JinkoSolar Holding Co., Ltd. Message Board

///In the past when ASP was much higher, then OPEX percent of revenue must have been extremely low with your logic///

Lets take a look at TSL.

If you look at Opex and interest as a % of revenue from Q1 2010 to Q3 2012 Opex has increased from 10.1% to 15.1%.

If you look at Opex and interest per MW it has remained fairly constant at $0.18+/-

This implies a constant cost per MW of production and the relationship to the ASP is that it increases as ASP drops.

If you look at Opex and interest per Watt as a % of ASP it has increased from 10.5% to 15.1%. This is inline with the comparison to ASP.

During the same time the ASP has declined 25.5% from $1.74 to $1.32 yet Opex and interest has increased at a rate of near 50%.

The primary culprit of this increase in RnD.

If you factor out Rnd, Then Opex(sales and Gen Admin) as a % of revenue has shown a steady increase from 7.7% in Q1 2010 to 9.9% in Q1 2011 to 13% in Q3 2011.

Again, this is increasing as the ASP drops and is increasing at a faster rate than ASP drops indicating some fairly fixed costs per MW of production.

That is indicative of a certain level of personel for support to manufacture and the associated costs with them.

well, the key question then is if we think that 90 days to collect the money will be standard for jks going forward.

I doubt that. but we have to monitor this for sure.

from a liability and debt sceanrio, they did not operate very well either. As sales increased 30% yet debt rose 79% and liabilities increased about 100%.


$320M short term
47.8M long term
$62.9M bonds
Current liabilities $896M


Eventually, liabilities need pay down.

//well, all I am saying is that they managed ok in for example q1 2011 and q2 2011 with much higher account receivable costs///


I might disagree on their managing AR’s or cash. You should look at it as days outstanding and not $$$. But even looking at $$$ that is still not very impressive

Q3 2010 AR 92.78 Sales $215M = 39 days
Q4 2010 AR 87.5M Sales 267.7 = 30 days
Q1 AR $201M Sales $326.7M = 56 days
Q2 AR $263M Sales $350.6M = 68 days
Q3 AR $261.9 Sales $279.2M = 85 days

Ratios

AR Q1 vs Q4 increased 26 days or 86.6%
Q2 to Q1 increased 12 more days or 21% more
Q3 to Q2 increased 17 more days or 20% more.
Total days outstanding Q4 to Q2 increase was 38 days or 126% increase in accounts receivables
Today days from Q4 to Q3 increased 55 days or 183%.

In my opinion managed well would have been maintaining AR’s or increase slightly by 10 or 20% not by 183%.

needless to say that we cant be sure on what will happen - the future will show. alot is definitely out of our control so predictions can only stay guesses.

I appreciate your input definitely.

all I can say is that when I for example saw some many months back that ldk has a workforce of above 25000 employees already I immediately thought there is tremendous room to cut costs further.

this is quite automated business - it is not like coal mining or so.

well, all I am saying is that they managed ok in for example q1 2011 and q2 2011 with much higher account receivable costs and higher inventory costs as they might require for example in H1 2012.

q2 2011.
shipped around 250 MW at around $1.4 - > revenue 350 million.
those are ARs.

they need to ship 350 MW+ in 2012 to reach that AR level.

I think the same is true for inventory. in q1,q2 they had potentially poly at $50-70 costs. now poly costs half of it so theoretically they need to double that 250 MW level shipment to have the same inventory costs.

I think that is what would be true for 2012.

you are absolutely right that with like end 2013 where they might reach 2 GW that some numbers for sure increase.
but then using your 15 cent profit per watt you are also looking at 2000x15 cents= 300 million gross profit.

I dont see a scenario for them where they produce 2 GW and sell 1.4 or so. I doubt they do that.
more stuff will be floating around but I doubt AR days increase heavily. unless you finance your own project of course which I hope they wont do - rather get a china bank onboard.

ABC,

Now you appear to be stretching to invalidate some presumptions I make in my models. I am doing straight across year valuations and not a ramped model. In addition taking a flawed approach of $1.40 ASP to derive reductions when current invnetory is based on a a $1+/- target ASP and current AR is based on Q3 shipments at $1.20ish ASP.

In my presumptions I use a growth model for production. To get to 1.4GW I would likely do a linear ramp over the quarters increasing by 50MW a quarter. Say 275,325,375, 425. Thus the target shipments is well over double Q4 estiamtes. In reality even more production over the booked shipments will occur. And then look at a presumption of Q1 2014 needing 500MW start Q1 with a atarget of 500MW is the needs of inventory + extra.


So for AR, if I believe they have 425MW sales in Q4 2013 at $0.90 and collections is 14 weeks due to some reasons companies are stating like floating inventory untill projects are verified complete and modules are operations, then I have and AR of around $420M.


Some of this extra is also in my comments of 10% of the installs in China for 300-500MW anyally with 6 month spins being 150-250MW of unaccounted for production at any given time.

While they may book 1.4GW, in my suggested model they might produce 1.8 to 1.9GW as some is in projects and some is in the water shipping and some is to build a distribution inventory round the world that is considered FG. This happened to TSL. They looked at what was in containers shipping and forcasted sales for this in their guidance. When it was received on shore, the sales or buyers they thought they would get did not pan out and they had to re-direct the inventory to other regions prior toclaiming as sales. There in lies why 2GW manufacturing capacity I suggested would be ramped to.

Like I said these are only models. I look at. Things could go ganbusters for them and make all this look low, or the market could tank and make this looks overy optimistic. It is just a way I use to model that I believe reflects more truely on needs for inventories.

I have debated with Explo and others over the years regarding LDK cash needs and costs due to similar logic and growth. To date, no one has shown a more accurate representation.

Here are a few questions to ask and account for vs just plain MW sales.

Do you believe they will have plant projects?
Do you believe they will setup up a global distribution?
Do you believe some accounting will not take place untill projects completed for booking revenues by customers?
Do you believe some order booking will not occur untill shipments received in the port of entry or taken by customers?
Do you believe some large contracts will have acceptance criteria such as placed into opeations and verified working?

These all add delays in MW that will be floating around and not claimed in the quarterly sales but required for productions.
When you grow a business all quantities grow with it. And yes some of the costs decline but as I noted, in my numbers breakout earlier, the quantities I expected and cost ranges.

Cheers
Have a safe new years and if you get to Berlin, say yo to my Bro.

the same logic can be used for inventories.
if you have 800 MW poly needs at $50 poly and 1200 MW poly needs at $25 poly is your inventory then more costly ?
I dont think so...

we also need to check our math here:

from 800 MW to 1200-1300 MW is some 50% increase.
but most of that 800 MW was sold in the asp range of maybe $1.40 on average.
800 x 1,4 = 1.2 billion revenue
if you now sell 1200 MW at $1 you get exactly the same revenue - 1.2 billion.
so in that case Accounts receivables dont change a dime.
unless your days to get the money change - I dont see that happening as we are in the midst of a debt problem. so that might improve.

for sure new sales teams cost money. but as I said before as these comps were earning alot of money while growing none of them really paid 100% attention to saving costs. that will now happen normally - if management is smart of course.