Ladies and gentlemen, thank you for standing by and welcome to Q3 of 2019 JinkoSolar Holdings Company Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Ms. Ripple Zhang. Thank you, Ripple. Please go ahead.

Thank you, operator. Thank you everyone for joining us today for JinkoSolar's third quarter 2019 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. Chen Kangping, Chief Executive Officer; Mr. Charlie Cao, Chief Financial Officer; and Mr. Gener Miao, Chief Marketing Officer. Mr. Chen will discuss JinkoSolar's business operations and company highlights, followed by Mr. Miao who will talk about the sales and marketing, and then Mr. Cao, who will go through the financials. 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 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 the applicable law. It's 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.

[Interpreted] Thank you, Ripple. Good morning and good evening to everyone and thank you for joining us today. I'm pleased to report strong operational and financial results for the third quarter, which I believe marks a turning point for our business as we begin to increasingly benefit from our investments in technology, leading integrated cost structure and expanding mono wafer capacity, which will steadily strengthen our overall profitability and expand margins going forward. Total revenues during the quarter were US$1.05 billion, an increase of 8.2% sequentially and 11.8% year-over-year. Our leading integrated production costs continued to fall and ASP went up sequentially, allowing us to initiate a reset of our gross margins and expand it to 21.3% during the quarter. Excluding the benefit from anti-dumping and countervailing duties, gross margins still increased a solid 6 percentage points year-over-year to 18.5%. Our margin reset supported record high operational profit of 19 -- US$89.4 million and a net income of US$50.9 million, significant increases of almost 2x to 3x sequentially and year-after-year -- year-over-year as our mono wafer production capacity ramps up and we further optimize our cost structure. In the fourth quarter and 2020, our overall profitability will continue to steadily improve. Due to the delayed announcement of the government subsidy policy for PV projects in China earlier this year, a large number of project bids remained in the bidding or preparation stages during the third quarter, which resulted in many of them being pushed back into the fourth quarter and in the first quarter next year. This delay is expected to drive strong domestic demand over the next six months, especially since the National Renewable Energy Information Management Center recently announced that it’s speeding up the formulation of subsidy policy for PV projects in 2020, the early release of next…

Thank you, Mr. Chen. Total shipments in the third quarter were 3,326 megawatts, flat with the second quarter. With a large number of domestic installation delayed into the fourth quarter and the first quarter of next year, overseas shipments accounted for 90% of our order book during this quarter. ASPs has risen sequentially. We are at a strategic turning point in our corporate history with mono-based high-efficiency products accounting for nearly 75% of the total shipments during this quarter. This number is expected to increase to 99% in 2020 and over 40% of which will be the new products. Due to the late announcement of government policy in China earlier this year, many major developers were forced to delay their projects with a portion of those installation pushed back into the first quarter of 2020. Delayed demand from 2019 to increased in grid parity projects expected in 2020, as well as anticipated policy announcement early for next year leave us very confident and optimistic about domestic demand in 2020 will increase strongly and exceed 40 gigawatt. The majority of which will be composed of grid parity and bidding projects. Demand in U.S market remain very strong where many states have begun implementing very aggressive clean energy policies, and accelerated the phasing out coal-fired power plants. In California, for example, our new homes will require rooftop solar panels starting next year. And there was a rush this year to submit projects in order to secure the highest tax exemption under the solar ITC. A large portion of these projects are expected to drive demand and began installation over the next four years. According to 2019 U.S. installation estimates complied by Bloomberg, our market share in the U.S. is currently approximately 20%. Recently we joined the Board of the Solar Energy Industry…

Thank you, Gener. We achieved record gross profits and income from operations in Q3 despite push out of China demand. Transitioning to the high-efficiency mono technology has been largely completed, making Q3 a turning point for the company. This gross margin reset has been driven by increasing sales towards integrated mono capacity, leading in-house integrated production cost, new premium products and global footprint. With our strong competitiveness in the industry, we're optimistic for the sustainable growth in the future. Stepping into 2020, we expect total shipments in the range of 18 to 20 gigawatts, mainly underpinned by the strong growth outside China and our diversified customer base globally. The capacity will expand to 28 gigawatts wafer, including 18 gigawatts mono wafer, 10.6 gigawatts high efficient cell and 22 gigawatts of solar modules. Mono-based high-efficient products are expected to make close to 100% of our shipments in 2020 and overall predominantly served by in-house capacity. The CapEx for 2020 will be around US$300 million, significantly lower than in 2019 given our capacity expansion is largely down. We plan to finance the CapEx by onshore renewable infrastructure fund and our operating cash flows. Turning to the strong performance of Q3. Total revenue was US$1 billion, up 8% quarter-over-quarter. Gross margin substantially improved to 21.3%, excluding the ADD, CVD reversal benefit gross margin was 18.5% compared to 16.5% in Q2. Income from operations was US$89.4 million, up 136% compared to US$37.9 million in Q2. EBITDA was US$100 million, up 52% compared to US$66 million in Q2. Non-GAAP net income was US$42.1 million, which translates into Non-GAAP diluted earnings per ADS of $0.96. Operating expenses were 12.8% of total revenue, excluding the disposal of obsolete equipment operating expenses accounted for 12.2% of total revenue compared to 12.8% in the second quarter. Moving to the…

Hi, everyone. Thanks for taking my question and nice quarter. Can you talk about the order visibility in 2020 just looking at the 18 to 20 gigawatts of shipment guidance? It's nice 35% uplift. But just wanted to understand which geographies are driving it, and how much visibility do you have into that order book as of now?

Thanks for the question. I think we are having over one-third of the order book fulfilled for 2020 right now. We are targeting to increase that level into a higher level by the year and the next two months’ time, let's say. And for the geographic coverage, majority of them are non-China demand, mainly international demand. I think we have secured a lot of global coverage including Europe, U.S., emerging markets, Asian markets, etcetera.

Got that. And just on the China market, if you can touch upon the new policy for 2020, when do you expect that announcement to happen? We've been hearing something to happen in the next month or in Q1, but any clarity on when the new subsidy would be announced and then when you can expect the new round of bids in 2020?

I think, definitely the lower-than-expected installation number in China in 2019 will encourage the, let's say, the government side to announce the policy and also the bidding policy for 2020 earlier than -- definitely earlier than 2019. We have seen this news coverage about the details -- drop the details -- drop to the detail about 2020 policies such as what's the proposed feed-in-tariff, seeding feed-in-tariffs, and also what's the expected installation volume. So, from that policy or the rumor side, we are pretty confident that policy could be announced in the next one to two months. Conservatively, at least before Chinese New Year, everything could be set up. And do you need me to remind you on these numbers?

Yes, sure. That’s would be helpful.

Yes. So according to what we have read on this Chinese, let's say, newspapers, we’ve seen the drafted policies around like $0.04, -- sorry, $0.04, $0.08 and $0.10 for the utilities distribution generation and individual homeowners. So I see -- we see that drop in the news. So, I'm not quite sure what should be the -- what will be the final policy. If that number comes through, we definitely are expecting over 40 gigawatt installation in 2020.

And then -- yes, sorry go ahead Charlie.

This is Charlie, and just to supplement some background. I think, in China, this year the debottleneck is the policy coming out late, and developers need sufficient time to get to the connection approved, to get to the land secured. So, some of the developers, there's no sufficient time, so some projects will be delayed in Q1 next year. But from the policy regulator perspective, next year is totally different. They are going to move in very quickly. So just like, Gener said, the policy -- the framework, the scheme of the framework in general is the same with this year. But subsidiary level will be down a little bit, but still very positive and the positive will for sure come out very early next couple of months. So, frankly speaking, we're very optimistic for China next year versus this year.

Got it. I had a quick follow-up on the 40 gigawatt China demand on 2020. Does that include the 2019 projects being delayed into the first half of next year, or …?

It's brand new -- its brand new in the 2020 projects.

Got it. And then just one housekeeping, and I will jump back into the queue. The Q4 revenue guidance, does that include the Mexico asset sale? And if not then, could you touch upon the timing of the sale?

Yes, good question. This revenue does not consider the revenue from the monetization of Mexico projects. So, it's purely for the 4.2 to 4.5 -- 4.4 gigawatts module shipments. And Mexico projects, we have signed agreements. It's going to submit some kind of regular approval procedures. We expect to be closed in a couple of months, and it could be by the end of the year or early next year, in Q1.

Got it. I'll jump back in the queue. Thank you.

Thank you.

Thanks.

Thank you. Your next question is from Philip Shen who is from ROTH Capital Partners. Your line is now open, Philip. Please go ahead.

Hey, guys. Thanks for the questions. First one is on pricing. Can you confirm what your Q3 ASP was? Our basic calculation was for about $0.315, but that seems a bit high. Also, what was your module-only revenue for Q3? And then looking ahead for Q4, and given the guidance that you have there we get to an implied ASP of $0.279. Are we close on that? And if not, can you talk about the ASP that you see for Q4? Thanks.

Hi, Philip. I will take the ASPs. I will leave the revenue question to Charlie. So for ASP side as we’ve just stated, I think the ASP is slightly up compared Q3 versus Q2. And for Q4 it will drop because there's some more shipment to China, is some more spot [ph] market, the current market price is lower than the -- in terms of contract we have signed a quite a while ago. So that's why the blended ASPs were lower. I think it's on approximate, the range you just talked about. The detailed number we will have to check -- we'll have to check. And for the Q1 and for the ASP trend, we believe the market will continue, let's say, in general is stable, but steadily going down quarter-by-quarter or year-by-year. I think as the whole industry is going into grid parity, which will be very helpful to stabilizing the turbo -- turbulence of this market price. But in general, in order to be more competitive for solar installations globally, I think the module or the whole solar system installation or specific -- particularly the LCOE [ph] cost will continue to be more competitive.

So, Philip, could you just repeat your question on for revenue?

Yes, just simplistically for your Q3 revenue, how much of that was pure module revenue that we can associate with your shipments? How much was wafer revenue for example?

Yes, yes. It's roughly -- I think the majority -- about 97% -- 97%, 96% is coming from module revenue.

Okay. That's great. So then, Gener, you were just talking about ASPs trending down through next year. Can you talk about the margins you expect to see by quarter next year if we start to see -- if we look at global pricing for mono PERC, especially and also China pricing, it's quite weak. And you guys have been able to maintain a pretty high ASP. So maybe talk about that premium, and then also, Charlie, if you can talk about the margin trend that you see for 2020, that would be very helpful. Thanks.

Firstly, I think China's ASP is down I think starting from third quarter and October and because the China demand is weak. And due to the late policy. And now, actually starting from the later October, what we're saying is China demand is huge, its pumping up. So the capacity constraint is a big issue for us. And it's very tight worry for the solar cell resources even the solar cell market price. And I think it increase a little bit. And for Jinko we have -- we’ve put business highlight in the third quarter earnings release because it's kind of a turning point. Why a turning point? Because we have completed the transformation for the mono based technology capacity. And if you look our capacity, basically, if I’m general thing about if I’m looking to the 2020, we have integrated capacity each quarter roughly 4 gigawatts. So -- and now we -- I think we are in very good position in terms of our capacity scale, in terms of our in-house integrated production costs. Under that, we're promoting high efficient products like the Tiger, the next-generation high-inflation mark technology integrated with tier [ph] technology. And we're promoting the [indiscernible]. So next year just likely in the two or maybe three new products is going to account for over 40 -- over 40% of our total shipments. So the new products -- my key points, it's the new products, the efficiency is higher, output is higher, but the production costs may be lower or the same with traditional products. And so we are focusing on the in-house capacity gross margins and we are targeting roughly 20% to 25%. So that is our goal.

And just to be clear, Charlie, that -- that's what you could possibly see for next year, 20% to 25% for your in-house [multiple speakers]?

Yes, it's in-house. We still need to do -- when we do 20 gigawatts, we still need to do some third-party by the solar cells. But what I'm thinking for each quarter in general we have 4 gigawatts, roughly 4 gigawatts integrated capacity and we still need to do some outside. So it's depending on each quarter. Some quarters, we may buy more from third-party. Some quarters, we need [indiscernible].

So, in general, Philip, I think Charlie's point is with higher level of the in-house, let's say, vertical integrated capacity, and we are manufacturing higher, more competitive and higher efficiency products, which can generate a better margin standard commodity and we are -- and we have more confidence than ever that we -- the gross margins and also the profitability are much more controlled.

Okay, great. One last quick question. As it relates to Jinko Power debt, can you just update us on whether or not there's any liability there for Jinko Power? How much of the Jinko Power debt are you guaranteeing, if any, these days? Thanks.

I think it's kind of legacy relationship, right. And you understand back into 2016 when we spin-off the Jinko Power, we have preexisting guaranteed relationships with Jinko Power by the end of 2016. So the guaranteed amount we have been -- we have disclosed in 20-F each year, and it's going down year-over-year in each year on average roughly, the guaranteed number will be down US$50 million to US$100 million. So you can get the year-end, let's say, 2018 20-F number and cut US$50 million to US$100 million. And you can get roughly a number.

Okay. So roughly now it's about US$600 million, is that right?

I don't think so. I don't think so. I will get back to you. I think it should be lower.

Okay, great. Okay. Thank you. I'll pass it on.

Thank you.

Thank you. Your next question is from Alex Menzel [ph] from Goldman Sachs. Your line is now open. Please go ahead.

Hey guys, it's actually -- it's Brian Lee here. How's it going? Thanks for taking the questions. Maybe just, Charlie, on the gross margin question, going back to that for a bit, I appreciate the view on the 20% to 25% internalized capability on gross margin. As we think about maybe the cadence though, because this year you had sort of a weaker first half in terms of margin profile versus the second half how you're exiting here. Could we expect something similar in 2020, given again you sort of have the similar dynamics where you'll be ramping up capacity? I know you had some capacity ramp up headwinds on the margins earlier in the year. And then it looks like, obviously pricing is going to be weaker here heading into year-end and then seasonally in Q1 typically we get another pricing down tick. So as you think about all those moving pieces, is it fair to assume you kind of start lower on the margins here in early 2020 and then you ramp up just like we saw in '19?

I'd say it's a totally different scenario. Let's say 2020 first-half year versus the first half year of the 2019. If you look at our capacity, low demand and ramping up schedules, actually our capacity investment in 2019 we invested roughly US$500 million. The mono wafer, the product sale came out second half year of 2019. So the impact is happening in the second half year. And the first half year 2019 its extremely worst-case. Its -- PERC cell is in supply shortage. The price is very high and we have very limited capacity. We need to buy a lot of volume for the PERC cell for the first half of the year 2019. But the story is going not -- it's going to never happen next year, because our capacity came out the second half year this year, our new second stage the mono wafer capacity will come out very quickly, second quarter to first quarter we are ramping up the second stage. The mono wafer starting from now and Q1 continue to ramp up full capacity in second quarter. So the key point is that the volume is there and it's totally different with first half year 2019. And just to give you some numbers is the volume, production volume next year 2019 will be dramatically increase for the mono wafer, for the product sale for the modules. If you look at the production volume, it depends on its capacity because capacity came out late this year and early next year. So year-over-year production volumes for mono wafer is up 115% year-over-year to 2020 -- which is 2019 for the PERC sale. The PERC sale is up roughly 60% and module is 70%. So my key point is integrated production volume I just talked, each quarter roughly 4 gigawatts that is produced by ourselves and we have confidence our leading cost structures and we have confidence our profitability levels even for the -- I think the ASP it's …

So when we did this sales planning in 2020 as well in order to stabilize the gross margins against the turbulence on the market price or the spot market changes, we are trying to, let's say, plan -- equivalent of volume growth against our capacity ramping up plan. So that will help -- be helpful, we believe will be helpful to stabilize the gross margins. We do not want to surprise the capital markets.

Okay. Fair enough. I appreciate the color. Maybe a couple more. Just on the modeling here for 2020 CapEx, you said it's going to be US$300 million. I know you spent closer to like US$500 million, you said Charlie for 2019. In the past, I think you said $0.07 to $0.10 a watt CapEx wafer and $0.02 to $0.03 a watt for module. If I run those numbers, it seems like 2020 CapEx will be more in line with the 2019 CapEx. Is there something changing for the CapEx figures for 2020, or are you gaining subsidize on any portion of the CapEx for 2020? And then, would that CapEx view for 2020, do you expect to be free cash flow positive on the year?

Yes. I think we are very confident, next year we're going to be free cash flow positive. And firstly, our profitability level should be very high growth next year. The EBITDA, the operating cash flow will be very healthy next year. And second one is the CapEx question. The investment level is lower, basically next year versus this year. And next year its just 5 gigawatts capacity for the mono wafer and roughly a 6 gigawatts module capacity. And it's going to -- it breaks down, its roughly US$160 million for the mono wafer, US$100 million for the module. And I think US$40 million for the upgrades, maintenance CapEx. And if you look at 2019, we invested a lot. We invest on the PERC sale converting existing module [indiscernible] as we're investing in next-generation N-type product sale. We are investing on the mono-wafers. And for the second stage 5-gigawatts, mono-wafer come out second quarter next year. Some more CapEx have already been reflected in this year. So this is another small -- has done some impact on the CapEx next year.

Okay. Understood. And then last one housekeeping. I think in the past you've put in the slides the CapEx, the DNA and the operating cash flow for the quarter. Can you provide those figures for the third quarter?

You mean depreciation, Brian?

CapEx depreciation and operating cash flow, I think you've usually put those metrics into the slides.

Depreciation and amortization should be roughly the same, slightly higher with the second quarter. The operating cash flow, actually it's pretty good in the third quarter because our profitability, gross margin and as you can see our operating efficiency improved for inventories, for accounts receivables. I think it's roughly US$100 million -- US$100 million to US$120 million in operating cash flow in the third quarter.

And then just on the CapEx for the third quarter?

CapEx I need to check. I need to check, but cumulatively for the for Q1 to Q3, roughly US$410 million. So I'm talking about this four year, US$500 million.

Okay. So US$410 million through the first three quarters?

Yes, yes.

Okay. Thank you, guys.

Thank you.

Welcome.

Thank you. Your next question is from John Segrich from Luminus. Your line is now open. Please go ahead.

Hey, guys. I just want to come back to kind of the profitability of the business. You've done a great job of improving the margin. But as you kind of look at it, it seems like the margin improvement is really been driven this year by ASPs going up, rather than cost going down. And I guess that's attributable to the fact that you've moved from lower spec product to like more mono PERC, is that the right way to think about it?

It's not right, John. And you're right, Q3 our ASP is slightly up and the impact to the gross margin I think is not so big.

I mean it looks like the $0.02, surely isnt up.

I don't think so. We have our revenues. And the second one, the Q3, our production volume, it's just mono wafer, the Q3 we are ramping up stage. So it ramp up stage by stage. The output, let's say, the full capacity of 5 gigawatts new mono wafer capacity if running full capacity, it's 100%. The third quarter it's roughly just output is 20% to 30%. But fourth quarter it's going to be 100% impact. So my answer to your question is it's because firstly our production costs improved quarter-over-quarter. Second one is Q3 the impact, the volume for the new capacity impact is limited, its just 20%, 30% full capacity. It's the same situation for the sale capacity.

Right. Okay. So looking at fourth quarter then you've got ASPs you're guiding down a little over 10%. And you would expect your cost to fall similarly?

It's two kind of impact. Fourth quarter, because we ramp up to 100% the capacity, the volume is increased a lot. What I'm talking about volume is sales deals volume for the mono wafer for the product sale in the fourth-quarter. Second one is our in-house production costs [indiscernible] to improve. So after [indiscernible] our exposure to China was relatively lower ASP. So that is why we guide gross margin in the fourth quarter we have improved.

Okay. Can you give us the in-house cost for 2Q, 3Q and what you think it is in 4Q?

We don't like. It's confidentiality, but you can do some estimate ASP, gross margin, you can do some kind of calculation.

Okay, right. Maybe I'll follow up offline. Thanks, Charlie.

Thank you.

Thank you. There are currently no more questions in queue. I'd like to hand the call over back to Ripple for her closing remarks. Please go ahead.

Okay. Thank you for joining us tonight. This concludes the call.

Thank you, Ripple. Ladies and gentlemen, that does conclude our conference call for today. Thank you all for your participation. You may all now disconnect.