Thank you for standing by and welcome to the JinkoSolar Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by the question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, August 25, 2016. I would now like to hand the conference over to your host today, Mr. Sebastian Liu, Investor Relations Director. Please go ahead, Mr. Liu.

Thank you, operator. Thank you, everyone, for joining us today for JinkoSolar's second quarter 2016 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 the newswire services. We have also provided a supplemental presentation for today's conference call, which can also be found on IR's website. On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Cao Haiyun, Chief Financial Officer; Mr. Gener Miao, VP of Global Sales and Marketing; and Sebastian Liu, IR Director. Mr. Chen will discuss JinkoSolar's business operations and the company's highlights, followed by Mr. Gener Miao, who will talk about the sales and marketing and then, Mr. Cao, will go through the financials. We 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 results 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. 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.

Thank you, Sebastian. Good morning and good evening to everyone, and thank you for joining us today. I am pleased to announce another strong quarter. Total shipment of solar modules were higher for 1,716 megawatts, exceeding the high end of our guidance of the quarter. Total revenue reached US$896.1 million, an increase of 86.1% over the same period of last year. Gross margin was 20.4%, compared with 21.3% in the first quarter of 2016 and 20.7% in the same period of last year. 46% [ph] of our margins to China from 3% to North America, 5% to Asia Pacific region, 4% to Europe and 2% to emerging markets during the quarter. Due to seasonality a large portion of our shipments both to the U.S. and China we expect shipments to balance out during our second half of the year. FIT remained flat and 55 U.S. is compared with the first quarter. Looking at second half of the year, we do see some uncertainty in terms of both demand and FIT caused by the uncertain [ph] bidding tough comp in China, additional global capacity coming online and some panic sales from small suppliers. We remain cautiously optimistic however, and are confident that we will be able to maintain our gross margin at a decent level. In China, we are actively participating in Top Runner Program and the PV Poverty Alleviation Program to counter the effects of the declining traditional utility- scale markets. We are the first PV company to receive the China Quality Certification Center's level-one energy efficiency certification for both mono and multi-products for the Top Runner Program. In the U.S. we have already secured a large number of orders for the second half period, a majority of which will be supplied through our overseas production facility which will significantly…

Thank you, Mr. Chen. As Mr. Chen mentioned, we shipped a total of 1,716 megawatts of solar modules during the quarter. [Indiscernible] results reached another history high for us. While we will face a challenging environment during the second half of the year, we remain cautiously optimistic about the market, especially in a number of markets that are already showing signs of regaining growth momentum in the fourth quarter. First, let's look at the geographic distribution of our shipments during the quarter. We shipped 1,512 megawatts of solar modules to third parties including 46% to China, 43% to North America, 5% to Asia Pacific region, 4% to Europe and 2% to emerging markets. Due to seasonality, a large portion of our shipments were to the U.S. and China. And like Mr. Chen just mentioned the geographic mix should balance out during the second half of the year when China slows down and the Japan, India, and Latin America pick up. China remained our largest market during the quarter, where our demand in the third quarter is affected due to the FIT cut at the end of year. We are confident about our position in the market and its future opportunities. Based on our current visibility we expect the demand will recover during the fourth quarter. We are actively involved in Top Runner Programs which set high standard for efficiency and the reliability of PV products helping tier one suppliers to create technology barriers in market. We are also very active in participating Poverty Alleviation Projects which will be [indiscernible] gigawatts market for the next five years. Outside China, the U.S. continues to be one of our most important markets where near term headwinds have dampened the markets sentiment even causing some customers to wait and see. It does not change…

Thank you, Gener. I’d like to welcome you to our financial results for the second quarter 2016. Total solar module shipments were 1.7 gigawatts, up 7% sequentially and up 88% year-over-year. The shipments exceeded the high end of our second quarter guidance. We connected 123 megawatts solar power projects in this quarter. By the end of Q2, we had 1,130 megawatts projects in operation. Total revenue was up $896 million, up 9% sequentially and up 86% year-over-year. Revenue generated from solar power projects was $43 million, up 56% sequentially and up 62% year-over-year. Gross margin was 20.4% compared to 21.3% in Q1 and 20.7% in Q2 2015. The sequential decrease was due to the increase of tariff costs related to module shipments to the U.S. market from China. ASP was $0.55 per watt, the same ASP in Q1. We continue to cut our manufacturing cost to $0.29 per watt from $0.30 per watt in Q1. The blended cost, excluding the U.S. tariff costs, was $0.41 per watt, flat compared to the cost in Q1. Our operating expenses represented 12.9% of total revenues compared to 10.8% in Q1 and 13.3% in Q2 2015. We had an impairment of $50 million for the replaced equipment during the process ph for the equipment automatic production level. Excluding non-cash expenses, the operating expense was 10% of total revenue in Q2 2016. Operating margin was 7.5% compared to 10.5% in Q1 and 7.4% in Q2 2015. Net interest expense was $18 million, down 4% sequentially and up 33% year-over-year. EBITDA was $180 million compared to $125 million in Q1 and $66 million in Q2 2015. EBITDA related to solar power projects was $36 million compared to $15 million in Q1 and $22 million in Q2 2015. Net income was $42 million, which translates into basic and diluted earnings per ADS of $1.36 and $1.28, respectively. Non-GAAP net income was $64 million, which translates into non-GAAP basic and diluted earnings per ADS of $2.04 and $1.92, respectively. Now let’s move to the balance sheet. By the end of the second quarter, cash, cash equivalents and restricted cash were $557 million compared to $523 million at end of Q1. Our accounts receivable was $626 million compared to $611 million at the end of Q1. Inventories were $466 million compared to $482 million at the end of Q1. The total debts were $1.8 billion compared to $1.6 billion at the end of Q1. The debt related to solar power projects were $1 billion compared to $865 million at the end of Q1. We updated the CapEx plan for our module business in 2016, which is in the range of $200 million to $250 million. At this moment, we are happy to take your questions. Operator?

Thank you, sir. [Operator Instructions] We’ll now take our first question from Patrick Jobin from Credit Suisse. Please go ahead. Your line is open.

Hi good evening. Thanks for taking the question. First question, I guess can you talk about the visibility you have into the margins in the second half? I guess I’m trying to reconcile the comment that you have a strong order book, but I guess, the comment that pricing is declining, the low teens percentage, should we think about gross margin percentage declining lockstep with that or how do we think about the margin profile in the next two quarters?

Okay. Patrick, I think we have – sorry, Patrick. I think we have some visibility for the second half year in terms of orders. And in terms of gross margin, Q2 gross margin was 20% and of which I think power business is 61%, and solar margin business is around 18%. For the module business, the ASP is under pressure but we are taking further steps to help the costs. We are seeing a lot of positive factors and targeting to cut our blended costs over 10% in the second half of the year. In the second half of the year, we expect the tariff costs will be significantly lower because we had completed our capacity expansion in the overseas markets and we had 1.5 gigawatts cell and module capacity on line, which will help us to address the strong U.S. markets. And we plan to ship over 90% shipments to the U.S. market from overseas factories in the second half of the year compared to 30% in the first half year. And the sale price is down dramatically, and if you look at our capacity, existing capacity, they don’t need to buy 40% from third-party so which will help us to drive some of our costs. And the next one is we are working actively with our strategic vendors and we expect to get more favourable platform from our vendors. And if you look at RMB, it’s still depreciating. So which will also help us to tackle costs, and we continue to invest in our R&D and improve the efficiencies. So for the module business, I would expect the gross margin in the second half year is around 13% to 17%. For the power business, the gross margin will be quite stable. It’s in the range of 60% to 65% for the third quarter. And for the fourth quarter, because of the seasonality, I expect that the gross margin will go down slightly.

Patrick, just one point. In fact, this quarter, our module business, gross margin is just a little bit above 80%. So in fact, for the second half, we expect that the gross margin for our module business just will decrease a little bit.

Okay, that’s helpful. And I guess, just in context of what you’re seeing on the pricing environment and what we and others in the industry have tabulated as quite a significant capacity expansion that’s occurring right now despite some markets where maybe you’re not seeing demand growth into the next year, can you help us understand kind of what you’re doing on the capacity front? Why make the decision this quarter to expand capacity further? How much of the expansion is PERC? Is it upgrading existing lines or are these new facilities? I’m just trying to reconcile the oversupply situation just the cyclical position we’re in and the decision to expand capacity right now. Thanks.

By the end of second quarter, our total capacity reached to 3.5 gigawatts for wafer and 3.5 gigawatts for cell and 6.5 gigawatts for solar modules. And you’re right, I think we have made strategic decisions to invest one gigawatt mono wafer capacity and one gigawatt impairments and the production will ramp up to full capacity by the end of the year. So the rationale is we anticipated the demand for the high efficiency modules in the markets, and we invested years for the module technology. And thanks to our technologies, we believe we can provide the leading high-efficiency mono modules in the market. The investment on mono does not mean we are going to shift our focus to multi from mono. And we believe that both the models have great potential in the future to increase the efficiency and transfer costs. And the investments will help us to solidify our leading position and provide more options to meet our customer needs. And for the total capacity expansion, we continue to adopt disciplined approach. And total CapEx this year 2016, for module business is in the range of $200 million to $250 million.

Got it, thank you.

Thanks.

Thank you. We will now take our next question from Vishal Shah from Deutsche Bank. Please go ahead.

Yes hi, thanks for taking my question. I wanted to just better understand your mix in the second – in the second half across different regions. What percentage of your shipments in say for example, Q3 will be to the U.S. market? And how will that mix shift in Q4 as China becomes a bigger percentage of mix?

Hi Vishal. This is Gener. I’ll just give you some color on that. So for the second half as a whole, we are expecting around 30% to 35% to China and a similar number around 30% to 35% to U.S., and 15% to 12% to Asia Pacific and similar number, 15% to 12% – 30%, to emerging markets and Europe will be below 10%.

That’s great. Thank you. And then what percent – what kind of visibility do you have right now with respect to Q4 shipments? What percentage of your current guidance is in the order books for both Q3 and Q4?

Well, so it’s difficult to differentiate Q3 and Q4 because some of the orders are long-term, so it comes through the whole year or the whole second half. So if we look into the whole second half of 2016, we are – our order books are more than 60% are full. I think we are pretty happy with the current position we have and that we are seeing more and more opportunities coming in and not only for the second half of 2016, but also for the 2017.

That’s great. Thank you. And then just a couple of other follow-up questions. On the U.S., you mentioned some of the customers are adopting a wait-and-see approach. Where do you think the demand is right now for your products in the U.S.? Is it commercial and industrial segment or utility scale segment? And how do you think the China market develops in 2017, is it going to be flat like you said in the U.S. or could it actually grow on an annual basis? Thank you.

Thank you. For the U.S., we are believing that majority of the demand were still coming from the utility segment. But we are seeing that growing faster-growing market from the demand from the commercial and residential markets. For our strategy wise we are really working together for the commercial and residential segment, we are working together with national-wide or regional-wide distributors and even larger size of the local installers to distribute our business and our product. So for the China, we are believing that next year, we will keep similar demand compared with 2016. So the total number will still be a high number, even global number one demand. Thank you.

Thank you.

Thank you. We will now take our next question from Philip Shen from Roth Capital Partners. Please go ahead. Your line is open.

Hi. I wanted to touch on the ASP topic for a moment. You mentioned in your prepared remarks that ASPs could improve in Q4. Can you elaborate on this? Typically, ASPs are - they fall 5% to 8% year-on-year and they’re accelerating, as you mentioned in your prepared remarks to kind of low teens level on Q3. What specifically do you see in Q4 for the ASP trends and how do you expect the ASPs to trend in 2017 as well?

Thank you Philip, this is Gener. ASPs, if we are looking to the supply and the demand side, actually if we are really from the demand side, we can see that Q3 mainly will be the weak season through 2016. Q4 and the Q1 will typically be the peak season for India and Japan markets. And also, after the feed-in tariff cut by the first half in China and the Q3, not many people taking actions for module delivery demand. But for sure, peoples are trying to close their grid connection before year-end, the fiscal year in China. So we will see a pretty strong compared with Q3 and we will see pretty strong Q4 demand in China as well. So U.S. will be the similar case, pretty flat. So combined all these four key markets we can see that the demand for Q4 will obviously be stronger than Q3. That is why we have the contest for this Q4 ASPs.

And then Gener, what do you see in 2017? We've heard reports that ASP, booking, ASPs and volumes seem – the back half of 2017 in terms of long term contracts are actually quite low. So do you see full, talk about 2017? Thanks.

Well, 2017 we are still cautiously optimistic. The correct compare with 2016 we can see obvious increase in demand is from India and also Japan will still be strong. So we do not see any decrease in demand. Meanwhile we can see some increase in demand. So from the total demand side we are too optimistic because our China market, China Government still got these ambitious targets to beat for 2017. And for the ASP side we can see the stable ASP in 2017 compared with second half this year and because we have, if we consider the increasing efficiency of the solar products we will see a slight decrease, but compared with the low end of the second half of 2016 we still have confidence that the ASP in 2017 will be – keep us in rational numbers.

Okay great. One more from me here, in terms of your downstream business, you mentioned in your release that you are still working on perhaps the potentially still that business ops, can you update us on where that stands and what the next steps might be and if there is anything in the near term that we could expect there?

Philip, this is Charlie. We continue to move the contest forwards and the target to complete the projects by the end of this year. And Chinese kind of the market is the first options and the Chinese regulators are analyzing the detail [indiscernible] for the overseas as the company coming home. And we are optimistic because China encourages the merchant operators for the low economies and renewable energy is small the key area to develop low carbon and sustainable economies. And so far, I cannot disclose the plan in detail and we will [indiscernible] posted if we made some significant milestone.

Okay great, thank you. I'll jump back in the queue.

Thank you.

Thank you, Philip

Thank you. [Operator Instructions] As there are no further questions in the queue, I will turn the program back to Mr. Liu for any additional or closing remarks. Thank you.

So, on behalf of the entire JinkoSolar's management team, I want to 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 and thank you and good bye.

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