JinkoSolar set to buck rivals' earnings trend
JinkoSolar suffered heavily on Tuesday as disappointing earnings from smaller rivals cast doubt on the upcoming earnings releases of China’s market leaders. JinkoSolar endured a 9.2% fall on Tuesday followed by a 0.3% decline on Wednesday, but I believe concerns over smaller rivals don't justify this fall.
JinkoSolar has distinguished itself from rivals because of its strength in both international and domestic markets. International growth has been helped by its offshore production facility in Malaysia, which has allowed it to service US and EU clients without having Chinese tariffs imposed on products – they aren’t technically produced in China, so are therefore exempt.
From a domestic market perspective, there is likely to be a reduction in China’s solar feed-in-tariffs by Chinese New Year (February) 2016, which will improve JinkoSolar’s profit margins. This will be a major theme of not only JinkoSolar’s revenues over the short and long term, but also of every Chinese solar panel manufacturer.
JinkoSolar will announce its third-quarter earnings on November 19, which will give investors a chance to see how the firm is preparing for the increased domestic focus on the industry, as a result of the 13th five-year plan.
Management and risk description
Any earnings release will increase the volatility of a trade thesis, and the same can be expected for JinkoSolar. Its third-quarter earnings release will be closely followed by the industry. Rival Trina Solar will be releasing its earnings on November 23. As both firms are market leaders in China, the two events will likely be volatile for this trade view, and investors should be aware that if JinkoSolar disappoints on the 19th, it is likely that Trina Solar will compound this.
As with any China-related trade, concerns over the health and state of the economy are persistent, and appear every time that a data release misses (or in the case of GDP, beats) consensus. I maintain my belief that we won’t see a hard-landing for the Chinese economy, but these concerns continue to appear in the trading of all US-listed Chinese firms.
Time horizon: two months.
— Edited by Gayle Bryant