Chinese solar photovoltaic (:PV) power product manufacturer JinkoSolar Holding Co., Ltd. (JKS) has announced the closing of its follow-on public offering of approximately 4.4 million American depositary shares (ADS). This includes approximately 0.6 million ADS, which the underwriters purchased to cover over allotments. In the offering, each ADS represents four ordinary shares at a par value of $0.00002 per share.
JinkoSolar managed to accumulate net proceeds of approximately $67.8 million from the issuance. The company intends to utilize the net proceeds to fund for general corporate purposes, including construction of solar ventures and expansion of manufacturing facility.
Initially, JinkoSolar announced that it will offer 3.5 million ADS. On Sep 9, 2013, the company increased the number to 3.8 million ADS, at $16.25 per ADS.
As of Jun 30, 2013, JinkoSolar had approximately 22.2 million of diluted ADS outstanding. With the current offering, the company’s outstanding ADS will increase to roughly 26.6 million.
Earlier, Chinese solar product manufacturers earned a major part of their revenues from the U.S. market. However, the U.S. government has implemented several clauses to control import volumes from China, while encouraging domestic players to promote their solar products in the U.S. market. These regulations have made the solar market more competitive for Chinese solar product manufacturers operating in North America. The U.S. solar markets are thus becoming less lucrative for the Chinese solar module manufacturers. Therefore, currently, the Chinese companies are exploring new prospective markets while strengthening their presence in China. The companies are investing substantially to expand their footprint in different geographies while continuing with their research and development (R&D) activities to upgrade technologies.
As of Jun 30, 2013, JinkoSolar had a cash balance of $74 million, which is not sufficient to sustain its expansion as well as R&D efforts.
Apart from issuing ADS, JinkoSolar borrows from the financial institutions to meet its financial requirements. In Apr 2013, the company entered into an agreement with China Development Bank for a 15-year loan of approximately $58 million. The main objective of taking loan is construction of a PV solar power plant for expansion and strengthening of the company’s Chinese operations.
We believe JinkoSolar’s efforts in expanding its operations and upgrading technologies will help to gain more contracts going forward.
JinkoSolar currently has a Zacks Rank #2 (Buy). Other stocks in the industry that are worth considering include SunPower Corporation (SPWR) with a Zacks Rank #1 (Strong Buy), and JA Solar Holdings Co., Ltd. (JASO) and ReneSola Ltd. (SOL), each with a Zacks Rank #2 (Buy).
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