Jinko Solar beats Q1 estimates, issues strong Q2 outlook

Last week, solar power panel manufacturer Jinko Solar Holding Co., Ltd. (JKS) reported an exceptional fiscal 2016 first-quarter earnings and revenue that surpassed the analysts’ estimates by a huge margin.

However, the share price is yet to see an uptrend. The main reason for the lackluster movement is the slowdown in China, which is the biggest market for the company.

However, going through the management’s rhetoric will reveal that the company is on a firm growth path and the shares are trading at an attractive price. The shares closed at $21.74 on Tuesday.

The fiscal 2016 first-quarter revenues of $847.8 million (RMB 5.47 billion) were higher than the analysts’ estimates of $685.1 million (RMB 4.42 billion). More importantly, the first-quarter revenues were 98.8% higher than $426.22 million (RMB 2.75 billion) reported in the first-quarter of fiscal 2015.

Jinko Solar

The revenue from the downstream solar power projects increased 81.7% to $28.8 million (RMB 185.5 million), from $15.82 million (RMB 102.1 million) in the prior year corresponding quarter.

During the first-quarter, the solar module shipments were 1600 MW, compared to 789 MW in the first-quarter of last year. This represents a102.7% increase in the shipments.

The company’s shipments include 166MW used for its downstream projects.

The GAAP net income reported for the first-quarter of 2016 was $48.6 million (RMB 313.3 million), compared to $7.90 million (RMB 51 million) in the prior year similar quarter. The earnings per share were $0.36 (RMB 2.33) for the first-quarter. This translates to earnings per ADS (American Depository Share) of $1.44 (RMB 9.32) for the first-quarter.

Excluding non-recurring costs and stock option expense, the non-GAAP earnings for the first quarter was $64.3 million (RMB 414.6 million), up from $26.50 million (RMB 171.2 million) in the year-ago corresponding quarter. The non-GAAP diluted earnings per share is $0.43 (RMB 2.80) for the first-quarter. This transforms to diluted earnings per ADS of $1.72 (RMB 11.20) in the first-quarter of 2016. The earnings estimate of analysts was $0.86 per ADS.

During the quarter, Jinko Solar was also awarded three projects, worth 188 MW of solar power capacity, from Mexico. It is the first overseas project for the company. At the end of March 2016, Jinko Solar had connected 1,007MW of solar power projects to the grid.

The company also gave its guidance for the second-quarter and full fiscal year 2016. Jinko Solar anticipates second-quarter solar module shipments to range between 1.6GW and 1.7GW. Shipments to third parties are expected to be in the range of 1.45GW to 1.6GW. For the fiscal 2016, the company forecasts 6GW to 6.5GW of solar module shipments. Considering the positives, Zacks investment research has upgraded the stock with a buy rating. Thus, fundamentally, the stock can be expected to spiral upwards.

The stock has a firm support at 20.50. The main line of the MACD indicator continues to stay above the zero line, indicating bullishness in the scrip. Thus, an uptrend till the next resistance at 28 can be expected.

So, a trader should select a one touch call option to benefit from the likely uptrend. Furthermore, the binary trader should allow a four week expiry period for the contract. Finally, to improve the chances of success, it would be better if the trader opts for a strike price of $28 or lower.