Emerging solar power product manufacturer, JinkoSolar Holding Co., Ltd (JKS), declared that it has won a contract from China Guangdong Nuclear Solar Energy Development Co., Ltd. (CGN-SEDC) for the supply of photovoltaic (:PV) modules. As per the contract, the company will deliver 30 Megawatt (MW) of modules to the high quality PV power plant project in Hami city, Xinjiang province of China.
This repeat collaboration between JinkoSolar Holding and CGN-SEDC signifies JinkoSolar’s strong position in China as a provider of reliable and efficient solar products and services. This contract is expected to provide a boost to the company’s top-line results and will aid in solidifying its business relationship with the principal players in the Chinese solar market.
The solar market in China looks promising. Particularly after the success of wind energy usage, we anticipate solar generation to catch up fast in the Chinese market, emerging as a prominent renewable energy source.
We expect favorable margins for the company as cost of producing solar PV’s is expected to decline in the near term due to continued investments in technological developments in the generation process. JinkoSolar is increasingly striving to achieve a comparative cost advantage over its rivals in the European market.
However, in the face of economic depression in Europe, the company’s glut in production could result in higher inventories and cascading average selling prices, a phenomenon noticed industry-wide. The company’s overt reliance on the government for solar PV deployment could add to costs.
On a more positive note, JinkoSolar has a diversified consumer base in the US which is increasingly shifting its preference towards renewables. The presence of a solid customer base will ensure stable returns for the company. In the near term, the prospects for renewable energy look favorable for the company’s US subsidiary.
However, we believe this benefit could be partially offset by the US government’s recent take on canceling subsidies to Chinese-based firms, which would hurt the company’s operations and financials.
Overall, JinkoSolar’s long-term opportunity looks encouraging as it is continuously strengthening its footprint not only in China but also in the global market.
JinkoSolar holds a Zacks #3 Rank implying a short-term Hold rating. The company’s closest peer is US-based MEMC Electronic Materials, Inc. (WFR).
Based in Shangrao, People’s Republic of China, the company together with its subsidiaries, engages in designing, developing, producing, and marketing photovoltaic products in China, Europe and US.
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