape across your key markets and maybe any sort of discussions around licensing or other legal actions that maybe you've been having. Charlie Cao: So the patents, if you look at it, Jinko is kind of the TOPCon promoter, the leader of technology, and in the recent three years, we invested around 5% to 6% total revenue on R&D, and the significant part we put into the TOPCon. So we're really very confident about our patents, particularly in TOPCon. If you look at the total volume, if you look at the quality, if you look at the patents, or the spread in different countries, particularly out of China. So I think at the beginning of this year, we also announced some kind of news. We granted some kind of patents to one sort of company, one sort of module company, once sort of sale company. So that demonstrates our strong capabilities on R&D and patent position. Operator: Your next question comes from Rajiv Chaudhri with Sunsara Capital. Rajiv Chaudhri: Good morning. I have a few questions. The first couple of questions are just housekeeping. Can you tell us what the depreciation and the capital spending numbers were for the second quarter and what the targets are right now for the full year? Pan Li: Okay. Thank you for the question. In the second quarter, we reduced the number of CapEx as compared with the first quarter, which was the total CapEx in the first half year would about be RMB4 billion. And our prospective total CapEx in the whole year would be adjusted to about RMB9 billion. Charlie Cao: Rajiv, I think the big question -- the big picture is, it's a tough situation, right, in the industry wise. But the industry has suffered in the, I think, three or four quarters. And as TOPCon companies, we help them manage the companies and the sustainable growth. And we balance the shipment for [indiscernible] and further solidify our positions on the cash flows particularly. On top of that, we significantly cut the CapEx this year as well as next year, as well as lower the operating expenses and optimize our operation, including the training some labor force. So, and if you look at our CapEx, for next year, we don't have any CapEx plan, except for the Saudi Arabia capacities, which is a strategic movement. So just for illustration, we understand. But we think after several quarters, we cannot predict exactly, but we have seen the big players, top two or top three, even some kind of relatively rental payers have been consolidated or phased out in June -- the downward cycle. So we are getting -- I think we are getting prepared really to go through the cycle time. Rajiv Chaudhri: So are you suggesting that CapEx in 2025 will be even less than the RMB9 billion in 2024? Charlie Cao: Yes, definitely. And Saudi Arabia is very unique. Because we take 40% equity and really equity will be $100 million next year. So except for that, I think we have some kind of maintenance CapEx as well as some kind of investment on R&D, R&D CapEx. So definitely it's going to be lower next year. Rajiv Chaudhri: Okay, and what about depreciation in the second quarter? Pan Li: So each month, roughly, if you want to use your financial model, it's kind of RMB500 million to RMB600 million, you can put in your financial model. Anyway, if you have detailed number questions, I would suggest you can follow up with our IR team to give you detailed number. Rajiv Chaudhri: Okay. So moving on to the next question. That is on your average selling prices. Your average selling price in the second quarter was down quite a bit. It was down actually more than 10%, 15% from the first quarter. And part of the reason I guess from reading the presentation is that DG was 50% of sales, and most of DG is, I think, in China. So the combination of focus on China and DG led to more than a pretty sharp decline in ASPs. Now, as you go into the second half of the year and shipments as a proportion of total shift away from China, shift away from DG, will that provide a more benign backdrop for pricing for you? Charlie Cao: The spot market price, in the last three or six months is continuing to decline, but we think it's going to be the lowest level to be stabilized. But if you look at financial numbers, because we have different markets, the utility scale, the DG segment. We have different markets, US, Japan, different regions and different lead time for signing the contracts. So if you look at the ASP, you're right, I think it's affecting the industry-wide, the down -- as well as market-wise for the modules as of late. Because we have different, in the meantime, different countries. So each quarter Q2, Q1, the averages is in a downward sign. We expect that continually trained in the third quarter, relatively stable in the fourth quarter. But on the other side, if you look at the supply chain perspective, the material cost continue to trend. Rajiv Chaudhri: So can we expect that the decline in ASPs will moderate from Q2 to Q3 relative to what we saw in Q1 to Q2? Charlie Cao: Yes, I would like to say, if you look at Q4 versus Q3, it's kind of the -- less or less, modernized. Rajiv Chaudhri: Okay. But can you say that we are at the point where pricing can be expected to be stable or we are not there yet? Charlie Cao: I think kind of in a time scheme, if you look at the sectors, most of the sectors is suffering cash losses. We don't believe there's a significant zoom further. And with the rate of capacity, it should be kind of destabilized. If you look at the solar wafer price in recent week, some top players, they have increased the small market price a little bit. And even, product price has been stabilized. So, step by step, I think, you will see the module and as well as the solar cell in the plants. Rajiv Chaudhri: I see, okay. Charlie, your costs were down, apart from the decline in polysilicon prices, your production costs were down quite significantly also in the second quarter and that helped you maintain the gross margin at a double-digit level. Can you break down some of the reasons why the costs were down and can we expect costs to keep on coming down at the same rates that we saw from Q4 to Q1 and then Q1 to Q2? we have had some pretty dramatic declines in cost here and that is separate from the polysilicon prices. Charlie Cao: Yes, there are a lot of efforts we are working on, the contingent to optimize our design and the key materials, the purchase price to be have been improved. And the improved working efficiencies, and labor costs cut off, and the operating expenses optimizations. So there are a lot of efforts we are working on. Rajiv Chaudhri: So does that mean that gross margin can go up in the third quarter relative to the second quarter? Charlie Cao: No, I don't believe that, frankly, because I think we are confident, the gross margin is bottom and we try to be stable -- try to stabilize. Rajiv Chaudhri: But you're not confident that it can go up from Q2 to Q3 yet? Charlie Cao: No, I would like to say stabilize kind of, if you look at our peers, we are in relatively good positions and stabilized and the phase-out takes time. I think it's not going to take one or two years, but maybe take several quarters. And on top of that, we take the average of our global manufacturing and the marketing capabilities and optimize the economics. Rajiv Chaudhri: Okay, another question is on the N-type market. What do you think the size of the N-type market will be in 2024, this year? I mean, and what will your market share be? If you do 90 to 95 gigawatts. Stella Wang: Hi, Rajiv. Sorry to interrupt you. We will take this as the final question. And for more questions, we can discuss after the call. Is that okay? Charlie Cao: I think N-type this year is kind of the TOPCon dominance. This is a dominating year for N-type TOPCon. And the market penetration for TOPCon roughly I think maybe 70% to 75% and Jinko roughly 90%. So that's, if you look at it, look for next year, I think it should be 100% penetrations for N-type. Operator: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.

JinkoSolar Holding Co., Ltd. (JKS) Q2 2024 Earnings Call Transcript

Matt Ingraham - ROTH Capital Partners Alan Lau - Jefferies William Grippin - UBS Rajiv Chaudhri - Sunsara Capital Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co., Ltd. Second Quarter 2024 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, Ms. Stella Wang, JinkoSolar's Investor Relations. Please proceed, Stella. Stella Wang Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's second quarter 2024 earnings conference call. The company's results were released earlier today and are 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. They 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 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. It's now my pleasure to introduce Mr. Li Xiande, Chairman and CEO of JinkoSolar Holdings, Mr. Li will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Li. We are pleased to announce that, thanks to our leading position in N-type TOPCon technology, competitive products as well as global sales and manufacturing network, our module shipments grew by 34.1% year-over-year to 23.8 gigawatts in the second quarter, ranking first in the industry. By the end of the second quarter, we had led the industry as the first solar company in the world to reach a total module shipments of 260 gigawatts to nearly 200 countries and regions. This again demonstrated the power of our globalization strategy. In the second quarter, prices in several segments of the industry chain declined slightly on a sequential basis. We flexibly adjusted our production scheduling strategy and the utilization rates for different process and also optimized our supply chain strategy to control costs. Gross margin was 11.1% in the second quarter, almost flat sequentially. Adjusted net income was $52.1 million, slightly down sequentially. [Foreign Language] Global demand showed faster growth momentum in the first half of 2024. The newly added installations in China totaled 102 gigawatts in the first half, up 30% year-over-year. From January to June, total solar module exports increased by around 20% year-over-year. At the same time, we saw an increase in capacity expansion projects delayed, suspended, with even some terminated. As to existing capacity, some manufacturers have cut or suspended production. Coming to the third quarter, prices in the industry chain were low and volatile with prices in most segments falling below cash cost. The utilization rates across the industry declined compared to the second quarter to an overall low level. We view this irrationally low prices as unsustainable. Meanwhile, government and industry launched the control policies to promote the healthy and orderly development of the solar industry. Financial institutions became more selective, preferring to favor strong and excellent companies with technological innovation and cost control capabilities as well as brand channel advantages. We believe that all these matters will further accelerate the elimination of the outdated capacities as well as industrial integration. In the future, we expect the companies with robust sustainable operations to reinforce their industry leadership. The in-depth industrial adjustments are bringing both challenges and opportunities to companies. We will continue to improve our management efficiency, strengthen and expand our globalization advantage, taking on challenges in the industry with our resource advantages and innovative capabilities. [Foreign Language] Thanks to our global footprint and the competitiveness of our products, by the end of the second quarter, the visibility of our order book for 2024 exceeds 80%. We have maintained our overall leading utilization rates in the industry, especially for N-type cells, the utilization rate is nearly 100%. [Foreign Language] We kept refreshing our record for cell efficiencies. At the end of the second quarter, lab efficiency of our N-type TOPCon-based perovskite tandem solar cell reached 33.24%, a significant leap beyond our previous record of 32.33% last year. The mass produced the efficiency of our 182 TOPCon cells exceeds 26.1%. We firmly believe that TOPCon remains in the path with the best economic performance in terms of cost, mass production yield, intellectual property protection and customer acceptance and still has room for further cost reduction and efficiency increase. We intend to keep our leading position by gradually adopting new technologies, while consider both efficiency improvements and economic returns. [Foreign Language] We continued to optimize our supply chain to cater to the demands of global clients for low-carbon, clean, high efficient and reliable products. In the first quarter of this year, we unveiled Neo Green panels produced in the Zero Carbon Factory certified by TUV Rheinland for compliance with the relevant criteria and the requirements. So far, we have received positive feedback from our clients. This once again confirmed our commitment to clean manufacturing and product innovation. [Foreign Language] Shifting to the international trade continuing expansion of our globalization capabilities is becoming increasingly important. As recently announced, we have entered into a strategic partnership with renewable energy localization company, a wholly owned subsidiary of PIS and Vision Industries Company to form a joint venture in Saudi Arabia for the production of 10 gigawatts of high-efficiency solar cells and solar modules. This is another step in our innovative transformation from global sales to global manufacturing and an important milestone for our globalization strategy. With years of experience overseas, we are dedicated to building localized solar ecosystem together with other partners to achieve synergy of resources and complementarity of advantages and further grow our competitiveness in the global market. [Foreign Language] We are accelerating the clearing out of P-type capacity to optimize our capacity structure. We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 195 and 130 gigawatts, respectively, by the end of this year. We expect our advanced capacity structure to continue to lead the industry. [Foreign Language] With our advantages in anti-TOPCon technology, competitive products as well as global sales and manufacturing network, we reiterate our guidance for module shipments to be between 100 and 110 gigawatts for the full year 2024, and we will continue to implement our globalization strategy to actively seize market opportunities and mitigate market risks. We expect module shipments to be between 23 to 25 gigawatts for the third quarter of 2024. By the end of this year, we expect net produced N-type cell efficiency to reach 26.5%. Overall, we are holding a healthy cash flow. We will continue to optimize the structure of our assets and liabilities as well as our cash flow levels, strengthening our resistance to risks. Gener Miao Thank you, Mr. Li. Total shipments were 25.3 gigawatts in the second quarter with module shipment accounting for approximately 94%. We are pleased that we continue to rank number one in the world for the market shipments as we are increasingly recognized by global clients for our high efficient and reliable products and services. In terms of geographic mix, approximately 60% of our module shipment went to overseas market in the second quarter with Asia Pacific and Europe accounting for majority. Sequentially, shipment to the US were relatively stable and shipment to Europe increased by 40%. Thanks to the continuous improvement in Tiger Neo product strength, Tiger Neo shipments accounted for 85% of total shipment in the second quarter, a steady increase from nearly 80% in the first quarter as these modules are increasingly accepted by price, particularly in China, Europe and North America. Currently, we lead the industry as the first solar company in the world to reach a cumulative N-type module shipments of 100 gigawatts. They continue to enjoy a premium in global market with premiums in some markets like Europe, US and the Middle East, especially high. On the strength of our extensive global sales network, we will continue to optimize our shipments and the product portfolio. We were recognized as a top performer across all reliable categories -- reliability categories in the PV Module Reliability Scorecard published by Kiwa PVEL for the tenth consecutive time. And we topped the PV Tech 2024 Q2 ModuleTech Bankability Report with the highest AAA rating. This is a continuous recognition of our commitment to quality, innovation and R&D over the long term as well as clients long-standing trust in our product quality, bankability and reliability. Recently, we became one of the few companies to have won both Tier 1 energy storage provider and the Tier 1 PV module manufacturer by Bloomberg. These orders are not only a testament to the power of our outstanding brand but also an affirmation of our proactive contribution to global energy transformation. As the economic of solar energy become more apparent, we expect demand in the global market to stay around 600 gigawatts in 2024 and a growth steadily in 2025. In addition to mainstream markets like China, US and Europe, emerging markets such as Middle East and some countries in Asia Pacific are also showing strong growth potential. With our accumulated experience in global sales and a growing industry trend footprint, we are confident we will over time, cease the opportunity brought about by the growth in global market demand more rapidly and more high efficiently and optimize overseas supply chain to effectively cope with changes in international trade policies. We will continue to optimize our products and services, constantly enhancing our competitiveness globally through strategic market positioning and outstanding client relationship management. Thank you, Gener. We are pleased to report sequential growth in module shipments and total revenues in a very challenging second quarter. While module prices declined, we reduced cost through supply chain optimization and technology upgrade, improve operating efficiency of optimized assets and liability structure. Gross margin was relatively flat sequentially and our asset liability ratio was down by one percentage point compared to the year beginning. Despite the challenging situation in the industry, we did not stop returning value to our shareholders for their long-term support. At the beginning of August, we announced a cash dividend of $1.5 per ADS, which was paid today as planned. In addition, as of today, we have repurchased a total of 5.6 million ADS in an aggregate amount of over $130 million in the open market, under our share repurchase program announced in July 2022 and the extended share repurchase program announced in December last year. Let me go into more details now. Total revenue was about $3.3 billion, up 4.4% sequentially and down 21% year-over-year. The year-over-year decrease was mainly due to a decrease in average selling price of solar modules. Gross margin was 11.1% compared with 11.9% in the first quarter this year and 15.6% in the second quarter last year. The year-over-year decrease was mainly due to the decrease in average selling prices of modules. Total operating expenses were about $525 million, up 24% sequentially and up about 18% year-over-year. The sequential and year-over-year increases were mainly due to the write-off the net book value of the equipment resulted from the fire accident in Shanxi Province, which was partially offset by estimated insurance proceeds from the fire accident in the second quarter this year. Total operating expenses accounted for about 16% of the total revenues in the second quarter compared to 13% in the first quarter and about 11% in the second quarter last year. Net loss attributed to the JinkoSolar Holding Company Limited ordinary shareholders were $13.9 million in the second quarter this year. Excluding the impact of the change in fair value of the convertible senior notes, fair value loss related to the investment in solar supply chain companies, share-based compensation expenses and net loss resulted from a fire accident in Shanxi, adjusted net income attributed to the JinkoSolar Holding Company ordinary shareholders was about $52 million. Moving to the balance sheet. At the end of the second quarter, our cash and cash equivalents were $1.91 billion compared with $2.4 billion in the first quarter this year. AR turnover days were 89 days compared with 100 days in the first quarter this year. Inventory turnover days were 82 days compared with 89 days in the first quarter this year, as a result of improving operating efficiency. At the end of the second quarter, total debt was $3.86 billion compared to $3.66 billion in the first quarter. Net debt was $1.95 billion compared with $1.22 billion in the first quarter of this year. This concludes our prepared remarks. We are now happy to take your questions. Operator please proceed. [Operator Instructions] Your first question comes from Philip Shen with ROTH Capital Partners. Matt Ingraham Hi, this is Matt Ingraham on for Phil. Thank you for taking our questions. Looking into the back half of the year and 2025, how do you see module pricing trending? And then on gross margins, what is it going to take to return to the mid-teens margin levels? And do you think this could be achievable in 2025? Gener Miao Thanks for the question. This is Gener. I think in general, market price will stay at the, let's say, a relatively low level for a while for most of the market. It's really because in general the oversupply situation is quite obvious across the industry, but for sure margin-wise it depends on the cost, how fast the cost reduction can catch up with the low price situation right now. So we, at least from what we are seeing right now, quarter by quarter or month by month, the cost reduction is happening almost every day. So hopefully with the improvement from the cost control and also all the actions we are taking or the whole industry is working on, the margin could go back to at least a healthy level as early as possible. Matt Ingraham Okay, great, thank you. And then kind of on supply and demand, with module prices so low for so long, is that resulting in any demand elasticity? And if so, which countries or regions could we see upside surprise in demand? And then on the supply side, when do you think this oversupply situation across the supply chain gets resolved? Does this happen next few quarters, next 12 months or longer? Gener Miao It's really difficult to forecast the right which day the market will turn upside down. But we see everything gradually going to that direction everyone. From the demand side, no matter it's US, Europe or China or other emerging markets, we still foresee healthy growth year-over-year. Meanwhile, when we see the supply side, for sure we have seen some newcomers that have dropped their plans to give up what they planned to do previously. And also from the policy-wise, we see some China government policy initiative, which is trying to control the new expansion of the capacity, which shows a pretty strong signal to constrain the capacity supply side as well. So, and also the current loss-making market will shake out some of the weak players across industry too. So, adding all those up together, supply side where we see a steady growth year-over-year. And the supply side, we see some action taking. It might take some time, but it's moving on the direction to restrict the supply into more rational levels. So adding those two together, we hope to give it several quarters, the things will get back to a rational level, I hope. Your next question comes from Alan Lau with Jefferies. Alan Lau Thank you for taking my question. This is Alan from Jefferies. So first of all, the results are actually quite impressive, especially during the backdrop of a very challenging market environment. So I've got a couple of questions I would like to check with the management. First of all, what is the US shipment amount and also the US shipment expectation in second half of this year? And what is your view on the policy risk in the US market, especially there were recently filings of critical circumstances? Gener Miao So for US, it's a very special market. We see the market is, firstly, for Jinko, we are gradually getting back our market share gradually after the efforts we have taken in the last two years time. So if you look into the total shipment numbers, we have provided the range of 5% to 10% as the annual shipment range. But if we look into Q4, it's roughly 5% to 6%. So seasonally, a change is required. For example, right now, there's a rush before the tariffs kick in. Also, the market demand is picking up. So season, quarter by quarter, there will be some small changes. But in general, I think it's still falling to the range between 5% to 10% of our total shipment in the US. And for the long term, we still believe US is a great market because of the demand, thanks to the AI driving, the electricity demand is strong and also the IRA act is a strong support to the new capacities both on the manufacturing side and on the utility project development side as well. So in long term we are still a big fan of US solar market. And we believe we will continue to be there to find a stable supply plan to serve our clients in US. Even there are some -- there might be some turbulence on the trade policy side, but we still have some prepared solution on it. Charlie Cao For the second, [indiscernible] I think you are talking about the [Technical Difficulty]. It's really a little bit of risk, but we have proactively managed the situations and based on the regulations and we think the risk to Jinko is relatively low. Alan Lau Is it because of the relatively stable volume from Jinko? Like there was no spiking volume, so you think it's actually compliant with the rules, right? Charlie Cao It's a little bit complicated, but [indiscernible]. So, and if you are going to be qualified for the situations you must be -- the volume shipments after the finding data case and the risks that they form and there should be a significant increase of shipments. So we proactively manage the volume. So that is what I'm saying. But there's still some kind of risk, but we think the risk is low for Jinko. Alan Lau Thank you, very clear. Also, we'd like to know what is the progress in our Middle East, because there was a huge announcement on the capacity [indiscernible] war in Saudi Arabia. So we would like to know what is the estimated timeline of that capacity and what type of policy you expect would be benefited? Charlie Cao It's really a very strategic move for our international manufacturing. And it's not only a purely facilities in Saudi Arabia and we are working with the PIF and the region industries. And in Saudi Arabia, we have a very big ambition for the energy transitions by 2030. And we work together to localize the production of advanced capacities to gigawatt for the module capacities. And Saudi, I think the government has a policy department, which is -- the goal is to help to promote local productions in Saudi Arabia. So we wait back after our operational in 2026 and then the modules for Saudi Arabia locally will have a premium compared to the modules out of Saudi Arabia. And on top of that, the government has strong support policies to the joint ventures in Saudi as well. Alan Lau So would there be any localization requirement on tendering so that you can ensure all of your modules will be sold and also even some of your competitors will have to buy your modules because of that localization requirement? Charlie Cao I would like to be more confident. We will have very unique competitiveness in Saudi and for the Saudi market. And Saudi, if you look at the total market size, it's roughly 50%, 60% of the total Middle East. And the Middle East, we are very optimistic in the next three to five years. And I think you want to explore the detail policies. There is some policies existing, but it's going to be developed, I think by the government as well. And the current policies, 20% local content space with some kind of additional penalty. The big issue is in Saudi Arabia there is no qualified module producers. So most of the developers at this stage is they get the waiver letter. By my understanding, there is no available local producers. But I think we are in a good position to penetrate the markets and absolutely announce our joint venture. Alan Lau So you will be technically the only qualified producer by 2026. So that might bring you premium there, right? Charlie Cao I would love to say that. I think we will be the first mover. So we take that along. We will be the first mover here. Alan Lau And an accounting question on the financials. Because I saw in the adjusted -- calculations of adjusted earnings, actually it's around RMB380 million. So is it like RMB665 million and then you take [58%] (ph) of shareholding on the loss of that. So you showed that you get to [$80] (ph) million. The adjusted net income. So it's shown as RMB378 million. So there's a net loss due to the Shanxi fire accident of RMB380 million. So I'd like to know if this RMB380 million is 58% of RMB665 million in the Asia level. Pan Li Yeah, you're talking about the total numbers for the Asia is kind of the number you're talking about. And because the US, called it 58%, so 58% so the minority, there's I think a separate line, net income attributable to non-controlling interest, that consolidated all the net income should be allocated to the minority interest from the perspective of US, [Mexico] (ph). Alan Lau Understood. Including the loss from the Shanxi province, right? It's also proportionated. Yes. Thank you. Thank you. So my final question is, what is the usage of FBR polysilicon now? Can you use 100% of that to save cost? I think we get kind of improvement on utilization levels. And typically, it's kind of 30% to 50%. [Operator Instructions] Your next question comes from William Grippin with UBS. William Grippin Hi, thanks a lot for the time. Just a couple for me. The first one was on the tandem cell efficiency that you noted in the press release. Could you just talk about kind of where you are in the development process for that technology? And how long before you think we could see something become commercially available? Charlie Cao The tandem is still in the early stage, but we are optimistic for the future commercialization of the TOPCon plus tandem technology. But still, it's -- if you look at the time scheme, it's -- we believe in the next five years, it's still in a laboratory stage. And it's possible after five years, it could be commercialized, but it depends a lot on progress. So back to the question, we don't believe it's commercially 100% visibility at this stage. And the earlier time may be after five years. William Grippin Got it. Thank you. And then just on the TOPCon side, obviously there's been a lot of headlines and reports of litigation, companies claiming IP around TOPCon, a little bit hard to get a good handle on the patent landscape there. Just wondering if you could speak to how comfortable you are with your position sort of in the TOPCon IP landscape across your key markets and maybe any sort of discussions around licensing or other legal actions that maybe you've been having. Charlie Cao So the patents, if you look at it, Jinko is kind of the TOPCon promoter, the leader of technology, and in the recent three years, we invested around 5% to 6% total revenue on R&D, and the significant part we put into the TOPCon. So we're really very confident about our patents, particularly in TOPCon. If you look at the total volume, if you look at the quality, if you look at the patents, or the spread in different countries, particularly out of China. So I think at the beginning of this year, we also announced some kind of news. We granted some kind of patents to one sort of company, one sort of module company, once sort of sale company. So that demonstrates our strong capabilities on R&D and patent position. Your next question comes from Rajiv Chaudhri with Sunsara Capital. Rajiv Chaudhri Good morning. I have a few questions. The first couple of questions are just housekeeping. Can you tell us what the depreciation and the capital spending numbers were for the second quarter and what the targets are right now for the full year? Pan Li Okay. Thank you for the question. In the second quarter, we reduced the number of CapEx as compared with the first quarter, which was the total CapEx in the first half year would about be RMB4 billion. And our prospective total CapEx in the whole year would be adjusted to about RMB9 billion. Charlie Cao Rajiv, I think the big question -- the big picture is, it's a tough situation, right, in the industry wise. But the industry has suffered in the, I think, three or four quarters. And as TOPCon companies, we help them manage the companies and the sustainable growth. And we balance the shipment for [indiscernible] and further solidify our positions on the cash flows particularly. On top of that, we significantly cut the CapEx this year as well as next year, as well as lower the operating expenses and optimize our operation, including the training some labor force. So, and if you look at our CapEx, for next year, we don't have any CapEx plan, except for the Saudi Arabia capacities, which is a strategic movement. So just for illustration, we understand. But we think after several quarters, we cannot predict exactly, but we have seen the big players, top two or top three, even some kind of relatively rental payers have been consolidated or phased out in June -- the downward cycle. So we are getting -- I think we are getting prepared really to go through the cycle time. Rajiv Chaudhri So are you suggesting that CapEx in 2025 will be even less than the RMB9 billion in 2024? Charlie Cao Yes, definitely. And Saudi Arabia is very unique. Because we take 40% equity and really equity will be $100 million next year. So except for that, I think we have some kind of maintenance CapEx as well as some kind of investment on R&D, R&D CapEx. So definitely it's going to be lower next year. Rajiv Chaudhri Okay, and what about depreciation in the second quarter? Pan Li So each month, roughly, if you want to use your financial model, it's kind of RMB500 million to RMB600 million, you can put in your financial model. Anyway, if you have detailed number questions, I would suggest you can follow up with our IR team to give you detailed number. Rajiv Chaudhri Okay. So moving on to the next question. That is on your average selling prices. Your average selling price in the second quarter was down quite a bit. It was down actually more than 10%, 15% from the first quarter. And part of the reason I guess from reading the presentation is that DG was 50% of sales, and most of DG is, I think, in China. So the combination of focus on China and DG led to more than a pretty sharp decline in ASPs. Now, as you go into the second half of the year and shipments as a proportion of total shift away from China, shift away from DG, will that provide a more benign backdrop for pricing for you? Charlie Cao The spot market price, in the last three or six months is continuing to decline, but we think it's going to be the lowest level to be stabilized. But if you look at financial numbers, because we have different markets, the utility scale, the DG segment. We have different markets, US, Japan, different regions and different lead time for signing the contracts. So if you look at the ASP, you're right, I think it's affecting the industry-wide, the down -- as well as market-wise for the modules as of late. Because we have different, in the meantime, different countries. So each quarter Q2, Q1, the averages is in a downward sign. We expect that continually trained in the third quarter, relatively stable in the fourth quarter. But on the other side, if you look at the supply chain perspective, the material cost continue to trend. Rajiv Chaudhri So can we expect that the decline in ASPs will moderate from Q2 to Q3 relative to what we saw in Q1 to Q2? Charlie Cao Yes, I would like to say, if you look at Q4 versus Q3, it's kind of the -- less or less, modernized. Rajiv Chaudhri Okay. But can you say that we are at the point where pricing can be expected to be stable or we are not there yet? Charlie Cao I think kind of in a time scheme, if you look at the sectors, most of the sectors is suffering cash losses. We don't believe there's a significant zoom further. And with the rate of capacity, it should be kind of destabilized. If you look at the solar wafer price in recent week, some top players, they have increased the small market price a little bit. And even, product price has been stabilized. So, step by step, I think, you will see the module and as well as the solar cell in the plants. Rajiv Chaudhri I see, okay. Charlie, your costs were down, apart from the decline in polysilicon prices, your production costs were down quite significantly also in the second quarter and that helped you maintain the gross margin at a double-digit level. Can you break down some of the reasons why the costs were down and can we expect costs to keep on coming down at the same rates that we saw from Q4 to Q1 and then Q1 to Q2? we have had some pretty dramatic declines in cost here and that is separate from the polysilicon prices. Charlie Cao Yes, there are a lot of efforts we are working on, the contingent to optimize our design and the key materials, the purchase price to be have been improved. And the improved working efficiencies, and labor costs cut off, and the operating expenses optimizations. So there are a lot of efforts we are working on. Rajiv Chaudhri So does that mean that gross margin can go up in the third quarter relative to the second quarter? Charlie Cao No, I don't believe that, frankly, because I think we are confident, the gross margin is bottom and we try to be stable -- try to stabilize. Rajiv Chaudhri But you're not confident that it can go up from Q2 to Q3 yet? Charlie Cao No, I would like to say stabilize kind of, if you look at our peers, we are in relatively good positions and stabilized and the phase-out takes time. I think it's not going to take one or two years, but maybe take several quarters. And on top of that, we take the average of our global manufacturing and the marketing capabilities and optimize the economics. Rajiv Chaudhri Okay, another question is on the N-type market. What do you think the size of the N-type market will be in 2024, this year? I mean, and what will your market share be? If you do 90 to 95 gigawatts. Stella Wang Hi, Rajiv. Sorry to interrupt you. We will take this as the final question. And for more questions, we can discuss after the call. Is that okay? I think N-type this year is kind of the TOPCon dominance. This is a dominating year for N-type TOPCon. And the market penetration for TOPCon roughly I think maybe 70% to 75% and Jinko roughly 90%. So that's, if you look at it, look for next year, I think it should be 100% penetrations for N-type. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.