Jinko Solar is currently the world’s largest Photovoltaic Module manufacturer. Their current manufacturing capacity of Jinko is roughly 40 GW . This demonstrates tremendous growth from just 8 GW a few years ago. The share price of the company has not reflected this amazing growth in capacity has not been reflected in it’s share price. Additionally, management continues to plan for increasing capacity during the economic downturn. This should demonstrate the resilience of the company. While China, the company’s domestic market, accounts for ~85% of their revenue, the company is expanding into EMEA and America. The potential of these new markets offers tremendous sales and profit growth for the company. A point of concern may be the stated low margin of 3% for the company’s products. However, this margin reflects sales of all the company’s products. Jinko, being a vertically integrated PV-module manufacturer sales many low margin products across it’s value chain. This does not reflect the true margin of close to 18% on the company’s primary offering. Another point of concern may be the heavy debt load of the company. While the debt load is natural for an industrial company of this size, the operating cash flow from the company’s sales is more than enough to cover these debts. The company also said that their customers have not asked for shipment delays during the pandemic.
The reason I believe the market has been so pessimistic towards Jinko Solar, is because the price of Energy is currently so cheap. However, this pessimistic view undermines the potential growth of the sector and the growth of the company’s PV modules sales over time. Also, the company has impressive return on dollars spent on R&D. The current sales of the company come from (I believe not 100% sure) about ~$200 million. These products now sell $6 billion dollars a year. This impressive return on R&D bodes well for the company. For example AMD had been cultivating a line of products with potential growth, however it was only years later these investments began to pay off. A similar story is unfolding here with Jinko.
I began buying Jinko Solar around $15 a share and increased my share as the stock approached $16. I believe these prices represent a significant margin of safety of around ~40%. This substantial margin of safety represents a good investment for the short time and a great investment over a longer time horizon. I believe as governments and energy companies begin expanding their solar projects demand for Jinko’s products will expand with this industry wide demand.