JinkoSolar Holding Co., Ltd. (NYSE:JKS) Q1 2024 Earnings Call Transcript

JinkoSolar Holding Co., Ltd. (NYSE:JKS) Q1 2024 Earnings Call Transcript April 29, 2024

JinkoSolar Holding Co., Ltd. beats earnings expectations. Reported EPS is $0.39, expectations were $-0.44. JKS isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, ladies and gentlemen, and thank you for standing by for JinkoSolar Holding Co. Ltd. First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to your host for today’s call, Ms. Stella Wang, JinkoSolar’s Investor Relations. Please proceed.

Stella Wang: Thank you, operator. Thank you, everyone for joining us today for JinkoSolar’s first quarter 2024 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 Newswire services. We have also provided a supplemental presentation for today’s earnings call, which can also be found on the IR website. On the call today from JinkoSolar are Mr. Xiande, Chairman and CEO of JinkoSolar Holding Company Limited; Mr. Gener Miao, CMO of JinkoSolar Company Limited; Mr. Pan Li, CFO of JinkoSolar Holding Company Limited; and Mr. Charlie Cao, CFO of JinkoSolar Company Limited. Mr. Li will discuss JinkoSolar’s business operations and the company highlights followed by Mr. Miao, who will talk about the sales and marketing.

And then, Mr. Pan Li, who will go through the financials. We will 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 Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks is included in JinkoSolar’s public filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements, except as required under the applicable law. It’s now my pleasure to introduce Mr. Xiande, Chairman and CEO of JinkoSolar Holdings.

Mr. Li will speak in Mandarin and I’ll translate his comments into English. Please go ahead, Mr. Li.

Xiande Li: [Foreign Language] [Interpreted] We are happy to announce that thanks to our advantages of N-type TOPCon technology, competitive products, global marketing and manufacturing layout, of module shipments grew 53.3% year-over-year to nearly 20 gigawatts in the first quarter ranking first in the industry. The proportion of N-type shipments increased to nearly 80% in the first quarter from approximately 70% in the fourth quarter last year, maintaining our leading position in the industry. Module prices continued to fall in the first quarter, while the industry average utilization rates declined sharply. We’ve maintained our leading utilization rate at high level. Over 70% of the modules were shipped to overseas markets in the first quarter, while proportion of shipments to Europe and the U.S. significantly increased sequentially.

Gross margin was 11.9%, flat sequentially. Net income was $84.4 million, up 19.8 times sequentially. Adjusted net income was $65.1 million, up 1.6% sequentially. Newly added installations in China reached 45.7 gigawatts in the first quarter, an increase of 35.9% year-over-year. Module exports totaled 61.7 gigawatts, an increase of over 20% year-over-year. The PV industry remains one of the few sectors maintaining a higher growth rate, and we expect the global PV demand to grow approximately 25% to 30% in 2024. Coming into the second quarter, polysilicon prices continued to decline as flight expense demand. On the other hand, macroeconomic conditions push the commodity prices higher while increasing market demand drove prices of raw materials such as glass and a film higher.

All those factors combined to keep recent model prices relatively stable at a low level. In the short term, the profitability of integrated solar companies is expected to come under pressure. Yet, this distinction in operating capabilities performance of different companies will have larger difference. We expect that overall production capacity in other industry will shrink with the elimination of weaker players that like market competitiveness, sustainable production capabilities and the ability to regularly upgrade and iterate technology, facing various external challenges, we will focus on enhancing our competitiveness, and we are confident to maintain relative advantages compared to our first tier peers. In the first quarter, since there is a changing market environment, we flexibly adjusted our sales strategies to better balance shipments and profitability, leveraging our global footprints and the competitive product, our order book visibility for 2024 currently exceeds 70%.

This continued pressure along the industrial chain, we continue to deploy new technologies to improve the mass-produced efficiency of TOPCon cells and module output while reducing cost through initiatives such as optimization of supply chain and production process. We are also accelerating the clearing out of our P-type capacity. Our N-type capacity is expected to exceed 90% of total capacity by the end of 2024, and we expect our advanced capacity structure to continue to lead the industry. As a company with the largest overseas integrated capacity in the industry, we continuously work to expand the global industry chain of 1 gigawatt N-type module capacity in the U.S. has started production and another 1 gigawatt is expected to start production in the second quarter this year.

This our advantage of global operation and long accumulated experience risk management we are confident to respond to changes in international trade and continue to provide a premium products and services to our global clients. According to the latest predictions by the International Energy Agency, IEA, solar PV and wind will account for 95% of global renewable expansion, benefiting from lower generation costs than both fossil and non-fossil fuel alternatives. By 2028, the share of wind and solar PV in global electricity generation will double to 25%. Solar PV still has enormous growth potential. Meanwhile, declining cost of solar plus storage will continue to improve the economics of investing into PV storage projects and stimulate demand growth for storage projects.

We are bullish that solar plus storage will become the major model for future growth in electricity generation and we are confident to continue to lead the industry with advanced technologies and premium high-efficiency products. Before turning it over to Gener, I would like to go over our guidance for the second quarter and full year of 2024. By the end of 2024, we expect mass produce of N-type cell efficiency to reach 26.5%. We expect our annual production capacity for mono wafers, solar cells and solar modules to reach 120, 110 and 130 gigawatts, respectively, by the end of 2024. We expect module shipments to be between 24 gigawatts to 26 gigawatts for the second quarter of 2024 and between 100 gigawatts and 110 gigawatts for the full year 2024 with N-type modules accounting for nearly 90% of total module shipments.

Gener Miao: Thank you, Mr. Li. Total shipments were 21.9 gigawatts in the first quarter, with module shipment accounting for over 90%, ranking first in the industry again. And with the stressful market prices in the first quarter, we flatly (ph) adjusted our geographic mix over 70% of modules were shifted to overseas markets, especially to Asia Pacific and the emerging markets. Shipments for the U.S. were relatively stable subsidiary, while shipments to Europe increased nearly 20%, evidence of future inventories reduction. On the demand side, the general trend for global low-carbon transformation was unchanged despite problems related to installation and connection in some regions and the positive issues in others. We continuously expect a relatively rapid growth in global demand in ‘24.

Our intensive sales network and the deeply rotated local customer service infrastructure will help us to respond to market shifts and adjust flexibly day and timely, [indiscernible] client demand for more reliable, low-carbon and compliant PV products. Looking forward to the full year, we expect that the proportion of shipments to Europe and the U.S. to further increase compared to last year. Shipments of competitive high-efficiency N-type Tiger Neo modules accounted for nearly 80% overall. But far exceeding the industry average as the value of Tiger Neo is increasingly recognized by customers. In the European and emerging markets, the Tiger Neo penetration rate exceeds 90%. In terms of segment demand from distribution markets in China, Europe and Asia-Pacific was strong during the first quarter.

Closely following the market trend we raised as a ratio of distribution to approximately 50% in the quarter. We focus very strongly on building our brand regulation because an outstanding brand is key to gaining the long-term trust of our clients. Recently, we were recognized as the Tier 1 energy storage provider by Bloomberg New Energy Finance due to our outstanding products and the capabilities in energy storage, reflecting our commitment to providing safe and reliable energy storage solutions and recognition by customers for timely delivery and effective deployment capabilities. Besides, we received the AAA rating once again in the 2024 Q1 release of PV-Tech’s ModuleTech Bankability reports, which demonstrates our leadership in manufacturing activity, reliable quality, market share leadership, sound financial performance and technology innovation.

With that, I will turn the call over to Pan.

Pan Li: Thank you, Gener. We are pleased to report that our solar module shipment increased by about 53 percentage in the first quarter, where solar module price declined, we enhanced control over costs and expenses. Gross profit margin with flat and adjusted net income slightly improved sequentially. At the same time, thanks to our efforts in debt management. Our net debt improved sequentially, leveraging our advantages in N-type technology and global sales and manufacturing network. We’re very confident in our growth prospects and will continue to improve the efficiency of our working capital, achieving sustainable growth in operating cash flow and enhance our resilience to risks. Let me go into more details now. Total revenue were $3.2 billion down sequentially and slightly down year-over-year.

The sequential decrease was mainly attributed to the decrease in the shipments of solar modules and year-over-year decreases was mainly attributed to the decrease in average selling price of solar modules. Gross margin was 11.9 percentage compared with 12.5 percentage in fourth quarter last year. The decreases were mainly due to the decrease in average selling price of modules. Total operating expenses for $426 million, down 18 percentage sequentially. The sequential decrease was mainly due to the decrease in the shipments of solar modules and lower expense in relation to the segment of a dispute with one of our customers. Total operating expenses accounted for 13 percentage of total revenues compared with 11 percentage in the fourth quarter and until the first quarter of ’23.

Net income attributed to JinkoSolar Holding ordinary shareholders was about $84.4 million, up nearly 20 times sequentially. Excluding the impact from a change in fair value of the note, a change in fair value of long-term investments and share-based compensation expenses, adjusted net income was about $65 million, slightly up sequentially. Moving to the balance sheet. At the end of the first quarter, our cash and cash equivalents were $2.44 billion compared with $2.69 billion in the fourth quarter of ’23 and slightly improved from $1.48 billion in the first quarter of ’23. AR turnover days were 100 days compared with 76 days in the fourth quarter, and 95 days in the first quarter of last year. Inventory turnover days were 89 days compared with 57 days in the fourth quarter and 100 days in the first quarter of last year.

At end of the first quarter, total debt was $3.66 billion compared to $4.38 billion in the fourth quarter of ’23. Net debt was $1.22 billion compared to $1.63 billion in the fourth quarter of ’23, a continuous improvement in our debt structure. This concludes our prepared remarks. We’re now happy to take your questions. Operator, please proceed.

Operator: Thank you. [Operator Instructions] The first question comes from Brian Lee. Please go ahead.

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Q&A Session

Brian Lee: Hey, everyone. Thanks for taking the questions. Appreciate it. I know you guys are not in the practice of providing specific margin and ASP guidance anymore. But just given kind of the fluctuations in the pricing environment. Can you give us a sense, pricing was down? It seems like kind of down to like the low to mid-teens here, ASP per watt if we back out the wafer and the cell revenue in the quarter, should we expect more ASP degradation in modules embedded in the 2Q guide? And then, what’s sort of the margin cadence you expect off the results here in Q1, should we expect 2Q to be up, down, flat? And then maybe back half views as well if there’s more of a recovery there.

Charlie Cao: Hey, Brian. This is Charlie. Yes, back to your questions. And the module price is down in the recent three quarters, and that’s a fact. And we have different ratings, different arrangement long term versus short term. If you are talking about Q2, the ASP on average, it’s down a little bit. But the most important thing is, we are improving the cost and try our best. At the same time, we are adopting the relatively new technology materials. And on top of that, we are ramping up — this year, our focus is the Shanxi Super factories. We’re expecting to be fully operational in the second half year. And for the gross margin and profitability’s, we strongly believe in the first half of the year, this year, it’s reaching to the bottom.

And for quarter-by-quarter, we expect the gross margin relatively stable for the second quarter versus Q1. And for the second half year, and we expect more shipments particularly in the United States, as well as in the European market. And on top of that, we are in a very good position for the Middle East market and it helps the gross margin and so that’s — in addition, we — the industry is suffering, the rate competition, particular for price, and we are expecting the capacities for the Tier 2, Tier 3 and even the capacity which are not able to be technology competitive will be phased out throughout this year. This may well help the overall supply versus demand situation, particularly in the second half year.

Brian Lee: Okay. That’s helpful. So if I summarize, I guess, it sounds like ASPs down a little bit more into 2Q and then margin is stable in 2Q off the 1Q level. Are you actually seeing quoting activity or what’s the outlook for pricing? I know you said shipment volumes and mix improved in the back half, but how about like-for-like ASPs? Are you actually seeing, you said 70% of your of ’24 is already covered in backlog, it sounds like what’s the pricing dynamic you’re seeing in the second half versus Q1 and Q2 where pricing is still going down?

Gener Miao: Yeah. For the pricing, Brian, for the pricing, we believe it will continue to follow the market, which we believe is already reaching the rock bottom, right, compared to the market prices versus the, let’s say, industry, even the leading cost structures is most of the peers or the industry players are under the water right now. So that’s why we believe the price is reaching the bottom. However, when we look into the improvement of the cost structure wise, definitely, it does not goes as fast as the price force in the last five, six, even eight months’ time. That’s why the market-wise, it will struggle at the beginning of the year, but we believe once the cost structure start to improve to reach the level of the ASPs and match the level of ASPs, we believe the company or even the whole industry, at least the leading competitive ones will keep their margin as healthy as possible. Hope that answers your question.

Brian Lee: Yes, absolutely. Very helpful. And then maybe last one for me, and I’ll jump back in the queue. You also mentioned back half of the year, it sounds like you’re positive on U.S. volume trends growing for you? I know this is pretty fresh, the inception of this AD, CVD potential investigation that was petitioned last week by some of the U.S. suppliers. I know in the fall last year, you guys were deemed to not have been one of the companies dumping or countervailing. And so you weren’t subject to any duties. It sounds like this petition is opening that entire case back potentially. So what are your thoughts on the latest trade policy update here given what happened last week? And then do you anticipate any — or are you seeing any customer feedback right now that suggests there’s more uncertainty for you as you move through the next few quarters? Just kind of how are you navigating it? Thank you.

Gener Miao: Well, it’s still early to see what could be the result of this upcoming AD, CVD petitions. But definitely, from Jinko’s perspective, we still prefer as a fair trade work, which could benefit not only the Jinko itself, but also the whole industry where we can drive that’s what the whole industry has been doing in the last even two decades, right, to driving the LCOE of the PV energy more and more competitive, which can help the whole world become greener and more environmental-friendly and less carbon footprint. With trade tariff or the current geopolitical issue, definitely, it is a big challenge. It increase a lot of cost. But as a company side, we have no choice but to try our best to adapt towards the market or what the government wants.

So that’s why we are working very hard with our lawyers, with our customers, trying to find out the best solutions in the U.S. market. But right now, honestly, speaking, it’s still too early to see what could be the pros and cons for that right now. So we will — we might need another, let’s say, three, even six months to see what could be the, let’s say, upside and downside on that. Thank you.

Brian Lee: Okay. Fair enough. Last one housekeeping for Charlie. I promise I’ll pass it on after this. Charlie, what was D&A in the quarter? What was CapEx in the quarter? And then also, could you tell us what the percent of sales in the U.S. this quarter was and what U.S. ASP range was dollar per watt or cents per watt in the quarter? Thank you.

Charlie Cao: The U.S. shipment roughly is 8%, 8% in total in terms of Q1 shipments – that’s shipments. And revenue percentage will be higher because the prices were dramatically higher, right, if you look at the average market price. And for the total CapEx, we always said about it — last year, we spent roughly RMB10 billion of the capacity expansion. And this year will be 50% lower than RMB10 billion. And last year, we delivered RMB25 billion operating cash flow. And this year, we — our target operating cash flow will be over — larger than the RMB10 billion. So that’s — for Q1, the CapEx is roughly RMB3 billion and the operating cash is RMB1.5 billion.

Operator: Okay. The next question comes from Philip Shen with Roth MKM. Please go ahead.

Philip Shen: Hi, everyone. Thank you for taking my questions. First one is a follow-up on Brian’s question regarding Southeast Asia AD/CVD tariffs that could be coming later this year. So I was wondering if you could talk about how you plan on managing the retroactive tariff risk. So I think you guys talked about increasing your shipments to the U.S. market or certainly having a high mix to the U.S. through 2024. Can you share how much of your shipment volume in ’24 could go to the U.S.? And then how do you plan on managing that retroactive risk that could be as early as May or July? Thanks.

Gener Miao: Yeah. For — firstly, for the volume-wise, we still stick to our previous plan that we are not intentionally increase or decrease our shipments in the U.S. because of the recent AD/CVD petitions. So that’s already within our — within the plan of this year. So if it’s definitely — because you know what’s happening in the last two years in U.S. to Jinko, that’s why this year’s total shipment numbers or the ratio of the U.S. market definitely will be higher than last year, that’s why we’re just saying that. And for this tariff risk retroactive or number-wise, we don’t have mature solutions right now, that’s why we are still — as I just answered Brian’s question, we are still talking to the lawyers and the customer to see what could be the best solutions. Right now, at least, I’m not aware of any good solutions on that.

Philip Shen: Got it. And how – thank you, Gener. How are your contracts structured? Meaning, oftentimes, there’s a change of law provision that may put the risk on to the customer. But does it cover tariffs? And so do you have the provisions in all your U.S. contracts so that the risk is on the customer or in this case, do you believe that the risk of retroactive tariffs may fall into your camp? Thanks.

Gener Miao: I don’t think we can disclose the details of the contract, but definitely, customers feel the risk as well. So even there are some language, which give the cash risk to the customer end. But definitely, the customer side has this the basic economics of the project financing, right? If it does go beyond a certain threshold, definitely, the project will not happen or as planned. That’s why we have to go through all those details with our customers, with their lawyers and even their financing providers to find out the best mutual solution for all parties. It’s not that easy to take one case — one solution for all.

Philip Shen: Okay. All right. Thank you, Gener. One last question on the U.S. market. What do you think is the amount of channel inventory in the U.S. We’ve seen a lot of shipments to the tune of about 5 gigawatts a month coming to the U.S. over the past year. Do you think there’s as much as 1.5 years of module inventory in the U.S. or do you think it’s much lower? Can you help us understand what you see? Thanks.

Gener Miao: We have reasons now saying that there’s, let’s say, oversupply in the U.S. market, even some players, either downstream or upstream try to get more modules before just not AD/CVD, but besides undeserved, right, so before any circa. We heard, we read the notes, but from our end, we have not been able to verify that directly from the customers or from some of our peers right now. But definitely, if we look into the numbers available in the market or some market energy report, we have seen a massive number of modules or solar product has been shipped to U.S. But the grid connection numbers might not support that big number. Definitely, we have the same question as you have right now.

Philip Shen: Okay. Thanks, Gener. Last question here for me on the fire that you guys disclosed over the weekend. Can you talk about the impact Shanxi is supposedly a key part of your margin, right? So you did say that there would be an impact in ’24. Can you quantify in any way? When do you think that facility could come back online, how destructive was the fire? Thanks.

Charlie Cao: Philip, the impact is still being evaluated. But Shanxi super factories, remember this year, we do two phases. Phase I is 14 gigawatts, Phase II is another 14 gigawatts. And the second phase, Phase II will stick to the original plan and are expected to start operation in Q3 for the Phase II and fully operational in early of Q4 this year. But we are talking about the Phase I, Phase I, the fire has the impact on the cell capacity, the 14 gigawatts, and we expect the cell capacity will be fully operational by the end of this year. And this is our original plan is by the end of the middle year. So it’s going to have some kind of impact two quarters roughly and estimated and 3 gigawatts to 5 gigawatts. So the impact is not significant.

It’s very — not significant impact for the cell. And so for the operational side, we have adjust our productions throughout the global facilities to minimize the impact to our customers. And for the cost side and the impact of the operation, we think it’s not significant However, for the losses of the fire is still evaluating, but the equipment is fully, get the insurance from the big insurance companies in China, and we’re working on it.

Philip Shen: Got it. Thank you very much for the color. I’ll pass it on.

Charlie Cao: Thank you.

Operator: Next question comes from Wade Wu (ph) with Jefferies. Please go ahead.

Alan Lau: Hello. Sorry, can you hear me?

Operator: Yes, your line is now open.

Alan Lau: Hey. This is Alan Lau from Jefferies. So, thanks management for taking my questions. So first of all, I would like to ask a follow-up the question from Philip on the — basically, how many — or what is the percentage of the contracts you have signed at least have the language that is passing through the potential liability of the delays in AD/CVD. The background of this question is because some of the peers suffered a lot last year, when they have procured high-priced polysilicon. And then later on, when they failed to deliver the shipment, they even have to pay penalties as per those contracts. So I wonder if those language is already there. And it’s only a matter of working with your clients to solve the problem? And is there any potential liability in delivering the obligations.

Gener Miao: Yeah. So again, I don’t think we can disclose that level of detail. But definitely, we are case-by-case working with customers on this AD/CVD risk as we always do, right? So we’ve got a lot of support from the customers regarding what has happened in the U.S. market in the last two years’ time. So definitely, we appreciate the support, and we are carrying that love for the future long-term partnership with most of our customers. That’s why we never want to end up with a lost, lost solution. So even if there’s a risk, we definitely go ahead with the customer to look into the solutions together. That’s why we can maintain our leadership in many markets, right?

Alan Lau: Okay. Understood. So the next question is regarding to some of the — appears to be one-off income in this quarter. So like the other income is actually surged quarter-by-quarter. So I wonder if that’s related to a disposal of our gain in our Xinjiang capacity and how much of that is related to that?

Charlie Cao: So in Q1, we have completed a transaction to sell 100% of equity of our Xinjiang facilities. And we retained, I think, roughly $800 million to $900 million net income impact.

Alan Lau: Understood. So also I recall in the transaction is further performance is kind of like a performance guarantee in the next couple of years. So has that been factored into this $800 million to $900 million or that is completely separated?

Charlie Cao: We didn’t record that. The performance kind of performance obligation or variable considerations from the sale of equity. So we did not account on the book. We just recorded a fixed portion for the transaction.

Alan Lau: Understood. So — and I think, another thing that is quite I would say, quite impressive compared to a lot of your peers is that you actually do not have any impairment on assets. So wonder if you think you will have any impairment risk going forward in this year or because you have a super majority of your capacities TOPCon already, so you do not foresee any risk going forward from here?

Charlie Cao: Yes, you’re right. And we have very small per capacity, and we accelerated depreciation over five years throughout the last two years and the net book value is not significant.

Alan Lau: That’s impressive. And also, you have mentioned the cash flow in the first quarter was actually positive. So I wonder if the company has taken initiative to improve the cash flow quarter-over-quarter because that’s also one of the concerns of investors as to the operating cash flow.

Charlie Cao: Efficiency is our still our focus, operational efficiencies and minimize the production lead time, logistics delivery time, cash conversion cycles and the Shanxi Super Factory we are building is one of the key consideration improves the whole cycle conversion and improves the cash flow minimize the working capitals and warehouse costs and logistics timing.

Alan Lau: Thanks a lot. Finally, on the buyback. I wonder if the company has any guidance on the pace of the buyback? Because I’ve noticed that there’s a lot of announcement around that, but wonder if you would provide any guidance on that? And would there be any blackout in buy back after the end of quarter and before the announcement of the results?

Charlie Cao: Our plan is preliminary price the shareholder return is roughly $200 million this year. And you can see, we released news, we have spent roughly $105 million to repurchase back, the ADS. And on top of that, which is subject to the broader pool, we plan to declared dividend roughly $70 million to $80 million. So together with our plan, preliminary plan this year’s shareholder return is roughly $200 million.

Alan Lau: Understood. Thanks a lot. I’ll pass on.

Charlie Cao: Welcome.

Operator: [Operator Instructions] The next question comes from Rajiv Chaudhri with Intrinsic Edge. Please go ahead.

Rajiv Chaudhri: Good morning and congratulations on a strong performance in a very tough first quarter for the industry. My first question is about the gross margin. It seems like your cost per watt for modules were down roughly 10% from the fourth quarter to the first quarter. And my question is, number one, can you give us an idea of how you were able to achieve such a dramatic decline in cost per watt given that the polysilicon costs were down as well, but not as significant. And then I have a follow-up on the gross margin as well.

Charlie Cao: Yes. It’s a combination of our supply chain, our R&D teams new technologies and improve the lower the consumption of the materials. And we upgraded the TOPCon capacity adoption LECO technology and significantly improve our sales efficiencies while cut a lot of consumption of the share reprices. And so a lot of efforts we are doing that. And we have — internally, we have a very solid target for the cost reductions. And step by step, we think with quarter-by-quarter, the cost will be relatively — improvement will be relatively quicker. But again, now the industry situation is module prices kind of dropped a lot, but we expect it to be stabilized and cost takes time, and we will try our best to improve the cost structure.

Rajiv Chaudhri: So Charlie, is it fair to think that in the coming quarters, Q2, Q3 and Q4 with all the improvements that you are making, that we can expect cost to improve by 1% to 2% every quarter.

Charlie Cao: It depends some of the things — most of the things we can control, but some of the things we are out of control. If you look at the severe commodity price is up a lot in recent months, but we’re trying to minimize the impacts. But if you look at quarter-by-quarter throughout the year, it’s definitely the end of this year, the cost will be lower than the cost as of today.

Rajiv Chaudhri: Right. But assuming that the material costs don’t change, is the 2% per quarter on a sequential basis, a reasonable assumption to make in terms of how you are reducing the cost.

Charlie Cao: We have internally even bigger targets and the 2 percentage quarter, if assuming the material cost is the same. But overall cost, depending on a lot of things. And I think for all it’s going to be improved. But again, we think in the next two quarters, the cost improvement will not so significant. And because we have done a lot of things and — but the commodity price now looks at to be keep at a very high level and consider that we don’t believe the overall cost will be genetically lower, but it’s lower — slightly lower in [indiscernible] in the next two quarters.

Rajiv Chaudhri: So combined with the fact that ASPs that we’ll be selling more product in the United States by the fourth quarter. And so it’s possible that ASPs are actually up somewhat sequentially from Q3 to Q4 and your costs are coming down by, let’s say, even 2% quarter-over-quarter. It looks like you should be able to get the gross margin to be in the 16%, 17% kind of range by the fourth quarter. Is that reasonable?

Charlie Cao: It’s difficult to estimate. As we think one of the key things with the capacity, some more capacity phase out in the second half year. We think the clients will be — come to a relatively rational level. On top of that, we have Shanxi super factory. We have more shipments in the U.S. and some of the premium market. It helps our margins, even some level of recovery, but it depends on a lot of things. We think, one, we are now doing is, we do internal things, and we do what we can control.

Rajiv Chaudhri: I see. Okay. My next question is on market share. Your market share in 2023 was in excess of 15%, closer to 16% for the year as a whole. And in the first quarter, it’s already in the 17% kind of range. Do you think that as the capacity comes off-line, as for the rest of the year that your market share will continue to increase, especially if you hit the 110-gigawatt kind of number for the year?

Pan Li : Well, we never take market share as our let’s say, our target, right? So that’s why we — it’s hard to say and also because of the different definitions, there are different ways to calculate it, right? It’s difficult to really define, let’s say, a fair well-accepted market share definition. But anyway, we appreciate your calculations on these numbers. Based on my perception, I think it’s roughly around 17%, 18% market share is where — how we are looking at ourselves today. Whether that number could go up or go down, it depends on the competition. It depends on the whole industry. So it depends on our peer strategy as well. So that’s why it’s difficult to say that right now, but definitely, we are doing our best to make sure we delivered the good results from the financial statement wise. Meanwhile, we are doing our best to serve our customers in the long term to keep the long-term partnership momentum. Thank you.

Rajiv Chaudhri: But is the market share that you have combined with the brand name that you are developing as well. Is that giving you a price premium or an increasing price premium relative to other brands?

Gener Miao: Definitely, we believe our brand give us a lot of strength and the market acceptance or awareness for sure. But how — whether it’s created a market premium, it depends on what numbers you are comparing with, right? If you compare with nobodies in the market definitely brands work quite a lot. But if you compare it with the top two or top three the definition of the acceptance of the customers across the different top brand might not be that much as people imagine. So, and also the brand premium in the different market sector in different countries will vary a lot as well.

Rajiv Chaudhri: I see. A question on the N-type products. What do you think the industry’s shipments of N-type products will be in 2024?

Gener Miao: Roughly, we believe the market will finish the transition from P-type to N-type by end of this year. So technically, it might start from, I’d say, roughly 35% to 40% range and to year-end, 90% even 95% range, that’s what we believe.

Rajiv Chaudhri: So you think the other — the competitors will also get up to the 90% range by the end of the year?

Gener Miao: I mean the whole industry, right? So someone might take action faster. Someone may be slower. But as the industry, we believe that the whole industry will look like that.

Rajiv Chaudhri: Now you have been ahead in terms of putting your cost of N-type down and now your N-type costs are comparable to P-type. What kind of margin premium does that give you over Tier 2 and Tier 3 companies, who are behind the cost curve relative to you guys?

Gener Miao: So let’s take this as the last question. Thank you for your question. Sorry. We believe if you look into some third-party marketing, for example, there’s, let’s say, PV Infolink, right? So if you compare the P-type, N-type for price, the gap is roughly $1 sales per watt for P. So if you — you can roughly calculate how much it will reflect the — in the margin wise, right? So it’s roughly like 9%, 10% of the margin difference, right? That’s the way we are looking to it. I see.

Rajiv Chaudhri: Okay. Just one last question.

Stella Wang: Sorry, because of the time limit, we need to connect with the next investors. For more questions, you can – we can negotiate after the call. Okay. Operator, please connect to the next question.

Operator: Okay. The last question comes from Leo Ho with Daiwa Capital Markets. Please go ahead.

Leo Ho: Okay. Thanks management. Just a question on the AD/CVD situation. I just wonder for our U.S. capacity, are we using like our own solar cell from Southeast Asia. And we’ve been hearing some industry feedback suggesting that probably there may be the cancellation of the Wafer-plus-three rules which means that we cannot use solar cell from Southeast Asia anymore? So do you have any view on that? Thank you.

Charlie Cao: I’m not quite sure what policies you are referring to. But based on Jinko situation, we are fully vertically integrated in outside China. It means polyethylene in the wafer cell module are not all from non-China sources, right? So that’s what we have built in the last two years’ time under the US RTA (ph). So that gives us a lot of advantage and trusting in the U.S. market.

Leo Ho: Okay. Just one more question, if I may. I would like to ask about the EU situation. Aside from, I think, publicly announced situation regarding [indiscernible] and also Shanghai Electric. Are we hearing any like troubles regarding Chinese players exporting to Europe, especially we’ve been hearing some weird news suggesting that probably that’s one of the major module maker with EU headquarter being rate. I’m not sure if you guys are hearing the same situation. Thank you.

Charlie Cao: Not — just not something I’m aware of right now. So if I have anything, I definitely will let you know.

Leo Ho: Okay. Thanks so much.

Charlie Cao: Thank you.

Operator: This concludes the conference call. Please disconnect your lines.