JinkoSolar Still A Buy, But Roth Capital Cuts Price Target

JinkoSolar Holding Co., Ltd. JKS reported its 1Q results ahead of expectations, while issuing a robust 2Q guidance.

ROTH Capital’s Philip Shen maintained a Buy rating on the company, while lowering the price target from $30 to $35.

Concerns for Q3

“Heading into H2’16, we are cautious on our entire group of upstream manufacturers given the threat of overcapacity in Q3 as demand in China steps down,” Shen explained.

Although all companies in the segment are expected to be impacted, the analyst believes the JinkoSolar is better positioned that its peers due to its margins and improving geographic diversification.

Demand is a top concern for Q3, “given the potential for an air pocket due to the FIT cut in China expected at the end of June,” Shen mentioned.

JinkoSolar’s China mix is expected to decline to 20-25 percent of overall shipments in Q3, and the analyst believes that “much of that may have firm pricing with SOEs.”

In addition, the company’s industry-leading cost structure positions it for an acceleration in ASP declines, going forward.

Q1 & Q2

JinkoSolar reported its Q1 revenue ahead of the consensus and the estimate, driven by higher than anticipated external module shipments.

The higher than expected gross margins for the quarter were driven by continued cost reductions and an increase in electricity revenues.

The Q1 EPS of $1.44 also beat the consensus and estimate, while management guided to higher than expected Q2 external module shipments.

“JKS reiterated its plans to connect 600-800MW of projects to the grid in 2016 vs. prior ROTHe of 600MW,” Shen added.