晶科能源 (JKS) 2014 Q4 法說會逐字稿

Thank you for standing by and welcome to the JinkoSolar Fourth Quarter Full Year 2014 Conference Call.

At this time, all participants are in a listen-only mode.

There will be a presentation followed by a question-and-answer session.

I must advise you that this conference is being recorded today, 2nd March, 2015.

I would now like to hand the conference over to your first speaker today, Mr. Sebastian Liu, Director of Investor Relations.

Please go ahead, Mr. Liu.

Thank you, operator.

Thank you, everyone, for joining us today for JinkoSolar's fourth quarter 2014 earnings conference call.

The Company's results were released earlier today and available on the Company's IR website at www.jinkosolar.com, as well as on the newswire services.

We have also provided supplemental presentation for today's earnings call, which can also be found on IR's website.

On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Arturo Herrero, Chief Strategy Officer; and Mr. Cao Haiyun, Chief Financial Officer.

Mr. Chen will discuss JinkoSolar's business operations and company highlights, followed by Mr. Herrero, who will talk about the Company's business strategy.

And then, Mr. Cao will go through the financials and guidance.

They will all be available to answer your questions during the Q&A session that follows.

Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1994.

Forward-looking statements involve inherent risks and uncertainties.

As such, our future result may be materially different from the views expressed today.

Further information regarding these and other risks is included in JinkoSolar's public filings with the Securities and Exchange Commission.

JinkoSolar does not assume any obligation to update any forward-looking [statements] except as required under applicable law.

Please be noted that to supplement its consolidated financial results presented in accordance with the United States Generally Accepted Accounting Principles or GAAP, JinkoSolar uses certain non-GAAP financial measures.

The Company believes that the use of non-GAAP information is useful for analysts and investors to evaluate JinkoSolar's current and future performances based on the more meaningful comparison of the net income and diluted net income per ADS when compared with its peers and historical result from prior periods.

These measures are not intended to represent or substitute numbers as measured under GAAP.

The submission of non-GAAP numbers is voluntary and should be reviewed together with GAAP results.

It is now my pleasure to introduce Mr. Chen Kangping, CEO of JinkoSolar.

Mr. Chen will speak in Mandarin, and I will translate his comments into English.

Please go ahead, Mr. Chen.

(interpreted) Thank you, Sebastian.

Good morning and good evening to everyone, and thank you for joining us today.

We've closed out the year on a strong note with total revenue during the fourth quarter, reaching $478.9 million, representing a 35.8% increase over the same period last year as module shipments reached a record high of 1,078 megawatts, which includes 339 megawatts designated for our own downstream business.

Our strong fourth quarter results in total module shipments for 2014 growing significantly to 2,944 megawatts, including 520 megawatts designated for our own downstream business.

Gross margin in the fourth quarter improved sequentially, reaching 22.8% as costs continued to improve and ASP stabilized.

Gross margin for the entire year reached 22.4% compared with 20.3% in 2013.

When looking at our bottom line, we achieved $39.4 million for the fourth quarter in net profit and over $100 million for the whole year, fulfilling our promise to investors at the beginning of the year.

Our downstream business continued to gain momentum with electricity revenues from solar project, reaching RMB18.4 million in the fourth quarter representing an increase of 38.6% sequentially.

We completed 270 megawatt worth of a project during the quarter, of which, 150 megawatts were connected to the grid bringing our total number of connect project to 503 megawatts.

A cold winter and slower grid connection process at the end of the year resulted in a lower number of megawatts being connected to the grid than we initially participated.

But we expect that to make it up during the first half of 2015 by connecting approximately 350 megawatts of projects.

Interest in the spin-off of our downstream business continue to grow at both our project connection and pipeline expense.

Management is working to move the spin-off process forward and will update the market when progress is made.

We continue to diversify our market presence as global solar demand in 2015 is expected to grow by 15% to 20% despite low oil prices.

The price of oil, in fact, has limited the impact on solar fundamentals as it is mainly used for transportation rather than power generation in most of the key solar markets.

The same applies to natural gas, which only has a limited ability to challenge the solar activity market in the US

Last but not least, we also noticed there is a mounting concern over the environment that has been one of the driving factors of increased solar demand in many key markets, China, in particular.

While the preliminary results of adjustment from the US Department of Commerce on the 2012 Trade Case were positive, we remain focused on further diversifying our production capacity geographically by establishing oversea production facilities for both cells and modules in regions unaffected by frequent solar trade disputes.

By managing our resources efficiently, we aim to strengthen our position as the leading solar supplier in key solar markets, while at the same time, pushing further into exciting emerging market with great growth potential such as Latin America and India.

Our experienced R&D teams and their ability to consistently deliver innovative and high efficiency product have allowed us to achieve new heights of module power outputs.

During the recent independent testing conducted at TUV Rheinland Shanghai Testing Center lab power output for JinkoSolar's Eagle+ 60-cell multi PV modules reached 334.5 watts, a new record that broke previous record of 306.9 watts also set by us in December 2014.

This is significantly higher than industry average of 255 watts.

Last month, we signed a contract to provide smart modules to the largest PV project, fully equipped with smart component in Japan.

This is only in the first stage towards our goal of developing an integrated intelligent solution from smart modules to intelligent solar PV systems.

We accomplished a lot in 2014 as we continue to push forward with our effort to transform into one-stop energy solution provider where we continue to face challenges.

I have the utmost confidence in our management team and our strategy as we're eagerly looking forward to leveraging our industry-leading technology, global presence and deep relationships with financial institutions to grow our business further and deliver solid financial result in 2015.

Arturo Herrero, our Chief Strategy Officer, will now discuss our major achievements in sales and marketing for the fourth quarter in further detail, as well as our strategy and market outlook for the first quarter 2015 in key countries and regions.

Thank you, Mr. Chen.

Good evening to everybody.

Good morning in the USA.

During the year 2014, we benefited from having built strong brand recognition and grew our worldwide market share across geographically diverse PV markets including China, Europe, USA and emerging markets.

Our high quality, cost leading products and successful sales and marketing strategies continue to attract new and existing customers as we expand our business both in size and geographic reach to over 69 countries and over 762 customers

We continue to diversify our customer portfolio in the fourth quarter last year as we rapidly expanded our market share in industrial, commercial and residential segments.

Shipment growth and demand for JinkoSolar modules grew faster than expected due to strong demand from China, USA and UK, but also in emerging markets such as Chile.

We are once again able to exceed our growth targets and continue to grow rapidly in Asia-Pacific mainly in Japan and India.

We are making good inroads into several new markets including Turkey, Middle East, Brazil, Central America and Asia-Pacific markets.

During the year 2014, we made cells to all 59 countries.

Our presence in the USA has been strong despite the anti-dumping challenges and countervailing duties.

While we have seen difficulties in the European markets, we have overcome most of them by relocating our shipments to other countries such as the UK.

A big portion of our shipments went to China allowing us to maintain the number one position in our country.

We expect to achieve similar results for the full year 2015 as we believe we will benefit from the government support and announced targets.

Over the past few quarters, we have made great process in Chile, Central America, Mexico and Brazil, and we spent more shipments with the establishment of more new local sale offices in these emerging markets following our localization strategy.

We also expanded into several new markets during last year.

During the quarter, we shipped 66 megawatts to emerging markets bringing total shipments for the year to a total quantity of 320 megawatts.

Our sales efforts also led to fruitful relationship with well-known developers in the African continent where we see growing demand and expect more business through the year 2015.

With regard to the United States, we're increasing our market share substantially.

We have very strong utility scale business, and with winter over, the US market will be ramping up strongly again.

We're also penetrating into residential and commercial sectors, so we expect to capitalize fully on these opportunities.

In the last quarter 2014, total solar product shipments to the third parties amounted to 838 megawatts, consisting of 739 megawatts of solar modules, 53 megawatts of silicon wafers, and 45 megawatts of solar cells.

We delivered approximately 34% of our solar modules to China, around 12% to the USA, around 28% to Europe including 13% to UK, and 9% to emerging markets, 17% to Asia Pacific, mainly to Japan and India.

For the whole year 2014, our geographical distribution and market diversification improved.

Our expanded geographic exposure reduced the risk JinkoSolar faces when changes take place in a specific country's policies.

For this year, 2015, we'll continue to capitalize on the growing recognition of the JinkoSolar brand and localize sales and marketing services to expand our market and diversify our customers and geographic portfolio.

We continue to build our strong partnership network with distributors, PV developers, and EPC contractors across the globe.

For 2014, we have signed some big new contracts including contracts with Enel Green Power, ACCIONA, Efacec and leading utilities from France and Chile.

Thanks to our good brand recognition in the USA, we closed big contracts with big customers such as EDP Renov

veis for emerging markets and AMEC which increases our exposure and our market share in the USA.

We also continue to sign new contracts supporting current existing customers in Europe despite uncertain solar policy and market landscape, as customers have come to rely on our high-quality product and services.

During the fourth quarter, we signed a very such important contracts including also in India in Gujarat for 21-megawatt project, 80-megawatt contract for China General Nuclear Power Group, and an important distribution contract in Mexico.

Regarding marketing, the rapid global expansion of our business has provided excellent exposure for JinkoSolar brand, especially in the USA, Europe and emerging markets where we have engaged in peer campaigns.

For the full year 2015, we plan on further expanding our communication activities, as well as attending approximately 15 solar and renewal energy exhibitions and further conferences.

We are currently sponsoring the several events, exhibitions and PV conference.

And besides, we continue having the benefit of our brand and close partnership with SolarPV.

TV, the first worldwide Internet TV portal completely and solely devoted to solar TV technology and business.

We're also actively members of solar business today.

That is a non-profit organization to support the business worldwide to promote TV in several steps of the society.

Regarding subsidiaries, we have been establishing local subsidiaries and local manufacturing as key strategy of JinkoSolar and developing long-term customer relationships and expanding our business in important markets.

We plan to establish new factories for cell and modules overseas, which will bring extra capacities and will be -- increase our cell and module production from China, outside China and outside South Africa and [Portugal] and our existing factories.

In 2014, we established new offices for sales and marketing in Japan, USA and Chile.

We also expect to open representative office even in the second half of the year to support our rapid global expansion and provide customers with local support.

In terms of ASP, solar models ASP remains stable, thanks to Europe and US constraints on import taxes and agreed MIP.

ASPs have been relatively strong, but we expect a slightly decrease because of the feed-in tariff cuts in countries such as Japan and currency impact on euro and yen versus US dollar.

Our ASP last year was over $0.63 per watt.

We see this as an opportunity for Jinko.

So as we are cost leader in the industry due, in large part, to our vertical integration and industry leading supply chain management and having gained significant brand recognition in all these markets.

Now, I would like to turn the call over to our CFO, Charlie, who will introduce our financial results and guidance for the first quarter of year 2015.

Thank you, Arturo.

Good morning and evening to everyone on call.

First, I'd like to walk you through our financial results for the fourth quarter and the full year 2014 followed by our first quarter and the full year 2015 guidance.

As Mr. Chen mentioned earlier, total solar products shipments to third parties in the fourth quarter of 2014 were 838.2 megawatts.

Total revenues were $478.9 million, an increase of 16% sequentially and an increase of 35.8% year-over-year.

Gross margin was 22.8% compared to 24.6% in the third quarter of 2014 and 24.7% in the fourth quarter of 2013.

The sequential increase in gross margin was primarily due to the continued cost reductions and higher gross margins from electricity revenues of solar power projects.

In-house gross margin relating to in-house silicon wafer, solar cell and solar module production was 24.3% in the fourth quarter of 2014 compared to 23.3% in the third quarter of 2014 and 24.3% in the fourth quarter of 2013.

Income from our operations was $38.1 million compared to $39.1 million in the third quarter of 2014 and $43.3 million in the fourth quarter 2013.

Total operating expenses were $71.2 million, representing an increase of 53% sequentially and an increase of 58.5% year-over-year.

The sequential increase was mainly due to the increase in the stock-based compensation expenses, R&D expenses, the disposal of obsolete fixed assets and shipping and warranty costs associated with the increase of module shipments.

The Company's operating expenses excluding stock-based compensation expenses, the provision for doubtful accounts and disposal of obsolete fixed assets represented 13.1% of its total revenues, up from 11.5% sequentially and up from 11.5% year-over-year.

Operating margin was 8% compared to 9.4% in the third quarter of 2014, and 12% in the fourth quarter of 2013.

Net interest expense was $13.2 million, an increase of 12.4% sequentially and an increase of 53.9% year-over-year.

We recorded an exchange loss of $1.1 million primarily due to the foreign exchange loss of $7.3 million offset by a gain in the fair value of forward contracts of $6.2 million.

We recognized a gain of $21.3 million in change in fair value of convertible senior notes and a loss from the change in fair value of capped call options of $8.4 million.

The Company recognized an income tax benefit of $1.5 million compared to an income tax benefit of $25.1 million in the third quarter of 2014 and an income tax expense of $57,000 in the fourth quarter of 2013.

Net income was $39.4 million compared to $45.7 million in the third quarter of 2014 and $27.1 million in the fourth quarter of 2013.

This translates into basic earnings per ADS of $1.28 and diluted earnings per ADS of $0.52 respectively.

Non-GAAP net income was $38.2 million compared to $55.7 million in the third quarter 2014 and $37.8 million in the fourth quarter 2013.

This translates into non-GAAP basic and diluted earnings per ADS of $1.24 and $1 respectively.

Now I'll briefly review our full year 2014 financial results.

Total revenues for 2014 were $1.61 billion, an increase of 41% from $1.17 billion in 2013.

Income from operations for 2014 was $150.1 million compared to $106.6 million for 2013.

Operating margin for 2014 was 9.3%, compared to 9.1% for 2013.

Total operating expenses in 2014 were $210.9 million, an increase of 65.2% from $130.8 million in 2013.

Operating expenses represented 13.1% of total revenues for 2014 compared to 11.2% for 2013.

The Company has recognized an income tax benefit of $21.7 million for 2014 compared to our tax expense of $3.1 million in 2013.

Net income for 2014 was $108.5 million compared to $31.1 million in 2013.

This translates into basic and diluted earnings per ADS of $3.52 and $2.48 respectively.

Non-GAAP net income in 2014 was $129 million compared to $71.4 million in 2013.

This translates into non-GAAP basic and diluted income per ADS of $4.20 and $3.36 respectively.

And now, I'd like to take a quick look at our balance sheet.

As of December 31, 2014, the Company had $369.7 million in cash, cash equivalent and restricted cash.

As of December 31, 2014, total short-term borrowings, including the current portion of long-term bank borrowings, were $420.2 million compared to $347.1 million as of September 30, 2014.

Total long-term borrowings were $154.2 million as of December 31, 2014 compared to $152.9 million as of September 30, 2014.

As of December 31, 2014, the Company's working capital was negative $18.7 million compared to positive $165.4 million as of September 30, 2014, which was primarily due to the rapid investment in solar power project.

For the first quarter 2015, the Company estimates total solar module shipments to be in the range of 710 megawatts to 780 megawatts, which includes 550 megawatts to 600 megawatts module shipments to third parties and 160 megawatts to 180 megawatts for its own downstream projects.

Revenue will not be recognized for the modules shipped to its own downstream projects as required by US GAAP.

For the full year 2015, the Company estimates total solar module shipments to be in the range of 3.3 gigawatts to 3.8 gigawatts which includes 2.7 gigawatts to 3 gigawatts module shipments to third parties.

Total new project development scale in 2015 is expected to be in the range of 600 megawatts to 800 megawatts.

At this moment, we're happy to take your questions.

Operator?

We will now begin the question-and-answer session.

Your first question comes from the line of Patrick Jobin from Credit Suisse.

Your line is open.

Please go ahead.

Hey.

Thanks for taking the question, guys.

First question is on your operating expenses at 13.1% excluding those charges.

How should we think about that trending for the next few quarters?

Hey, Patrick.

Thanks for your question.

I think for the operating expenses in the fourth quarter, as a percentage of the revenue, it's 14% compared to 11% in the third quarter.

The increase of operating expenses was primarily due to the stock-based compensation expenses, R&D expenses, disposal of obsolete fixed assets, and the shipping and warranty costs associated with the increase of module shipments.

In the fourth quarter, we provided stock options to return and provide incentive to the key employees, was anticipated future growth for our business.

And in the fourth quarter, we continue to invest in R&D to improve our cell conversion efficiency.

In terms of shipment in the fourth quarter, we have bigger shipments in the UK, US and Japan.

The shipping cost is relatively higher than the shipping cost in China.

Looking to 2015, we continue to see the operating leverage, thanks to the shipment increase and revenue increase.

We expect the operating expenses, as a percentage of revenue, it's going to be in a range of 10% to 12%.

Okay.

Thank you.

Two simple questions.

First, when I think about the 503 megawatts of projects that are connected to the grid, I'm just trying to think of it in context to the Jinko Power spin-off.

How many of those megawatts are receiving the subsidy portion of the feed-in tariff today?

And what do you think is the current average delay in receiving those payments...

Okay.

I think it's a good question.

And in terms of feed-in tariff payment, we continue to see improvement.

In the fourth quarter, we received $5 million for the renewable subsidy for our downstream projects.

In general, I think you understand the renewable subsidy is paid a [pound] once the projects are [on the left] our subsidy catalog.

And in the fourth quarter, for some projects, even we are waiting for the final approval of subsidy catalogue; we received subsidy.

For example, for the DG project in Zhejiang Province, in the fourth quarter, we received all the feed-in tariff.

For the utility scale projects in Jiangsu Province, we received a local subsidy.

And we expect China will further accelerate approval for the subsidy catalogue.

And the next round of subsidy catalog is expected to be approved by the end of second quarter.

We had 503 megawatts in operation by the end of 2014.

And as of today, we have 100 megawatts, is on the list of subsidy catalog.

By the end of second quarter, we expect the total 350 megawatts is going to be on the list.

The DSO for the electricity revenue is favorable, and now, it's six months.

And we expect that the DSO will improve to three months step by step in 2015.

Thank you.

And then just lastly on the capacity expansion.

Is it correct to assume that of the 500 megawatts of cell and 800 megawatts of module capacity, all of that would be outside of China or is any of that within China?

Thank you.

Okay.

This is also a very good question.

I think in terms of our capacity, by the end of 2014, our capacity is 2.5 gigawatts for wafer, 2 gigawatts for cell and 3.2 gigawatts for solar modules.

We are running the capacities at 100% in the fourth quarter.

And due to the capacity constraints and also strong demand in UK and Japan, we controlled our shipment in China.

And we are looking to expand our capacity by 20% to 25% in 2015 and reach a total capacity to 2.5 gigawatts for wafer, 2.5 gigawatts for cell and 4 gigawatts for solar modules.

The capacity addition will come from our new factories in overseas market.

We have made a strategic decision to start the construction of our new factories in countries located in Southeast Asia.

The total capacity is around 500 megawatts cell and 450 megawatts solar modules.

We expect that the capacity will start production in May 2015.

We believe the overseas factory will give us more flexibility to serve the key solar market in the future and get around the international trade disputes.

In China, we don't have significant capacity expansion plan.

We may expand the module capacity to meet the strong demand in 2015.

On the wafer and cell side, our focus is to upgrade existing equipment to improve the efficiency and output.

Thank you.

Your next question comes from Philip Shen from ROTH Capital Partners.

Your line is open.

Please go ahead.

Hi, everyone.

Thank you for taking my questions.

I'd like to start off with your bookings.

How do your bookings look so far for Q1?

And how do you expect ASP's trend in the first quarter?

Okay.

In terms of capacity booking, Q1 is fully booked and over 60% is booked for the second quarter 2015.

The ASP in Q1, we expect the ASP will go down slightly due to the continued depreciating of euro and the Japanese yen.

And in the rest of the year, we expect that ASP will be relatively stabilized.

Great.

Thanks, Charlie.

And then, as for my follow-up, how do you guys think about gross margins and how they might trend sequentially in Q1?

Okay.

I can give some color, okay, for the 2015 gross margin trend.

We don't give the guidance basically on the gross margin, but we expect the gross margin in the first quarter of 2015 will go down slightly with the results of different factors.

Firstly, we expect ASP will go down slightly due to the continued depreciation of euro and Japanese yen.

And on the cost side, actually we are targeting to cut the total module cost by 80% to 10% in 2015 and make the total module cost in the range of $0.40 to $0.41 per watt by the end of 2015 which means for each quarter, we expect $0.1 per watt reduction.

Certainly, I think we expect the increase -- continued rapid increase of the electricity revenues from the solar projects with higher gross margins.

Now, we are seeing the depreciation of RMB and which will improve the gross margin as well.

Because our total module cost is denominated in RMB.

And back to your question, we believe the Q1 2015, the gross margin will go down slightly.

And the gross margin in the second quarter will be stabilized.

And in the second half year 2015, the gross margin will improve with the first phases of stabilization of currency movement, and second one is the continued cost reductions [serve around] the rapid increase in electricity revenues from the solar project business with more capacity in operation.

And in the second half year, we just discussed, we plan to shift the modules from our overseas factories to the US markets.

With our tariff, we expect that the gross margin is going to be in the range of 25% to 30%.

Great.

Thanks.

And one more if I may.

Can you provide us an update on your downstream listing process?

Specifically, can you talk about what conditions might be required to list and what's the potential timing and where do you expect to list?

Thanks, Charlie.

Sure.

I think our first choice is to go the US IPO and we are actively evaluating all the factors including capital market condition, evaluating on detailed timetables.

We will discuss in detail with analysts and investors when we reach significant milestone for our IPO process.

For the project development scale and target in 2015, it's in the range of 600 megawatts to 800 megawatts.

We target to reach 800 megawatts to 1 gigawatt in operation by the end of the second quarter of 2015, and the 1.5 gigawatt project in operations by the end of 2015.

And we believe the project scale and quality are sufficient for a successful IPO in 2015.

Great.

Thank you.

I'll jump back in queue.

Your next question comes from Frank He from Goldman Sachs.

Your line is open.

Please go ahead.

Thanks for taking my question.

The first question is a follow-up on the gross margin side.

In Q4, if we -- excluding the electricity sales gross profit, we estimate a margin for modules still 22%, up 2 percentage points Q-on-Q.

So just wondered given that the ASP in Q4 is generally down on Q-on-Q basis, how does the cost change to manage -- to increase the margins in Q4?

Okay.

The Q4 gross margin was 22.8%, up from 20.6% in the third quarter.

It's contributed by the continued cost reductions for our solar modules and higher electricity revenues from solar project business.

Our total margin cost was $0.45 by the end of 2014, the lowest in industry.

So in terms of ASP, in the fourth quarter, it's $0.60, which is the same to the ASP in the third quarter.

Okay.

Got it.

And then second question is regarding your receivables, and we see that you have around $500 million receivable, and just wonder how much is related to the electricity sales by end of last year?

In electricity, revenue receivable is roughly $27 million.

If you accelerate to the - adjusted the DSO for the downstream project business, it's around six months, six months.

The electricity revenue for the fourth quarter is $13 million and the receivable is $27 million.

Okay.

Last question is about your guidance for CapEx and operating cash flow for 2015.

Thanks.

In terms of CapEx, I think the CapEx of the Jinko Group is composed of two components.

The first one is the CapEx for the manufacturing business.

It's in the range of $100 million to $120 million, including $78 million for the overseas new factories and $38 million to $58 million CapEx for the maintenance and upgrades for the equipment in China.

And for the downstream projects, CapEx is in the range of $700 million to $900 million based on our project scale in the range of 600 megawatts to 800 megawatts.

Okay.

Got it.

Thank you.

Your next question comes from Colin Rusch from Northland Capital Markets.

Your line is open.

Please go ahead.

Thanks so much.

Can you walk us through the current dynamics on electricity payments in China?

Are you factoring receivables at this point?

And how consistently are those revenues coming in and what's the delay at this point?

In terms of the payment of expected revenues, I think, you know we are seeing the improvement.

Also, I just said, the Chinese government is accelerating the approval process, and some provinces we are seeing the provincial government is pushing very hard for the payments of the subsidy.

In terms of discounting of the accounts receivables in electricity revenues, we're in discussing with some financial institutions.

And where are those discussions at this point?

Are you close to being able to monetize those receivables or do you feel like you're still in the early stages of those discussions?

Firstly, we believe, okay, the payment of feed-in tariff will improve significantly in first half year of 2015.

And second one is in terms of discussing, we are in discussing with various banks and I think it's in the early stage currently.

Okay.

Perfect.

And then in terms of geographic mix for 1Q and 2Q, can you talk a little bit about how those our shifting from 4Q into 1Q and then what you're seeing so far with your orders in 2Q?

Okay.

I think Arturo will take this question.

Yes.

This is Art, the CSO.

So mainly, the mix has been improved, and we can see that it helps Jinko to diversify our distribution approach and also to reduce our exposure and risk in case of uncertainties and change on the tariff of the subsidies or the support from government.

So mainly, during the 2014 last year, we were mixing between China that took around 40%, Asia Pacific around 12%, Europe 15%, thanks to UK, and then emerging markets 13% and North America, USA, mainly 17%.

And going forward for Q1 and Q2, we are even diversifying further but still China is taking the major part, obviously.

But we are entering into new countries with some good insights in emerging markets where we have seen quite good growth in markets like Chile, Mexico, and in the future in Brazil too.

Okay.

And...

I just want to add more comments on the 2015 demand.

We believe the demand is more diverse and the total global demand is around 53 gigawatts, up 20% and in the first quarter strong demand from UK and Japan, second quarter and the second half year 2015, strong demand for US, China, and emerging markets, will offset any potential weakness in Japan, UK after the reduction of feed-in tariffs.

For Jinko, in 2015, our shipment is more balanced.

In China, we've seen a range of 30% to 35%, Asia-Pacific ranging 20% to 25% for the full year 2015, okay.

China is 30% to 35%, Asia-Pacific ranging 20% to 25%, Europe 12% to 15%, emerging markets 5% to 10%, and North America 18% to 24%.

Great.

And then one final question.

Demand in China right now, are you seeing an acceleration in demand yet?

Are we still kind of working through typical seasonality?

How should we think about the trajectory on the China market?

So the first quarter in China, the demand is relatively soft due to the typical seasonality and the Chinese New Year.

But we believe the seasonality in Q1 in China will not become so obvious because, firstly, the projects which did not connect to a grid by the end of 2014 will continue to construct in the first quarter.

Second one is the projects in the East Coast can start construction in the winter season.

And for the total 2015, China is proposing 15 gigawatt connection target, up 40% year-over-year.

So we are very optimistic.

We believe it's a realistic mix with 8-gigawatts utility scale projects and 7 gigawatts DG projects including 3 gigawatts rooftop projects.

And China cut the interest rates last week by 25 basis points.

And China is expected to cut the interest rate by two times or three times in 2015.

It's going to lift our economics and the returns for the projects.

We did some sensitivity analysis for our projects.

If the interest rate cuts by 100 basis points, the IRR with leverage is going to increase by 160 basis points.

All right.

Perfect, guys.

Thank you so much.

Thank you, Colin.

Your next question comes from Gordon Johnson from Axiom Capital Management.

Your line is open.

Please go ahead.

Thanks for taking my question, guys.

Hello.

Can you talk a little -- hey.

Can you talk a little bit about the increase in receivables and inventories that we saw this quarter and I guess what the puts and takes around that are?

As well as is there any risk that maybe some of that inventory is in Europe and Japan and there could be potential write-downs later this year?

And then I have a follow-up.

The receivable by the end of 2014 is around $500 million, up 13%.

It's due to the increase of revenue.

If you look at our revenue, the revenue increased by 16%.

In terms of DSO, it's quite healthy.

Our DSO is around 95 days.

And Gordon, I think you understand, we have some big exposures in Chinese market.

In China, the payment term is typically longer than international markets.

We have taken very straight credit consults for our Chinese customers.

So we didn't see any deterioration in any particular ratings for our receivables.

And for the inventories, it's around $300 million.

The relatively higher inventory level is due to the anticipated strong shipments in the first quarter for both third parties and our downstream projects.

I think, Gordon, especially, it's for our own [industrial] projects, not for the European markets or particularly in Japan market.

So you don't have to worry about any further write down of those inventory.

Yes.

If you look at our inventory turnover days, it's around 65 days.

I think it's one of the lowest in the industry.

Okay.

Guys, that's extremely helpful.

And then just lastly, one of your peers, Hareon, reported earnings earlier.

And clearly, you guys aren't the same company, but they did highlight that they saw some -- not concerning, but some issues around selling projects and delays in buying projects specifically in China.

So if you guys could comment on that.

And also, just lastly, on ASPs, we've heard, anecdotally, that the spread between ASPs in China and Japan has narrowed significantly.

So if you could comment on that.

And again, thanks for the questions, guys.

I think in terms of projects in China, Jinko's business model is very clear.

We build the projects by ourself and to make sure the lowest cost of the solar projects higher as the economic returns for the projects.

So our methodology is to hold and -- to build and hold the projects and swing off in a time to market to maximize the values.

And for the ASP in China and Japan, I think Q4, the ASP increased by $0.01 per watt.

It's in the range of $0.56 to $0.57 in Q4.

In Q1, the demand in China is relatively soft, but the price is -- it's about $0.55, and we expected the price will be stabilized.

And also, your question about the price in Japan, in fact, if you mirror the price ASPs in local currency, it's quite stable.

But mainly because of the depreciation of yen.

So yes, you will see some -- a decline of the ASP in Japan, but still it's in the range of $0.57 to $0.59.

Yes.

I think Sebastian -- yeah, it's correct.

In terms of the ASP in Japan, if you measure it in local currency stabilized, for Jinko, it's around CNY68 per watt.

And we are facing some pressures from the currency movement including euro and Japanese yen.

But for Jinko, we entered a forward contract to mitigate the impact.

And our shipment exposure in Japan and also in euro is not significant compared to our peers.

In Japan, over 40% sales is found in US dollars, so -- which is kind of immune to the currency movement.

So we don't think -- anticipate significant profitability impact in the first quarter due to the currency movement.

Very helpful.

Thank you.

There are no further questions at this time.

Mr. Sebastian Liu, please continue.

Okay.

So on behalf of the entire JinkoSolar's management team, I want to thank you for your interest and participation on this call.

If you have any further questions or concerns, please feel free to contact us.

Have a good day.

Have a good evening.

Thank you and good-bye.

That does conclude our conference for today.

Thank you for participating.