The need for renewable energy sources is rising as the world moves away from burning fossil fuels. Solar energy is one of the cleanest and most abundant energy sources known to man.
The growth of solar power as an alternative to fossil fuel burning has meant that companies producing photovoltaic products, solar modules, silicon wafers, solar cells, etc., are in high demand.
Given the rising adoption of solar energy, these products related to producing solar power will see their demand increase. Amid this backdrop, it could be wise to buy JinkoSolar Holding Co., Ltd. (JKS).
In this piece, I have discussed several reasons why it could be wise to buy the stock now.
In 2022, solar panel imports declined 1.4% to 140,263 20-foot equivalent units. However, U.S. imports of solar panels are picking up after months of gridlock following a law that banned goods made with forced labor. U.S. solar power capacity additions dropped 16% to 20.2 GW last year due to the Uyghur Forced Labor Prevention Act.
With customs officials clarifying the rules around the law, which banned goods made with forced labor, more solar panel shipments are getting accepted by U.S. customs. This is good news for Chinese manufacturers like JKS.
During the first quarter, JKS surpassed the consensus EPS and revenue estimates. Its EPS came 348.7% above analyst estimates, while its revenue beat the consensus estimate by 5.2%. The company shipments of solar modules, cells, and wafers came in at 14,490 MW. Shipments of solar modules and cells, and wafers rose 72.7% year-over-year.
Its quarterly module shipments rose by 60% year-over-year, and its shipments to China increased by more than two times year-over-year. The company has a strong order book for fiscal 2023 exceeding 60%, with overseas orders playing a significant role.
In the second quarter, the Shangrao, China-based company expects its module shipments to be between 16 GW and 18 GW. Its module shipments for fiscal 2023 are expected to come between 60 GW and 70 GW.
JKS' Chairman and Chief Executive Officer, Mr. Xiande Li, commented, "We are pleased to deliver year-over-year improvements in module shipments, total revenues, and gross margin. With polysilicon prices being volatile in the first quarter, we adjusted our supply chain strategy to effectively control costs.”
“Meanwhile, the ratio of N-type products shipment approached nearly 50% of our total module shipments thanks to their high efficiency and our strong global marketing network, which partially contributed to the improvement in our profitability,” he added.
He further went on to state that its efficiency of customs clearance and the size of shipments to the U.S. market has gradually improved recently. The company is confident in its ability to further increase its competitiveness and profitability in the global market through continued investments in R&D, continuously improved global industrial chain and cutting-edge N-type technology and products.
With the Biden administration determined to reach its clean energy and climate change goals, the sector is well positioned for growth. The Chinese solar energy market is expected to record a CAGR of more than 15% by 2028.
JKS’ stock has fallen 3% in price over the past month. However, it has gained 12.8% year-to-date to close its last trading session at $46.66.
Here are some factors that could influence JKS’ performance in the upcoming months:
Robust Financials
For the fiscal first quarter that ended March 31, 2023, JKS’ total revenues increased 58% year-over-year to RMB23.33 billion ($3.31 billion). The company’s income from operations increased significantly year-over-year to RMB1.21 billion ($171.55 million).
Its net income attributable to JKS’ ordinary shareholders increased considerably year-over-year to RMB788.65 million ($111.81 million). In addition, its net EPS came in at RMB14.95, representing a significant increase over the prior-year quarter.
Solid Historical Growth
JKS’ revenue grew at a CAGR of 41.4% over the past three years. Its EBITDA grew at a CAGR of 15.7% over the past three years. In addition, its EPS grew at a CAGR of 6.8% in the same time frame.
Discounted Valuation
In terms of forward non-GAAP P/E, JKS’ 6.40x is 69.3% lower than the 20.85x industry average. Its 0.62x forward EV/Sales is 77.6% lower than the 2.79x industry average. Likewise, its 7.62x forward EV/EBITDA is 44.8% lower than the 13.81x industry average.
Positive Analyst Estimates
The consensus EPS estimate of $7.21 for the fiscal year 2023 represents a 73.4% improvement year-over-year. The consensus revenue estimate of $15.66 billion for the same year indicates a 29.3% increase over the prior-year period. Its EPS and revenue for fiscal 2024 are expected to increase 18.2% and 11% year-over-year to $8.52 and $17.38 billion, respectively.
JKS's EPS and revenue for the quarter ending June 30, 2023, are expected to increase 13% and 43% year-over-year to $1.26 and $4.02 billion, respectively.
POWR Ratings Show Promise
JKS has an overall B rating, equating to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. JKS has an A grade for Value, consistent with its discounted valuation. It has a B for Growth and Sentiment, in sync with its solid historical growth and favorable analyst estimates.
Within the Solar industry, JKS is ranked #2 out of 16 stocks. Click here to access JKS’ ratings for Momentum, Stability, and Quality.
Bottom Line
Despite its profitability remaining under pressure due to demurrage costs in the United States, JKS reported a solid financial performance, with its EPS and revenue surpassing analyst estimates. The company expects its shipments to the highly lucrative U.S. market to rise gradually in the coming quarters, enabling it to increase its profitability.
The company is well-positioned for growth, given the long-term prospects of solar energy. Therefore, given its robust financials, favorable analyst estimates, solid historical growth, and discounted valuation, it could be wise to buy the solar stock now.
How Does JinkoSolar Holding Co., Ltd. (JKS) Stack Up Against Its Peers?
JKS has an overall POWR Rating of B, equating to a Buy rating. Check out this other stock within the Solar industry with a B (Buy) rating: Canadian Solar Inc. (CSIQ).
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
JKS shares were trading at $45.32 per share on Wednesday afternoon, down $0.81 (-1.76%). Year-to-date, JKS has gained 10.86%, versus a 7.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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