JinkoSolar: Bright Spot in China Solar

10/20/2015 10:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Our latest featured recommendation is a vertically integrated Chinese manufacturer of solar wafers, cells, and modules, explains Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

JinkoSolar (JKS) also generates and sells electric power, but it's the sales of solar hardware—especially modules, which contributed more than 90% of 2014 revenue—that generate the revenue.

The company’s annual manufacturing capacity is 3 gigawatts of silicon ingots, 2.5 gigawatts for solar cells, and 4 gigawatts for solar modules. Its power plants have connected 725 MW of generating capacity to the Chinese power grid.

JinkoSolar’s biggest market is China (well over 40% of revenue), followed by the US (18%), the UK (13%), and many smaller global markets.

The solar industry is economically sensitive and has been challenged by both cheap oil prices and reductions in government support for solar projects.

Despite these headwinds, JinkoSolar enjoyed 52% revenue growth in 2013 and 39% in 2014. Revenue grew 37% in Q1 2015, but was flat in Q2.

Investors see excellent long-term growth prospects for solar and JinkoSolar has survived the big shakeout among Chinese solar companies.

Investors are also pleased that a class action suit accusing JinkoSolar of misrepresentation in some SEC filings has been settled on the cheap.

While revenue is projected to grow just 8% in 2015, 2016 estimates call for 36% growth.

With good long-term prospects, JinkoSolar is an excellent way to play the strength of solar, especially now that investors are edging back into the Chinese market.

JKS was a monster in 2012 and 2013, but began a slow-motion correction in 2014, sliding from a high of $38 as the year started to as low as $16 in January 2015.

JKS bounced back to $32 in June, but was scorched by the broad market’s July-August meltdown. From its low of $14 in August, the stock has rebounded to $26 on good volume.

It’s an interesting speculation for anyone looking for big upside potential who doesn’t mind taking on some risk. A small buy on weakness could pay off.

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