JinkoSolar Holding Co., Ltd. (JKS) Q2 2015 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the JinkoSolar Second Quarter 2015 Earnings Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, August 20, 2015. I would now like to hand the conference over to Sebastian Liu, JinkoSolar Investor Relations Director. Please go ahead.

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's second quarter 2015 earnings conference call. The company's results were released earlier today and available on the company's IR Web site at www.jinkosolar.com, as well as on the newswire services. We have also provided a supplemental presentation for today's earnings call, which can also be found on IR's website. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Arturo Herrero, Chief Strategy Officer; and Mr. Cao Haiyun, Chief Financial Officer. Mr. Chen will discuss JinkoSolar's business operations and company highlights, followed by Mr. Herrero, who will talk about the company's business strategies. And then, Mr. Cao will go through the financials and guidance. 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 provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve 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 filings with the Securities and Exchange Commission. JinkoSolar does not assume any obligation to update any forward-looking statements except as required under applicable law. Please be noted that to supplement its consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles or GAAP, JinkoSolar uses certain non-GAAP financial measures. The company believes that the use of non-GAAP information is useful for analysts and investors to evaluate JinkoSolar's current and future performances based on the more meaningful comparison of net income and diluted net income per ADS when compared with its peers and historical results. These measures are not intended to represent or substitute numbers as measured under GAAP. The submission of non-GAAP numbers is voluntary and should be reviewed together with GAAP results. It is now my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar. Mr. Chen will speak in Mandarin, and I will translate his comments into English. Please go ahead, Mr. Chen.

[Foreign Language] Thank you, Sebastian. Good morning and good evening to everyone, and thank you for joining us today. [Foreign Language] We had an overall strong quarter as we continue to build a diversified foundation for long-term sustainable growth. We are efficiently executing our strategy of course all segments of our business as we benefit from the strong growth momentum gained by expanding both of our module and downstream business. Total revenue during the second quarter was US$516.2 million, representing an increase of 31.6% over the same period in 2014 and 16.4% sequentially. Module shipment to third-party reached 823 megawatt exceeding the high end of our third-party shipment guidance in a row. Gross margin slightly improved to 20.7% as our Malaysian production facility gradually ramp up and more high margin power revenues in the second quarter. We expect this trend will continue throughout the entire year. [Foreign Language] Solar power output during the second quarter also exceeded our expectation by reaching 203 GWh up approximately 75.8% sequentially. We are generating RMB178 million revenue with the similar effect of Chinese New Year behind us and new project ramping up to for capacity. We expect that high margin power revenue will generated more profits in the second half of 2015. [Foreign Language] A 108 megawatt worth of solar power will connected to the great during the quarter, we are on track to hit our target of 600 megawatts to 800 megawatts of connected capacity in 2015. This has been our total capacity of project to 725 megawatts. Large amount of capital continue to flow into China solar downstream sector where we are working to swing off our downstream business and expand our project assets. [Foreign Language] Global demand remains robust. We will be reaching our strong brand recognition and deep relationship with our customers we are able to strengthen positioned in the number of key and new emerging markets. Well we are positioned in China as a market leader to benefit from expected strong demand to in the second half. We also made substantial progress in the U.S. World shipment increased a 115% sequentially. In Asia Pacific region, we increased our market share substantially in Thailand. Shipment to Japan and UK returned to normal levels following the year end last quarter but still remain were active and show premises size of the gross. Turkey and Switzerland in now yield region, as were as emerging markets such Brazil and Chile also grid potentially. We continued to seek our new opportunities as we diversified our customer portfolio and geographic presence. [Foreign Language] On the technology side, we are focusing our efforts incorporating Passivated Emitter Rear Cell or PERC and the Reactive Ion Etching or RIE technology into our technology into our production lines and continued to develop new module products. We will remain the industry course leader with silicon and non-silicon cost dropping US$0.01 each during the quarter demonstrating our technology development and operating efficiency. We also joined the National Energy Administration’s top performer program and were selected as a model supplier for one of the demonstration projects. [Foreign Language] Directly, I would like to go our recent development in diversification of our financing channels at both corporate and project levels. At the corporate level, in addition of our existing close relationship with domestic commercial banks, we secured loans from the Export and Import Bank of China for our Malaysian production facility and doubled JinkoSolar U.S. credit limits with Wells Fargo. On the project level, in addition of our close cooperation with China Development Bank, we secured large project credit lines from Mingsheng Bank and the Ping An Bank as we strengthen our financing capabilities with additional financial institutions. Such strong support from financial institutions demonstrates their confidence in our ability to execute growth strategies across our business and geographies. [Foreign Language] In closing, I’m pleased with the progress, we make in our entire business, the continued corporate and level financial support we are receiving from diversified financial channels will continue to serve as a foundation for our sustainable long-term growth combined with extension of our downstream business industry leading technology and diversified geographic presence, our future growth prospect looking increasingly promising. [Foreign Language] As for the guidance of the third quarter of 2015, the company estimated total solar module shipments to be in the range of 1 to 1.1-gigawatt, which include 900 to 950 megawatts module shipment to the third-party and the 100 and 150 megawatt for its own downstream projects. For the full year 2015, the company raises the guidance of the total solar module shipment to 4.5-gigawatts, which includes 3.4 to 3.7-gigawatts module shipments in third parties. The company expects to connect solar power projects with a total capacity of 600 to 800 megawatts in 2015. [Foreign Language] Arturo Herrero, our Chief Strategy Officer will now discuss our major achievements in sales and marketing for the second quarter in further detail as well as our strategy and the market outlook for the third quarter of 2015 in key countries and regions. Thank you.

Thank you, Mr. Chen. Thank you, CEO. We reached another record during the quarter in 10 plus megawatt shipments and full utilization of our capacity while making improvement in our visibility for the year and contracted books. During the second quarter, we made another progress and consolidated our leadership position in important busy markets that have big potential such as the USA and China as well as emerging markets such as in Chile. We also continue to grow our market share in the UK and Japan. Also important is the progress we made in penetrating new PV markets such as Thailand, Singapore, Switzerland and Turkey. We are generating this good results, thanks to split globally of our brand name international teams and global customers. Our sales and marketing strategies continue to pay-off as our business keeps expanding in size and geographical presence now reaching over 47 countries in Q2. We expect to see demand improve through the rest of 2015 and even into the first quarter of 2016 thanks to the signed contracts currently in our pipeline. Our good reputation [indiscernible] report and service to our partners, healthy financial operational position differentiates us when compared to our competitors. We continue to diversify our customer portfolio during the second quarter as we rapidly expanded our market share in the industrial, commercial and residential segments. In Q2, shipments and demand for JinkoSolar modules grew faster than in Q1 due to the strong demand from China and the USA but also in the emerging market such as Chile, where we have around 40% market share. In Q2, we shipped 915 megawatts of which 823 megawatts were to third-parties representing 17% growth from the previous quarter. Through the first half of 2015, we maintained our leadership position in the Chinese market. We expect to achieve similar results for the full-year, as we believe we will benefit from the Chinese government continuous report and China’s National Energy Administration’s 17.8-gigawatts annual installation target. Our presence in Europe and the USA continues to be strong despite [indiscernible]. We had increasing our market share in the U.S. substantially especially in the utility scale business and we are also penetrating the residential and commercial market. While there are still difficulties in the European PV market, demand from UK and France continues to grow a hit back in the non-European regions such as Turkey or Switzerland. UK had aggregated 2-gigawatt of PV projects during last year 2014. And it is expected to grow over 4-gigawatt this year. Over the past few quarters, we have made progress in central America, a part of Chile, for large scale projects and also for distributed generation. We have a strong visibility in that region for the rest of the year. Our sales force also led to fruitful relationship with well-known developers in the rest of Latin American countries and across the African continent where we see growing demand. In terms of percentage, we delivered in Q2 approximately 45% of our solar modules to China. Around 23% to the USA and around 14% to Europe. Then emerging markets in Asia Pacific each of them at 10% approximately mainly for Japan and Thailand. The top first countries we shipped to during the second quarter were China, USA, UK, Chile and Japan. We will continue to capitalize on the growing recommendation of JinkoSolar’s brand and localized sales and marketing services to expand our market share and diversify our customer and geographical portfolio. In terms of partnership, we continue to build a strong partnership with distributors, PV developers, EPC contractors. We announced during the quarter that we signed strategic contracts. Just to mention few of them we underline 104-megawatt project for the Utah Red Hills renewal product in the USA. With our partner [indiscernible] as our developer. Our 80-megawatt concept with China and Southern Power Grid Synthesis for distribution generation, another 34-megawatt project in Chile, another 50 megawatt project in Turkey with Tegnatia an contract with Vivint Solar in the USA for distribution. We will continue to build some partnership network with distributors, PV developers and EPC contracts are under the group. And we also continue to sign new contracts supporting current and existing customers in Europe, despite the uncertain solar policy and market landscape. As customers have come to rely on our high quality products and services. In terms of marketing, the rapid global expansion of our business has provided excellent exposures for the JinkoSolar brand particularly in our local market at China, but also in the USA, Europe and emerging markets where we have growing recognition. With having the HPR campaigns during the whole year and we plan for expanding our PR activities as well as actively attending solar and renewable energy exhibitions and conferences. During Q2, we will have sponsored several events, important exhibitions and conferences, where we were actively speaking including in Mexico, central America, Germany, USA and Asia Pacific, especially important to mention our participation in the investors’ conference in Wall Street for REFF. In addition, we continue to benefit our brand exposure in close partnership with solar PV TV. The first worldwide internet portal completely and solely devoted to the solar PV technology. We are also in a situation with solar future today preparing for a film that will be an important achievement for our industry. The rapid global expansions in our business has provided excellent exposure for JinkoSolar brand. Next quarter Q3, we already planned to be in more than nine exhibitions including Tokyo, San Francisco, Sao Paulo and Brazil, Warsaw in Poland and Kuala Lumpur in Malaysia and Mexico City. Yet to finalize order for to ASP, our average selling price remained stable despite the volatile exchange rates. Our ASP during this quarter was US$0.57 per watt on average is a percentage one cents lower than the previous quarter. In the next quarter, we expect to see ASP stabilize so we don’t see a major impact on exchange rates. Now I would like to turn the call over to Charlie who will go over our financial results and guidance for the third quarter 2015. Thank you very much.

Thank you, Arturo. Good morning and evening to everyone on the call. First, I would like to walk through our financial results for the second quarter of 2015 followed by guidance for the third quarter and full-year 2015. As Mr. Chen mentioned earlier, total solar products shipments in the second quarter of 2015 were 915-megawatts. Total revenues were $516.2 million an increase of 16.4% sequentially and increase of 31.6% year-over-year. Gross margin was 20.7% compared to 20.3% in the first quarter of 2015 and 22.6% in the second quarter of 2014. The sequential increase was mainly due to continued reduction on solar modules and rapid increased of an existing revenues. In-house gross margin relating to in-house silicon wafer, solar cell and solar module production was 26.3% in the second quarter of 2015 compared to 24.1% in the first quarter of 2015 and 25.4% in the second quarter of 2014. Income from operations was $38.2 million compared to $37.1 million in the first quarter of 2015 and $40.6 million in the second quarter of 2014. Total operating expenses were $68.8 million and increase of 29.9% sequentially and an increase of 42.9% year-over-year. The sequential increase in operating expenses was mainly due to the increase in R&D expenses shipping and warranty costs associated with the increase of module shipments. The company's operating expenses excluding stock-based compensation, the change in provision for doubtful accounts, represented 13.2% of its total revenues, representing an increase from 13.5% sequentially and increase from 11.9% year-over-year. Operating margin was 7.4% compared to 8.4% in the first quarter of 2015 and 10.3% in the second quarter of last year. Net interest expense was $12.8 million an increase of 26.3% sequentially and an increase of 11.2% year-over-year. We recorded exchange gain of $2.4 million primarily due to our foreign currency exchange gain of $2.1 million and change in fair value of forward contracts of [$0.3] (Ph) million. We recognized a loss of $9 million from the change in fair value of convertible senior notes, which was offset by a gain of $0.9 million from the change in fair value of capped call options. We recognized an income tax benefit of [$0.3] million compared to income tax expense of $3.2 million in the first quarter of 2015 and income tax expense of $3.4 million during the second quarter 2014. Net income was $3.3 million compared to net income of $8.2 million in the first quarter of 2015 and net income of $22.3 million in the second quarter of 2014. This translates into basic and diluted earnings per ADS of $0.40. Non-GAAP net income was $33.4 million compared to non-GAAP net income of $27.6 million in the first quarter of 2015 and non-GAAP net income of $27.5 million in the second quarter of 2014. This translates into non-GAAP basic and diluted earnings per ADS of $1.08 and $1.04 respectively. And now, I would like to take a quick look at our balance sheet. As of June 30, 2015, the company has $367.5 million in cash, cash equivalents and restricted cash. As of June 30, 2015, total short-term borrowings including the current portion of long-term bank borrowings were $657.7 million compared to $483 million as of March 31, 2015. Total long-term borrowings were $344 million as of June 30, 2015 compared to $180.6 million as of March 31, 2015. As of June 30, 2015, the company's working capital was negative $285.4 million compared to a deficit of $195.9 million as of March 31, 2015, which was primarily due to the reclassification of convertible bond of $127 million to current liability in the second quarter of 2015. For the third quarter of 2015, the company estimates total solar modules shipments to be in a range of 1-gigawatts to 1.1-gigawatts, which includes 900-megawatts to 950-megawatts module shipments to third parties and 100-megawatts to 150-megawatts for its own downstream projects. Revenues will not be recognized for the module shipped to its own downstream projects as required by U.S. GAAP. For the full-year 2015, the company raised the guidance of total solar module shipments to 4-gigawatts to 4.5-gigawatts, which includes 3.4-gigawatts to 3.7-gigawatts module shipments to third parties. The Company expects to grid-connect solar power projects with a total capacity of 600-megawatts to 800-megawatts in 2015. At this moment, we are happy to take your questions. Operator.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. We will now take the first question from Patrick Jobin from Credit Suisse.

Hi guys. This is Jennifer Ky on the line for Patrick. Thanks for taking the question. Could you give us a little more color on ASPs by region in Q2 and Q3? Thank you.

ASP in the second quarter was $0.57 down slightly from $0.58 in the first quarter due to change our shipment mix, we have more shipments in China of around 45% in the second quarter and in terms of the trend of ASP, we expect the ASP in the second half of the year will be flat or down slightly. If you look at ASP by regions, China ASP is very stable in the range of $0.53 to $0.55 with better payment terms and anticipated very strong shipments in the second half of the year and Japan the ASP in the range of $0.55 to $0.56 facing some very little pressure from the currency movement and U.S. in the range of $0.65 to $0.67 down very slightly due to the competition. [technical difficulty] for the downstream solar projects both commercial banks and the policy banks were active in providing longer term loans for the solar projects and we continued to diversify our financing resources for the downstream project business. Recently we signed on the three pending credit line agreement with China Mingsheng Bank and another RMB with Ping An Bank. And this week on Tuesday, we signed for year’s strategic agreement with ICBC Johnson brands. And I think, last one and we released the deals as a news for the JinkoPower. We completed our US$115 million term loans for with the [indiscernible] financial institutions. The extra fund will help us to achieve 1.4-gigawatts in your future and which demonstrates the JinkoPower’s competitiveness in the industries and no separate financing capabilities. Back to the China involvement, we are seeing and more companies are coming into the solar sectors for the first half of the year the public companies in China raised around RMB26 billion in the capital market to develop the solar projects and the National Energy Administration is in discussing to advance the cumulative installation targets to 115-gigawatts to 200-gigawatts.

Great. Thanks, Charlie.

Welcome.

The next question comes from Philip Shen from ROTH Capital Partners.

Hi, guys. Thanks for taking my questions. Can you update us what percent of your operating projects are actually receiving our attrition payments?

The feed-in tariff payment is critical for the Chinese market. And we are optimistic, China will approve the next round subsidy catalogue in the second half year and accelerates payment schedule. But the end of second quarter we have 725 megawatts in operations around 100 megawatts is on the subsidy catalogue. And if the NDA approved the next loan, subsidy catalogue we expect around total cumulative 500 megawatts will be on the subsidy catalogue.

Great. And how you are connected projects, how much is DG, are you receiving cash payments all of your DG projects and given, go ahead, Charlie

This is a good question. I think we targeted 5% to 10% in terms of rooftop DG and by the end of second quarter we have 725-megawatt operating around 8% is distributed generations and for the DG, as you are right, I think a power process and payment of feed-in tariff is better than the [indiscernible] projects. And I see around in terms of the total GT compared to be operated around over 60% we are receiving the feed-in charge on a regular basis.

Great. And to what degree, as a result of more reliable payments coming from DG, are you potentially shifting your downstream of strategy or greater focus on DG.

Our target is 5% to 10% for the DG and we are shifting our focus from last year to the east and south China for the projects with strong energy demand particularly the utility DG and rooftop DG, east and south China. For rooftop, 5% to 10%

Great. Thanks, Charlie. One more here and I’ll jump back in the queue. I didn’t expect margins to trend in Q3 and Q4.

Gross margin we expect second half year, we have improved quarter-by-quarter with couple of party factors, firstly our overseas factories millennial factories is ready for the US market, the factory is strongly to 100% utilization now. And we plan to ship around 200 megawatts to 250 megawatts through the US market with our tariff. And the gross margin for the 200 megawatts to 250 megawatts is in a range of 25% to 30%. And for the downstream power revenues, now we are leading developers in China and we are on the track to achieve cumulative 1.1-gigawatts to 1.3-gigawatts by the end of this year. So we expect our power revenue will glow very quickly in the second half year. And for the third quarter we expect our an expected revenue will up 30% quarter-by-quarter and the last one is stable ASP involvement and we continues to content module cost. On top of that, the RMB depreciated by 3% to 4% in the recent ways and which is where the positive for the reduction of module cost and improves the gross margin.

Thank you Charlie.

Thanks.

The next question comes from Shen Zhong from Morgan Stanley.

Thank you for taking my question. Just follow up on the, the third point of your cost cut of module, are you still looking for $0.41 end of this year?

Yeah, the module cost, total in house module cost was $0.42 in the second quarter, $0.08 silicon cost and $0.34 in non-silicon cost. We continued to see this room to cut module cost and we’re on the track to reach our total module cost to $0.40 by the end of this year. So that means $0.01 by quarter is achievable

So that - I think that will mainly come from the downs city comp cost right?

Yes, we’re expecting on lower than material cost continue investing R&D, we are implementing the product and R&D technology and we - to lower to 100 megawatt to 200 megawatts by the end of this year which will improve the more to conversion efficiency by 46% and we continue, streamline our supply chain to get to the favorable purchase price from our suppliers.

Got it thanks and…

[indiscernible] Better will be quite favorable in the range of $15 to $16 per kilowatt.

Okay, thanks. Okay helpful and can you give some guidance on your outlook of the module shipment breakdown by geographic breakdown in the second half?

No, I haven’t give you shipment by the reading for the third quarter and then may be and for year 2015. For the third quarter, China is in the range of 30% to 35% Asia Pacific region 13%, 20%, Europe 5% to 10%, emerging market on 20% to 25% on - America 15% to 20%. I just want to comment, the color of the demand of second half year. We expect well - to our command from China and United States and the strong gross potential in the emerging market and Asia Pacific region including Japan, Thailand, India and South Africa, Chile, Brazil and Mexico and the capacity with Jinko is almost stilled out for the 2015 and we are taking order for 2016 particularly in the U.S. market as of today we have side around 750 megawatts for the U.S. market for 2016. We planned to side up to, in the range of 1-gigawatt to 1.5-gigawatts in the fourth quarter for the U.S. market for 2016.

Yes, that’s look comfort. Great and last question about the inventory actually you have a some increase in the inventory do you have some specific color on this?

Yes, the inventory by the end of the second quarter was $475 million up 50% quarter-over-quarter. The inventory is for the anticipated or strong shipments in the second half year and inventories very good, conditions any write off risk and we expect to the inventory level we go back to lower level by the end of this year.

Understood, thank you very much.

Sorry and we revised to the full-year guidance by 20% and the third party shipment guidance now is 3.4-gigawatts to 3.7-gigawatts. So that is why we want to build the inventory to catch up the market demand.

Yes very helpful. Thank you very much Charlie.

Thanks.

We would now take the next question from [indiscernible]. Please go ahead.

Hi guys. I think you touched on this with Phil’s question but can you just quantify how much the Malaysian manufacturing plant cost you in gross margin in Q2, maybe how many basis points of margin that cost you because if you are ramping it obviously that is still utilizing at the entire quarter, it is inevitably some drag on margin, correct.

In second quarter, in May we just started the production for Malaysia factory, so the impact –partly impact for second quarter is very small and we expect to moving gross margin impacting the second quarter - sorry in the third quarter and first quarter.

I understand that but how much did it cost you in gross margin in the second quarter because it was likely dilutive to gross margins in the second quarter and obviously, in the back half it will be higher but in the second quarter, how much did that sort of hurt your gross margins?

Hi, Paul this is Sebastian. Let me take this question. So because in the second quarter definitely the factory has not ramp up to the full competitive yet and the production is very limited. It is very hard for us, so it is very hard for us to estimate the build cost and also the core in Malaysia factory but like we discussed it before the cost will be within U.S. different with our domestic facility. So you can do the calculation. So like Charlie said before that we expect that the gross margin for our Malaysia product shipped to U.S. will be in the range of 25% to 30% if we assume under the current contract we signed with our customers.

Great and then one last question, you mentioned that you have already sort of seen orders for 2016 and you may have already spoke about this but maybe I missed it, what does pricing look like for those contracts for 2016 or you really just locking in volumes now and prices will be discussed sort of as we head to later in 2015.

The price for U.S. market in 2016 is quite stable based on our latest account activities with customers.

Great, it is great news guys. Thank you.

We will now take the next question from Taylor Frank from Robert W. Baird. Please go ahead.

Hi guys. Thanks for taking the question. I was wondering if you can talk about what you see for the current tariff issues and do you see any resolution coming to that, can you also talk about what your thoughts are on the ITC and how that may impact market demand in the U.S. in 2017?

The tariff and the final results, our tariffs 30.6% came worse than expected but the impact of Jinko is very small because our rates is ready to address the U.S. market and for the ITC impact we are saying the U.S. market actually now is on fire and we are seeing very strong momentum in U.S. market in 2015 and 2016 and post 2016 with respect to U.S. market we continue because the continued rapid reduction of total solar system cost. And the [indiscernible] U.S. market will continue to drive the growth particularly power generation segment and we are saying both China, United States and India are taking more favorable policies to support solar sectors. U.S. allowance to the green power plant, Obama administration to further cut the carbon emissions and increase the renewable percentage in energy mix from 22% to 28%. In India market, the government last week announced a detail plan to reach 100-gigawatts by 22. So we think the policies very favorable in the next few years.

Okay. Thank you very much. Operator [Operator Instructions] We’ll now take the next question from [indiscernible] from Goldman Sachs. Please go ahead.

Thank you for taking my question. The question can you share with us blended cost including outsourcing and duty if there is an kind of guidance for the full year. Thank you.

The blended solar module cost is around $0.46 and to $0.47 and we continued to count in module cost and we tend to cost leadership in the industry. Just like the in-house, silicon house module we target to cut [indiscernible] for a while basis in each quarter.

Thank you very much. And the second question is about the RMB depreciation just not your shared it will be beneficiary since the cost will be lower, wondering if it’s impacting the solar electricity cells as well, because it’s a RMB sales exposure. Thank you.

Our functional currency is RMB. So in terms of the JinkoPower, because of the assets, revenue cost structure is RMB so I don’t see any impact on the revenue side. But if you convert to US dollar of course, it will impact the revenue denominated in the U.S. dollar. But for the solar module, business is different. We have I think around 60% from the international sales. So there are depreciation, the cost is 100% denominated in RMB. So which is we are part of drive down the solar module cost at the time, we can get more revenues from the overseas sales market denominating U.S. dollar, Japanese Yen, and Euro.

Okay. Thank you very much. And also if you ask further total for your connection target of 6 to 800 megawatts, so it’s approximately 500 left for the half year, is that equally distributed for the cultures or not with year end.

So in the first half year, we connected around 220 megawatts solar projects for JinkoPower and we target to connect 150 megawatts to 200 megawatts in the third quarter for JinkoPower and for the fourth quarter. we target a 350 megawatt to 400 megawatt to make the total connection in a range of 600 megawatt to 800 megawatt. By the end of the second quarter, we had around 500 megawatts already under constructions. So we are confident to achieve the target by the end of this year.

Thank you. One last question, we see operating expense increasing as a percentage especially from SG&A, do you see for the full year, SG&A cost will trend for the full year. Thank you.

Thanks to the strong shipment second half year. And we continue to see the operating leverage we expect that the operating expenses as a percentage of revenue is in a range of 10% to 12%.

Thank you so much.

Thanks.

We now take the next question from [indiscernible] CICC.

Hello. Hi, thank you for taking my question. My question is I noted that our 2Q SP is $0.57 and our module shipment is around 800-megawatts, I multiplied this two number that say that your strength rate is about 6.1 to 6.2 and then the revenue is about RMB2.8 billion but it is higher than our total revenue. I don’t know why

I think you’re talking about revenue breakdown for JinkoSolar.

Good correct.

I think, the ASP is $0.57 and our shipment to third party is 823 megawatts. The module revenue is around same, 91% and we also have in excess of revenue of $29 million, which is around 5% of total revenues. The remaining 3% to 4% is coming from the sales of wafer and the sales.

Hi, this is Sebastian so, I think that the gap you are seeing of the revenue population is from the some small sales of our sales and reverse.

Okay.

In the revenue breakdown, wafer revenue is around 2% still 1.4%, module is 91% in excess power revenue is 5.5%.

Thank you.

We’ll now take the next question from Dan Ries from Ardsley Partners. Please go ahead.

Hi, just a quick question. I’m sorry if I missed it. I see that you say that U.S. sales were up 115% sequentially which is amazing, did you say what percentage of the total either shipments or revenues came from the United States and then I have two other really quick ones.

You mean 2015 or second half year?

No, just in 2Q.

The second quarter last.

Yes.

Second quarter our shipments in the U.S. market is 191 megawatts so, it’s a around that is 23% and U.S. shipment is we’re backend loaded in this year. We target and 800 megawatt from 900 megawatts in the U.S. markets this year and for the first half year our total shipments in the U.S market is our - 300 megawatts.

Hi, Dan this is Sebastian. I understand your question and to the percentage of our U.S shipment in the second quarter and were the small portion of that shipment is coming from our Malaysia production so the number is worse more because we just begin production in the second quarter so, the effect of the high gross margin will come out in the second half of the year. We don’t have to be considering as a factor.

Great and Charlie I’m looking at your debt level and your interest expense are you guys able to capitalize what some of the interest on the projects that you’re developing I’m just curious to $12 million of interest expense?

Yes, you are right, we’re trying capitalizing some interest expense based on the U.S. cap and I think it’s are for the second quarter is around $2 million to $3 million we capitalize in the prior assets.

Great and I was [indiscernible] your leading market share in Chile and that’s great and but as curious may be I’ll turn what your customers down in Chile, given the commodity prices of have can’t sell now around the world in particular, do you view that as a risk to Chilean demand in the year end not necessarily the quarter had I that’s all booked in the things but what your thoughts on 2016 given the Chilean economies so dependent on commodities - yes, my - where we thought to be part of the demand.

That’s true that, that Chile is mainly supported by the demand on the commodities mainly for copper so they have is one of the top three countries in the exporting copper so, the economy definitely with the reduction on the price of the raw materials is part of the GDP that has been impacted, whoever for us we’re not seeing effect in the short term and mainly most of the plans are has been already permitted and contracted by our developers and issued companies that are mainly our customers not the mining, because we don’t have any mining as a company, but mainly utility companies so far they have not been pulling back any of these plans. It doesn’t mean that in the next two years if continue the situation like this we will see the effect not for the next coming let’s say eight months. So this year, everything is constructed and we have also projects in 2016 for Chilean big companies that are firm and contracted and signed that will help us for the next half of the year in 2016. So I didn’t see any effect on this regard.

Thank you very much.

You’re welcome. End of Q&A

As there are no further questions at this time, I would like to hand the call back to Sebastian Liu. Please go ahead.

Thank you, operator. So on behalf of the entire JinkoSolar’s management team, I would thank you for your interest and participation on this call. If you have any further questions or concerns, please feel free to contact us. Have a good day or good evening, bye-bye.

Thank you. That concludes this conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.