Earnings Expert, LLC

JinkoSolar Holding’s fourth quarter of fiscal 2010 was successful in top-line growth with a rise in revenues of 23% and an increase of 20% in module shipments.  The company on the surface looks solid beating the street’s earnings estimates for the last three quarters by an average of 87.3%. The company doubled capacity growth in the fiscal year of 2010 and plans 2.5 times capacity growth in 2011.  Like many Chinese companies, JinkoSolar does not disclose many key performance indicators like operating cash flows.  The company is expecting 2011 revenues to be in the range of $1.4 to $1.5 billion; but with recent issues arising in markets like Italy, a dramatic growth strategy is risky.  JinkoSolar has sold into Italy historically and it is unknown how it will impact the company due to a lack of geographic revenue disclosure.  At four times forward earnings estimates for 2011 the company trades at a 51% discount to its peer group.

The company ranks toward the middle of its peer group in many quantitative metrics.  Top ten ranking for gross margin for the last-12-months improved during the quarter to 8^th.  Our calculated operating cash flow and free cash flow numbers both fell relative to net income for the last-12-months.  The cash conversion cycle declined to 31^st from 25^th in the prior quarter. Free cash flow to net income fell from 15^th in the third quarter of 2010 to 34^th in the fourth quarter due to substantial capital expansion. The company’s three year cumulative average growth rate (CAGR) revenue growth fell in the quarter despite having a 23% increase in revenue. Debt-to-equity has declined from 22^nd to 26^th, as cash-to-debt remained steady in the quarter.