U.S. Markets closed

Edited Transcript of JKS earnings conference call or presentation 5-Jun-17 11:30am GMT

Thomson Reuters StreetEvents

Q1 2017 JinkoSolar Holding Co Ltd Earnings Call

Shanghai Jun 6, 2017 (Thomson StreetEvents) -- Edited Transcript of JinkoSolar Holding Co Ltd earnings conference call or presentation Monday, June 5, 2017 at 11:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Gener Miao

JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing

* Haiyun Cao

JinkoSolar Holding Co., Ltd. - CFO

* Kangping Chen

JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director

* Sebastian Liu

================================================================================

Conference Call Participants

================================================================================

* Maheep Mandloi

Crédit Suisse AG, Research Division - Research Analyst

* Paul Strigler

* Philip Lee-Wei Shen

Roth Capital Partners, LLC, Research Division - Senior Research Analyst

* Qingli Lei

Deutsche Bank AG, Research Division - Research Associate

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Thank you for standing by, and welcome to JinkoSolar First Quarter 2017 Earnings Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today, June 5 2017. I will now hand the conference over to your host today, Sebastian Liu, Investor Relations Director. Please go ahead.

--------------------------------------------------------------------------------

Sebastian Liu, [2]

--------------------------------------------------------------------------------

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's First Quarter 2017 Earnings Conference Call. The company's results were released earlier today and available on the company's IR website at www.jinkosolar.com as well as on the newswire services. We have also provided supplemental presentation for today's conference call, which can also be found on the IR website.

On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Cao Haiyun, Chief Financial Officer; Mr. Gener Miao, VP Global Sales; and Mr. Sebastian Liu, IR Director.

Mr. Chen will discuss JinkoSolar's business operations and company's highlights, followed by Mr. Gener Miao who will talk about the sales and marketing and then Mr. Cao 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 provision of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve the inherent risks and uncertainties. As such, our future result may be materially different from the views expressed today. Further information regarding these and other risks is included in JinkoSolar's public filing with the Securities and Exchange Commission.

JinkoSolar does not assume any obligation to update any forward-looking statements except as required under applicable law.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [3]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [4]

--------------------------------------------------------------------------------

Thank you, Sebastian. Good morning and good evening to everyone, and thank you for joining us.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [5]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [6]

--------------------------------------------------------------------------------

During the quarter, module shipment hit a record high of 2,068 megawatt, an increase of 19.3% sequentially where total revenue reached USD 839.3 million, up 12.8% sequentially. Gross margin was 11.2% compared with 14.3% of last quarter and 20.5% in the same period of last year.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [7]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [8]

--------------------------------------------------------------------------------

ASP declined slightly. Polysilicon prices increased during the quarter as did some of the material costs in the supply chain caused by a strong demand, which negatively impact our gross margin. Seasonality around Chinese new year also constrained our capacity during the quarter requiring more use of OEM, which averaged down our overall gross margin. With our mono wafer and PERC cell capacity climbing and with polysilicon price stabilizing, we expect to see our gross margin has room to improve in Q2 and during the later half of the year.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [9]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [10]

--------------------------------------------------------------------------------

Demand in China was strong during the quarter and we maintained gross momentum in Q2. While the June 30 feed-in-tariff cost has create some uncertainty in utility market, we haven't seen demand weaken. We believe that the Top Runner project, PV Poverty Alleviation project as well as distributed generation project will provide strong support in the second half of the year. Our mono PERC products are in short supply and have been fully booked for the rest of the year, demonstrating that the strong demand that our high-quality products have. Also, China, Suniva's petition under Section 201 and the U.S. International Trade Commission's decision to launch a unification has somewhat disrupt the U.S. market and create uncertainties. We believe Suniva's petition is baseless, and if granted, will hurt the U.S. PV industry and threaten more than 260,000 jobs to it. While the petition may stimulate some rush demand and win orders in the short term, we remain steadfastly opposed it. We have seen the U.S. ASPs in the past month increasing slightly due to the strong demand in the second half of the year. This U.S. growth momentum is expected to continue on top of 201 rush orders. Demand from India and the emerging market also continued to grow rapidly where we are devoting more resources there to expand -- lead the market share. I will let Gener to go over the market information in more detail later.

Looking ahead for the next quarter, though, we expect to increase our shipment by another 25% in the second quarter of 2017 as a result.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [11]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [12]

--------------------------------------------------------------------------------

We continued to ramp up our mono wafer and PERC share capacity, which will reduce overall cost of our mono products and help increase the margin. Our focus on the product efficiency gave us product competitive advantage in the market. Both our mono and multi-products are qualified for the Chinese Top Runner Program. And our PERC product, as I mentioned before, are in short of supply. In the meanwhile, our team is working hard to optimize our cost structure of both our mono and multi-products.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [13]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [14]

--------------------------------------------------------------------------------

While we expect some short-term challenges and headwinds, the continued development of global solar industry is irreversible. We have always been confident in long-term prospects of the solar energy and believe JinkoSolar will be able to generate sustainable growth for our shareholders.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [15]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [16]

--------------------------------------------------------------------------------

Before turning the call over to Gener, I will quickly go over the guidance. The company estimates total solar module shipment to be in the range of 2.5 to 2.6 gigawatts for the second quarter and 8.5 to 9 gigawatts for the year of 2017.

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [17]

--------------------------------------------------------------------------------

(foreign language)

--------------------------------------------------------------------------------

Sebastian Liu, [18]

--------------------------------------------------------------------------------

Thank you, Sebastian. With that, I will turn the call over to Gener.

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [19]

--------------------------------------------------------------------------------

Thank you, Mr. Chen.

Total module shipment during the quarter reached a record high of 2,068 megawatts, which reflects continued strong demand for JinkoSolar's products and services. Strong demand will continue into the second quarter with shipment expected to increase by approximately 25% sequentially. We shipped to approximately 67 countries during this quarter. Taking a closer look: 35% went to China, 23% to Asia Pacific, 18% to emerging markets, 13% to North America and 11% to Europe. We will continue to capitalize on the growing recognition of JinkoSolar's brand and improve our localized sales and marketing services to increase our market share and to capture new opportunities.

China remained our largest market during the quarter. Momentum in China will continue, driven by the rush orders coming in before the June 2017 subsidy change. Our PERC products have been in short of supply. Top Runner projects and the PV Poverty Alleviation projects will supplement Chinese market demand in the second half, and particularly in Q3, distributed generation projects will make strong demand. We will continue to develop our presence across Chinese market from utility scale power plants to the Top Runner Program and the Poverty Alleviation Project and also down to distribution sectors for residential markets.

Outside China, we expect the demand in U.S. market to remain strong during second half of 2017 and the first half of 2018 as the development of most projects draw to a close. As a result of relatively limited supply, ASPs have stabilized and are increasing modestly.

Suniva's petition under the Section 201 and the U.S. International Trade Commission's decision to launch an investigation has somewhat distracted the U.S. market and created uncertainties. We believe that the U.S. government will, however, take into full consideration the more than 260,000 people currently employed in the service, installation and the financing of the U.S. solar market. We will continue to provide long-term service for our customers there and offer our highest-quality products as well as most of professional services.

Demand in Turkey and the U.K. were also very strong during the quarter. Following the withdrawal from the EU's MIP, demand in local European markets such as Germany stabilized and are expected to remain that way for the foreseeable future. We believe the further of -- future of European solar industry will continue to be promising with many southern regions having opportunities to reach great parity under old and [user end]. We have achieved a leading position in key European markets and will further consolidate our competitive advantages.

In Asia Pacific region, ASPs and demand in Japan remained steady and we expect that -- to see considerable demand there over the next few years. India has peaked demand during the first quarter and is well on its way to becoming a sizable market as PPA price becomes more competitive. Other markets such as Australia, Malaysia, Vietnam and Indonesia are also showing great promise.

Emerging markets have grown rapidly. We expect them to be among of most important markets to us over the next 2 to 3 years. The Latin America market has become one of the fastest-growing solar markets in the world and where we have won and are currently bidding for a number of long-term contracts. The Middle East and Africa markets are being -- beginning to contribute meaningful to global demand growth. We remain a market leader in key markets such as Mexico and the UAE with more than 30% market share and have established a sophisticated local service team to further expand.

Overall, ASPs during the quarter came in at USD 0.395, slightly decreased from $0.41 in the first quarter of 2016. We expect the ASPs to remain stable in the second quarter. Challenges will not, however, change our confidence in the future of the PV industry and our ability to lead it.

Moving to marketing and branding. We attended exhibitions worldwide during the quarter. In January, we participated at the World Future Energy Summit in Abu Dhabi, UAE, which is the largest renewable energy trade show in the region. In March, we also attended a PV EXPO in Tokyo, Japan with our brand-new Eagle PERC series product. We also attended a Boao Forum for Asia Annual Conference 2017 in Hainan, China and we are honored to deliver a speech on private sector roundtable. In addition, we sponsored 8 trade conferences and organized 2 customer events, more than 10 customer trainings, 10 road shows, 8 co-marketing activities with key distributors or partners across the world. Also, JinkoSolar hosted a media conference during NPC and CPPCC in Beijing on March. More than 70 mainstream medias internationally attended the conferences. We have future strength in our leading position and brand value and the recognition worldwide by participating in those events.

Now I would like to turn the call over to Charlie who will go over our financial results of the first quarter of year 2017.

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [20]

--------------------------------------------------------------------------------

Thank you, Gener. I'd like to walk you through our Q1 results.

Total solar module shipments were 2.1 gigawatts, up 19% sequentially and up 29% year-over-year. Total revenue was $839 million, up 13% sequentially and up 11% year-over-year.

Gross margin was 11.2% compared to 14.3% in Q4 and 20.5% in Q1 2016. The lower gross margin was due to the slightly decline on module price, higher poly and some lower material costs and the increase of OEM volume. The blended cost remained at $0.35 per watt. We target to continuously cut the blended cost throughout the year. The operating expense represented 10.3% of total revenue compared to 12.7% in Q4 and 10.5% in Q1 2016.

EBITDA from continuing operation was $37 million compared to $44 million in Q4 and $114 million in Q1 2016.

Net income was $8.8 million. This translates into basic and diluted earnings per ADS of $0.28. Non-GAAP net income was $11.6 million. This translates into non-GAAP basic and diluted earnings per ADS of $0.36.

Now let's move to the balance sheet. By the end of Q1, cash, cash equivalents and restricted cash were $249 million compared to $406 million at end of Q4. Inventories increased to $780 million, preparing for the strong demand in the second quarter.

The total debt was reduced to $881 million, and the net debt was $632 million.

During the quarter, we completed the repurchase of our convertible bonds due in 2019.

The company's working capital was $117 million compared to $192 million at the end of Q4.

At this moment, we are happy to take your questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We will now take our first question from Philip Shen from Roth Capital Partners.

--------------------------------------------------------------------------------

Philip Lee-Wei Shen, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [2]

--------------------------------------------------------------------------------

I'd like to talk about the ASP outlook, if possible. Perhaps you could give us a sense for where you see blended ASPs in Q2. I know you talked about, I think, some strength in the second quarter, but then, specifically about Q3, with China's demand increase to be potentially not being as bad as some think given the Top Runner projects as well as DG and Poverty Alleviation, can you kind of give us some color as to where you think China ASPs could be in Q2? And then what they look like in Q3, specifically?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [3]

--------------------------------------------------------------------------------

Philip, this is Gener. Let me answer your question. So regarding the Q2, we have seen, as we mentioned in the earlier speech, we see the China demand are extremely strong and that's mainly due to this Q2 rush of this feed-in-tariff change. And the ASPs, Jinko are -- sorry, the ASP from the market side, we see the high 30s range, let's say, USD 0.38, USD 0.39 per watt peak. That's price you need to pay if you want to get any product at a recent date in China. So overall, for our China total demand, we will see the ASP will keep kind of stable as Q1 as you general ASP are doing as well. And for Q3, we need to differentiate the ASP from the different product. So if you are looking -- or we are looking into this demand from Top Runner, which is specified by some high-efficient modules such as PERC, the ASP are extremely high. The numbers we are looking into right now is approximately mid-40s, so let's say, USD 0.44, USD 0.45, so that's the market price we need to pay for the PERC modules at Q3 market right now. And -- so we have to -- if we look into this poly price, standard poly product price, we are expecting a slightly, let's say, decrease compared from Q2. I will assume around a 5% or -ish decrease compared to what we have from Q2.

--------------------------------------------------------------------------------

Philip Lee-Wei Shen, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [4]

--------------------------------------------------------------------------------

Okay, that's helpful. So from the blended ASP perspective kind of globally, I think we calculated Q1 ASP of being about $0.41, is that right? And then also how do you expect the blended ASP for the company to be or to come in for Q3?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [5]

--------------------------------------------------------------------------------

Yes. In my speech, I already mentioned that our ASP in Q1 is $0.395, so that's our ASP in Q1.

--------------------------------------------------------------------------------

Philip Lee-Wei Shen, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [6]

--------------------------------------------------------------------------------

Great. Yes, sorry I missed that. And then what about for Q3, where do you expect that to go?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [7]

--------------------------------------------------------------------------------

Q2 or Q3, sorry?

--------------------------------------------------------------------------------

Kangping Chen, JinkoSolar Holding Co., Ltd. - Co-Founder, CEO and Director [8]

--------------------------------------------------------------------------------

Q3.

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [9]

--------------------------------------------------------------------------------

Okay. Yes, so if we look into the blended ASP in Q3, I will expect a kind of stable, maybe a slightly decrease, but in general, is stable. I will not see too much surprise or big change compare with Q2 ASP mainly because the high price from the premium products.

--------------------------------------------------------------------------------

Philip Lee-Wei Shen, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [10]

--------------------------------------------------------------------------------

Okay, good. And then in terms of the U.S. market, you talked about the potential for a rush in the back half of the year. Can you quantify or provide some color as to what that rush looks like? How much has it -- has begun, if any? And how do you expect the U.S. ASPs to trend in Q3 and Q4 relative to Q2?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [11]

--------------------------------------------------------------------------------

Sure. From the market perspective, we will see a very strong rush in demand from U.S. market due to the uncertainty brought by this Suniva 201 petition and we are expecting a very strong -- even stronger demand later. So that's why when you look into a market, it's very difficult to find any or, let's say, a large amount of availability to supply to U.S. for the following, let's say, 6 months. So I think that's pretty, let's say, same for all the players because of the limited demand, because, obviously, you cannot use this big China capacity to supply U.S. market, so the market available to supply to U.S. market is pretty limited.

--------------------------------------------------------------------------------

Philip Lee-Wei Shen, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [12]

--------------------------------------------------------------------------------

Right. And how do you expect margins to trend as we go into Q3?

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [13]

--------------------------------------------------------------------------------

So Philip, this is Charlie. I think regarding the first quarter gross margin, 11%, which is lower than our expectations, and the unexpected high poly sale price put some pressures on the gross margin in the first quarter. And more importantly, we -- due to the capacity constraints, we increased our OEM volume to 25%, 30% in first quarter. And the gross margin for the OEM volume is pretty low compared to the margin we produce by ourself. The -- improving the gross margin is our key focus for the U.S. for the rest of the year. And we are saying the zoom to improve the gross margin in Q2 and the second half year. One of the key area is the mono PERC module and we are ramping up the capacities. We had only 5% shipments in the first quarter and the volume are expected to increase to 15% in second quarter and 20% in the third quarter. And the gross margin for the mono PERC is pretty high compared to the gross margin of traditional multi products. The second one is, due to the capacity, the module capacity online and -- we have planned to cut the OEM volume in the second half year. And I just said, the gross margin for the OEM multi-product is pretty low compared to the module we produced. The third one is we increased our cost in-house, around silicon costs reduction target to the range of 10% to 15% compared to the original target 8% to 10%.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

We will now take our next question from Maheep Mandoli (sic) [Maheep Mandloi] from Crédit Suisse.

--------------------------------------------------------------------------------

Maheep Mandloi, Crédit Suisse AG, Research Division - Research Analyst [15]

--------------------------------------------------------------------------------

Could you talk about the mix between mono and multi-production in your shipment guidance for rest of the year? And how much visibility do you have for both of them for the year?

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [16]

--------------------------------------------------------------------------------

In terms of the breakdown for the mono and multi, I just said, for the first quarter, we only had around 100 megawatts mono per shipment, which is around 5% of shipment. And for the second quarter, we estimate that for the mono PERC shipment, which is in the range of 350 megawatts to 400 megawatts, accounting for around 15% of total shipments. And in the third quarter and the fourth quarter, we estimate total around 500 megawatts mono PERC shipments for each quarter and around 20% of total shipments.

--------------------------------------------------------------------------------

Maheep Mandloi, Crédit Suisse AG, Research Division - Research Analyst [17]

--------------------------------------------------------------------------------

Got that. And in your prepared remarks, you said you have a full visibility for the mono shipments. How much visibility do you have for the multi- shipments for rest of the year?

--------------------------------------------------------------------------------

Sebastian Liu, [18]

--------------------------------------------------------------------------------

First -- Maheep, this is Sebastian. First, it's not -- fully booked, it's not mono, it's mono PERC, let me clear it, and I will turn the question to Gener.

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [19]

--------------------------------------------------------------------------------

Yes. So Maheep, this is Gener. So in general, we have more than 50% booked. So if you will take consideration for the second half, I mean, so if we look into the numbers just mentioned by Charlie, approximately 20% is the PERC, you will understand where we are.

--------------------------------------------------------------------------------

Maheep Mandloi, Crédit Suisse AG, Research Division - Research Analyst [20]

--------------------------------------------------------------------------------

Got that, and sorry for confusing between the names there. And just last question from me. The G&A declined by $15 million sequentially. So how much of that was due to the reversal of the onetime charge?

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [21]

--------------------------------------------------------------------------------

It's around, I think, USD 3 million to USD 4 million are for the reversal of accounts receivables because of subsequent cash matchings. And the operating expenses is our work area. We are working out to cut the operating expenses and improve our profitability levels, and we estimate our operating expenses will be in a range of 9.5% to 10% in the rest of the year.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

(Operator Instructions) We will now take our next question from Brad (inaudible) from (inaudible).

--------------------------------------------------------------------------------

Unidentified Analyst, [23]

--------------------------------------------------------------------------------

What are you thinking on CapEx for the year, still $400 million to $500 million?

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [24]

--------------------------------------------------------------------------------

We don't have any change for the CapEx plan and -- for the 2017. The key investment is on the mono wafer and PERC capacity and we still stick to our total CapEx plan, which is around USD 400 million.

--------------------------------------------------------------------------------

Unidentified Analyst, [25]

--------------------------------------------------------------------------------

Okay. I think you said last quarter $400 million to $500 million, so now you think of $400 million. What's -- I mean, what's the bigger picture thought on free cash flow and returning cash to shareholders and stock buybacks, maybe one day? I mean, you burn cash, 11 of the last 12 years, you've been a public company, and really, I think that the CapEx plan being so high, what is the rationale there?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [26]

--------------------------------------------------------------------------------

I think the investment in the mono PERC, which is a-high-efficiency product, is not for only 2017, it's for the long-term. And we estimate the market has a strong demand for the high-efficiency products. So the investment is for the future of JinkoSolar and achieve the competitiveness in the world. And regarding the return to shareholders and we are working out and including we are controlling our operating expenses, improve the profitability levels at the rest of the year, and we're still committed to deliver value to our existing shareholders and potential investors in the future.

--------------------------------------------------------------------------------

Sebastian Liu, [27]

--------------------------------------------------------------------------------

Brad, this is Sebastian. So this year, definitely not only you, but it is a concerns of the whole, I think, as a industry about the CapEx. But this year, it's a little bit special because there are some transactions from the multi to the mono. So yes, we don't like it, but that's for the future.

--------------------------------------------------------------------------------

Unidentified Analyst, [28]

--------------------------------------------------------------------------------

Yes. And so what percentage would your mono be -- mono PERC be exiting the year following that CapEx spend?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [29]

--------------------------------------------------------------------------------

So you are talking about the mono PERC?

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [30]

--------------------------------------------------------------------------------

You're asking that -- how many mono we will have by the end of the year, right?

--------------------------------------------------------------------------------

Unidentified Analyst, [31]

--------------------------------------------------------------------------------

Yes. Well, usually, you have to spend this CapEx. I'm wondering what -- where it's going to get you, yes.

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [32]

--------------------------------------------------------------------------------

You mean the capacity, right? You mean the capacity for the mono on the order capacity? Capacity-wise, by the end of second quarter, we plan to have 2 gigawatts mono wafer and the PERC capacity in full operation and we can also add additional 1 gigawatts mono wafer in the second half year. So by the end of the year, we will have 3 gigawatts mono wafer capacity and 2 gigawatts PERC capacity in operation.

--------------------------------------------------------------------------------

Unidentified Analyst, [33]

--------------------------------------------------------------------------------

Right. Well, I guess, the concern from an investor's standpoint is that really the best use of capital is to put it to work where it has the highest return on investment. And if your stock trading at 2.5x EBITDA, it seems like, at some point, a stock buyback or focusing on positive free cash flows is going to really create more shareholder alignment. And I guess, wondering is that going to be a 2018 phenomenon? Or when do you foresee the company moving to more a free cash flow type of a model?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [34]

--------------------------------------------------------------------------------

Sure. I think in 2017, our free cash flow should be negative because of the $400 million CapEx investment, but we are very careful about the healthy operating cash flows. And regarding the 2018, I think that is one of the -- definitely our goal. We like to generate free cash flow in the next year.

--------------------------------------------------------------------------------

Unidentified Analyst, [35]

--------------------------------------------------------------------------------

Would you be open to a stock buyback ever?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [36]

--------------------------------------------------------------------------------

I think we are open to all options including buybacks here, so stock dividends, but it's subject to the company's spot determinations. But we are definitely open for all the options and build the values to -- for investors.

--------------------------------------------------------------------------------

Sebastian Liu, [37]

--------------------------------------------------------------------------------

Yes. Brad, I think you made this suggestions before and we really appreciate it. But since that, like you know, that this year, our -- you know that we have heavy CapEx, so that's why we think we should keep the cash in that way. And the next year, if we will have this kind of a plan, still depends on our CapEx plan, but so we -- like Charlie said, definitely, we will consider in this kind of trend if we will have a healthy cash flows in the future, so we -- it's definitely in our mind.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

(Operator Instructions) We will now take our next question from Paul Strigler from Esplanade.

--------------------------------------------------------------------------------

Paul Strigler, [39]

--------------------------------------------------------------------------------

Have you guys done any work to -- just any math around how much mono PERC capacity is coming online from your competitors as well? I know there's LERRI Solar, there's obviously JA (inaudible) Canadian are adding mono PERC. But overall, do you know how much -- or estimate how much total is coming online in the back half of the year?

--------------------------------------------------------------------------------

Sebastian Liu, [40]

--------------------------------------------------------------------------------

Yes. First, let me -- this is Sebastian. Let me clear, I remember -- if I remember right, Canadian, it's not mono PERC. It's multi PERC.

--------------------------------------------------------------------------------

Paul Strigler, [41]

--------------------------------------------------------------------------------

Yes. Sorry, Hanwha is bringing mono PERC. Sorry, my bad. It was Hanwha.

--------------------------------------------------------------------------------

Sebastian Liu, [42]

--------------------------------------------------------------------------------

Okay, yes. That makes sense. Okay.

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [43]

--------------------------------------------------------------------------------

Yes, this is Gener. So from the market-wise, we have seen lots of plan or expansion plan has been announced. And -- however, if we look into the real effective capacities available in the market right now, we are seeing, let's say, around -- globally, around the 10 to 12 gigawatt available on the market for the PERC. And in China, approximately, let's say, 7 to 8 gigawatts available for the PERC capacity in China. And -- however, the other expansion plan or the CapEx spend are announced and we are expecting more and more demand are coming up online. But how much more? Honestly speaking, if we're adding up all the announcements number together, it will be another, let's say, 10 gigawatts. However, personally, I will still be cautious on those numbers because not many capacities will become the real effective capacities. It's just announcement.

--------------------------------------------------------------------------------

Paul Strigler, [44]

--------------------------------------------------------------------------------

And then just 2 quick questions surrounding the Section 201 petition in the U.S. One, has your legal counsel has she sort of informed you about any potential retroactivity? So if you ship a module to the U.S. today, is it potentially levied with those tariffs should the Trump administration impose tariffs? Or are you pretty confident that retroactivity is not an issue, which it is today?

--------------------------------------------------------------------------------

Haiyun Cao, JinkoSolar Holding Co., Ltd. - CFO [45]

--------------------------------------------------------------------------------

Paul, I think based on our understanding and some kind of advice from the external legal, we think the retroactive probability is pretty low because the plaintiff did not file the applications for the treatments. And Section 201 is, we think it's -- were complicated, but we -- as solar companies, we strongly oppose the Section 201 and we believe the probability is not very high. But we are actively following up the progress of the case and we plan to get the back-up plan really in the near future.

--------------------------------------------------------------------------------

Paul Strigler, [46]

--------------------------------------------------------------------------------

And then a final thing on Section 201. Would you guys ever consider building manufacturing in the U.S.? Whether it's heavily automated or not, have you done any sort of initial work on what it might cost to relocate or to distill new capacity in the U.S.?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [47]

--------------------------------------------------------------------------------

Yes, from Jinko's point, we have -- we are evaluating all the solutions to different scenarios, right? Retroactive, not retroactive and what could be the rate or what could be MIP price or quotas, et cetera, et cetera. So we are doing our exercise as a homework right now. But honestly speaking, currently, we have -- we cannot make any decisions yet because there are still full of uncertainty. But establishing a factory either in U.S. or somewhere else is on the table.

--------------------------------------------------------------------------------

Operator [48]

--------------------------------------------------------------------------------

We will now take our next question from Vishal Shah from Deutsche Bank.

--------------------------------------------------------------------------------

Qingli Lei, Deutsche Bank AG, Research Division - Research Associate [49]

--------------------------------------------------------------------------------

It's Rachel on for Vishal. We just would like if you guys could -- thank you for taking our question. Just if you could give us a little bit more color on the near-term pricing environment in the U.S. market and how you guys are sold out in the near term?

--------------------------------------------------------------------------------

Gener Miao, JinkoSolar Holding Co., Ltd. - VP of Global Sales and Marketing [50]

--------------------------------------------------------------------------------

Okay. So as I mentioned earlier, so we have seen and I think the industry has seen a rush in demand from the U.S. to avoid the uncertainty brought up by this 201, the petition from the Suniva recently. And due to the limited supply from non-Chinese manufacturers of solar factories, so we believe most of the factories will be sold out, even already been sold out or will be sold out very soon. From a pricing-wise, because of relationship of -- between supply and demand, we see the market price will be stable, even going up a little bit for this -- for the near -- even for now and for the near future. However, not many people can get the supply due to the short of -- sufficient supply due to the shortage of the capacity.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

As there are no further questions in the queue, that will conclude today's question-and-answer session. I will now turn the call back to your host for any additional or closing remarks.

--------------------------------------------------------------------------------

Sebastian Liu, [52]

--------------------------------------------------------------------------------

At this moment, we are happy to say that thank you for your interest and participation on this call. On behalf of the entire JinkoSolar's management, we thank you for joining us today. And if you have further questions and concerns, please feel free to contact us. Have a good day and good evening. Thank you, and goodbye.

--------------------------------------------------------------------------------

Operator [53]

--------------------------------------------------------------------------------

That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.