NEW YORK (
) -- There's a new kid on the solar block,
, a Chinese solar module maker that went public on Friday.
It might seem like an interesting time to go public, with the markets selling off yet again on Friday, and solar stocks taking a another huge hit as the euro slipped even lower in trading. JinkoSolar had also previously shelved its IPO in February.
Nevertheless, the demand outlook for solar in 2010 has become much more bullish, and JinkoSolar may have timed its initial public offering range to the better solar demand story, even amid the short-term declines in solar stocks.
While most of the well-known Chinese solar module makers traded down on Friday, the difficult days may still be ahead for JinkoSolar as the newest Chinese solar stock. It has to prove that it not only can pull off an IPO, but continue to prove itself as a long solar stock story amid an already crowded field of Chinese vertically integrated solar players.
JinkoSolar's IPO documents listed a range of $11 to $13. The shares priced at the low-end of the range, at $11.
There were 5.8 million JinkoSolar shares sold in the offering, led by Credit Suisse, and including a syndicate of
Oppenheimer & Co.
Do solar investors need another low-cost, vertically integrated Chinese solar module maker to spread across their long and shorts in the solar sector, with companies from
Yingli Green Energy
( SOLF) already providing plenty of plays on the Chinese solar stock story?
Trina Solar is the favored Chinese module maker in the consensus Street view. Suntech still needs to bring its costs down, in the Street view, and Yingli needs to move past its poly plant ramp up period to get back its earnings power. Solarfun is the volatile microcap play among the bunch, and that leaves JinkoSolar...?
JinkoSolar describes itself in its SEC paperwork as a "fast-growing solar product manufacturer with low-cost operations" whose principal products are silicon wafers, solar cells and solar modules. The company said it has customers in China, Hong Kong, Taiwan, the Netherlands, Germany, the United States, India, Belgium, Singapore, Korea, France, Spain and Israel, among other countries.
JinkoSolar's description just about describes any Chinese solar module maker.
Of course, if the demand story is as good as the most bullish estimates for solar in 2010 -- upwards of 12 gigawatts -- JinkoSolar may not have to stand out as much as just reap the rewards of the short-term frenzy. How JinkoSolar stands out in 2011 and beyond, though, with more feed-in tariff cuts expected and the macro environment in Europe not favoring generous subsidies for solar, is an issue that JinkoSolar and all its Chinese solar peers will face.
Nevertheless, after Friday's continued selling in solar shares, even pricing at the low-end of its IPO range, JinkoSolar's shares were higher than shares of Yingli and Suntech.
No Street analyst can even cover JinkoSolar yet, however, one analyst said on background that it is very difficult for new entrants among the Chinese solar manufacturers to distinguish themselves because most use the same equipment purchased from overseas suppliers and the efficiency of the crystalline silicon technology is, with the exception of Suntech Power, very similar. Scale of operations can be the difference maker, and JinkoSolar will be starting off with less scale than the biggest of the Chinese solar module makers.
JinkoSolar's history is tilted more to the solar wafer story, but wafer making isn't necessarily a difference maker, given the wafer slicing process be more or less commoditized and low margin. In the short-term, with wafer prices high due to the demand levels, internal wafer capacity benefits vertically integrated players. JinkoSolar began its operations in 2006 as a solar wafer supplier for
JinkoSolar didn't even start manufacturing and sales of solar cells and solar modules until Summer 2009. At the end of 2009, JinkoSolar had 300 megawatts of solar wafer capacity, and 150 MW each of solar cell and solar module capacity. This could be an issue as it attempts to scale up to the size and cost structure of Chinese module makers pegging 2010 capacity above 1 gigawatt.
However, JinkoSolar's plans for 2010 are to significantly change the solar mix, with a projected 500 MW of both wafers and modules in 2010, and 400 MW of solar cells.
As of March 31, 2010, JinkoSolar said its solar cell and solar module capacity had gone up 50 MW to 200 MW capacity.
JinkoSolar had revenue of $229.7 million for the year ended December 31, 2009, and a gross margin level of 14.7%, with approximately 60% of sales in solar wafers, according to its SEC filing. Trina Solar, the leading low-cost Chinese solar module market, had revenue of $845 million and gross margin of 28% in 2009.
Can JinkoSolar stand out on cost?
According to the JinkoSolar SEC filing, its average wafer sales price in Chinese RMB as of March 31, 2010 was RMB 5.4. Using Friday's currency conversion, the average sales price for JinkoSolar's wafer would be 79 cents per watt. Trina Solar said in its fourth quarter earnings that it plans to be at 70 cents per watt by the end of 2010.
JinkoSolar stated in its SEC filing that its solar cell average sales price at the end of the first quarter was RMB 7.9, or just under $1.16 per watt.
JinkoSolar stated that its module average sales price at the end of the first quarter was RMB 11.6, or a shade under $1.70 per watt.
The Chinese solar module makers are, by several industry accounts, on their way to $1.50 per watt module price in 2010, if not lower by year-end, with the steep level of price declines slowing, however, as the major gains made from rapidly declining raw polysilicon prices reach an end.
JinkoSolar reported a revenue decline of 20% in the first quarter of 2010, and said it was primarily due to a decrease in the sales of solar modules and silicon wafers.
JinkoSolar's SEC filing stated that sales of solar modules decreased by 46%, primarily because the company "did not recognize revenue during the quarter for a portion of shipments made in the first quarter of 2010 which had not been received and accepted by the customers as of March 31, 2010."
JinkoSolar sales of silicon wafers decreased by 21.7% in the first quarter of 2010, partially due to an increase in the amount of silicon wafers the Chinese solar company used for its own production of solar.
JinkoSolar sales of solar cells increased by 11.6% in the first quarter of 2010,.
On the other hand, JinkoSolar stated that gross profit and gross margin were both up from the fourth quarter 2009 to the first quarter 2010, as JinkoSolar continued its business mix shift away from wafers and to module sales.
Gross profit was up 16.2% quarter over quarter, and gross margin increased from 16.2% in the fourth quarter of 2009 to 23.7% in the first quarter of 2010, JinkoSolar said in its IPO filing.
-- Reported by Eric Rosenbaum in New York.
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