晶科能源 (JKS) 2015 Q2 法說會逐字稿

Thank you for standing by and welcome to the JinkoSolar second-quarter 2015 earnings conference call.

(Operator Instructions).

I must advise you that this conference is being recorded today, Thursday August 20, 2015.

I would now like to hand the conference over to Sebastian Liu, JinkoSolar Investor Relations Director.

Please go ahead.

Thank you, operator.

Thank you, everyone, for joining us today for JinkoSolar's second-quarter 2015 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 a supplemental presentation for today's earning call, which can also be found on the IR 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 strategies.

And then Mr. Cao, who will go through the financials and the 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 1995.

Forward-looking statements involve inherent risks and uncertainties.

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

Further information regarding this and other risks is included in JinkoSolar's public filing with 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 Jinko's current and future performances based on a more meaningful comparison of net income and diluted net income per ADS when compared with peers and historical results.

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 viewed together with GAAP results.

It is now my pleasure to introduce Mr. Chen Kangping, CEO for 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 had an overall strong quarter as we continued to build a diversified foundation for long-term sustainable growth.

We're efficiently executing our strategy across all segments of our business as we benefit from the strong growth momentum gained by expanding both of our module and downstream business.

Total revenue during the second quarter reached $516.2m, representing an increase of 31.6% over the same period in 2014 and 16.4% sequentially.

Module shipment to third parties reached 823 megawatts, exceeding the high end of our third party shipment guidance in a row.

Gross margin slightly improved to 20.7% as our Malaysian production facility gradually ramped up and more high-margin power revenues in the second quarter.

We expect this trend will continue throughout the entire year.

Solar power output during the second quarter also exceeded our expectation, reaching 203 GWH, up approximately 75.8% sequentially.

We are generating RMB178m in revenue.

With the seasonal effect of Chinese New Year behind us and new projects working up to full capacity, we expect that this high-margin power revenue will generate more profit in the second half of 2015.

108 megawatt worth of solar projects will connect to the grid in the quarter, leaving us well on track to hit our target of 600 to 800 megawatts of connected capacity in 2015.

This brings our total capacity of projects to 725 megawatts.

Large amounts of capital continue to flow into China's solar downstream sector, where we are looking -- where we're working to swing off our downstream business and expand our project assets.

Global demand remains robust.

Leveraging our strong brand recognition and deep relationship with our customers, we're able to strengthen position in a number of key and new emerging markets.

We're well positioned in China as a market leader to benefit from expected strong demand during the second half.

We also made substantial progress in the US, where shipments increased 115% sequentially.

In Asia Pacific region we increased our market share substantially in Thailand.

Shipments to Japan and UK returned to normal levels following the year-end rush last quarter but still remain very active and show promising signs of growth.

Turkey and Switzerland in non-EU region as well as emerging markets, such as Brazil and Chile, all show great potential.

We continue to seek out new opportunities as we diversify our customer portfolio and geographic presence.

On the technology side, we are focusing our efforts on incorporating passivated emitter rear cell or PERC and reactive-ion etching or RIE technology into our cell production lines and continue to develop new module products.

We remain the industry cost leader with silicon and non-silicon costs, cutting $0.01 each during the quarter, demonstrating our technology development and operating efficiency.

We also joined the National Energy Administration's top [prong] program and was selected as a module supplier for one of the demonstration projects.

Lastly, I would like to go over our recent development in diversification of our financing channels at both corporate and project levels.

At the corporate level, in addition of our existing close relationship with domestic commercial banks, we secured loans from the Export-Import Bank of China for our Malaysian production facility and doubled JinkoSolar US credit limits with Wells Fargo.

On the project level, in addition of our close cooperation with China Development Bank, we secured large project credit lines from Mingsheng Bank and Ping An Bank as we strengthen our financing capabilities with additional financial institutions.

Such strong support from financial institutions demonstrates the confidence in our ability to execute growth strategies across our business and geographies.

In closing, I'm pleased with the progress we've made across the entire business.

The continued corporate and project-level financial support we're receiving from diversified financing channels will continue to serve as the foundation for our sustainable long-term growth, combined with the steady expansion of our downstream business, industry-leading technology and diversified geographic presence.

Our future growth prospects looking increasingly promising.

As for the guidance of the third quarter of 2015, the Company estimates the total solar module shipments to be in the range of 1 to 1.1 gigawatts, which includes 900 to 950 megawatts module shipment to third parties and 100 to 150 megawatts for its own downstream projects.

For the full-year 2015, the Company raises the guidance of total solar module shipment to 4 to 4.5 gigawatts, which includes 3.4 to 3.7 gigawatts module shipment to third parties.

The Company expects to grid-connect solar power projects with a total capacity of 600 to 800 megawatts in 2015.

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

Thank you.

Thank you, CEO.

We reached another record during the quarter in terms of megawatt shipments and full utilization of our capacity while making improvement in our visibility for the year and contracted books.

During the second quarter we made a lot of progress and consolidated our leadership position in important PV markets that have big potential, such as the USA and China, as well as in emerging markets, such as in Chile.

We also continue to grow our market share in the UK and Japan.

Also important is the progress we made in penetrating new PV markets, such as Thailand, Singapore, Switzerland and Turkey.

We're generating these good results thanks to the spread globally of our brand name, international sales teams and global customers.

Our sales and marketing strategies continue to pay off as our business keeps expanding in size and geographical presence, now reaching over 47 countries in Q2.

We expect to see demand improve through the rest of 2015 and even into the first quarter of 2016 thanks to the signed contracts currently in our pipeline.

Our good reputation, local support and service to our partners, healthy financial operational position differentiates us when compared to our competitors.

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

In Q2, shipments and demand for JinkoSolar modules grew faster than in Q1 due to the strong demand from China and the US, but also in emerging markets, such as Chile, where we have around 40% market share.

In Q2 we shipped 915 megawatts, of which 823 megawatts went to third parties, representing 17% growth from the previous quarter.

During the first half of 2015, we maintained our leadership position in the Chinese market.

We expect to achieve similar results for the full year as we believe we will benefit from the Chinese government's continued support and China's National Energy Administration's 17.8 gigawatts annual installation target.

Our presence in Europe and the USA continues to be strong despite the trade dispute.

We are increasing our market share in the US substantially, especially in utility-scale business.

And we are also penetrating the residential and commercial market.

While there are still difficulties in the European PV market, demand from UK and France continues to grow, as it does in the non-European regions, such as Turkey or Switzerland.

UK had aggregated 2 gigawatts of PV projects during last year, 2014.

And it is expected to grow over 4 gigawatts this year.

Over the past few quarters, we have made progress in Central America, [apart of] Chile for large-scale projects and also for distribution generation.

We have strong visibility in that region for the rest of the year.

Our sales efforts also led to fruitful relationship with well-known developers in the rest of Latin American countries and across the African continent, where we see growing demand.

In terms of percentage, we delivered in Q2 approximately 45% of our solar modules to China, around 23% to the USA and around 14% to Europe, then emerging markets and Asia Pacific, each of them at 10% approximately, mainly for Japan and Thailand.

The top five countries we shipped to during the second quarter were China, USA, UK, Chile and Japan.

We will continue to capitalize on the growing recognition of JinkoSolar's brand and localized sales and marketing services to expand our market share and diversify our customer and geographical portfolio.

In terms of partnership, we continue to build a strong partnership with distributors, PV developers and EPC contractors.

We announced during the quarter that we signed strategic contracts.

Just to mention a few of them, we underline 104-megawatt project in the -- for the Utah Red Hills Renewable Park in the USA with our partner Scatec as a developer; our 80-megawatt contract with China's Southern Power Grid Synthesis for distribution generation; another 34-megawatt project in Chile; another 50-megawatt project in Turkey with Tegnatia; and a contract with Vivint Solar in the USA for distribution.

We will continue to build a strong partnership network with distributors, PV developers and EPC contractors around the world.

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

In terms of marketing, the rapid global expansion of our business has provided excellent exposures for the Jinko brand, particularly in our local markets, like China, but also in the USA, Europe and emerging markets, where we have growing recognition.

We have engaged PR campaigns during the year and we plan further expanding our PR activities as well as actively attending solar and renewable energy exhibitions and conferences.

During Q2 we have sponsored several events, important exhibitions and conferences, where we were actively speaking, including in Mexico, Central America, Germany, USA and Asia Pacific.

It's especially important to mention our participation in the investors conference in Wall Street for REFF.

In addition, we continue to benefit our brand exposure in close partnership with Solar PV TV, the first worldwide Internet portal, completely and solely devoted to the solar PV technology.

We are also, in association with Solar Future Today, preparing for a film that will be an important achievement for our industry.

The rapid global expansions in our business has provided excellent exposure for JinkoSolar brand.

Next quarter, Q3, we already plan to be in more than 9 exhibitions, including Tokyo, San Francisco, Sao Paolo in Brazil, Warsaw in Poland, Kuala Lumpur in Malaysia, and Mexico City.

Just to finalize, I will refer to the ASP.

Our average selling price remains stable despite the volatile exchange rate.

Our ASP during this quarter was $0.57 per watt on average, $0.01 lower than the previous quarter.

In the next quarter we expect to see ASP stabilize so we don't see a major impact on exchange rates.

Now I would like to turn the call over to Charlie, who will go over our financial results and guidance for the third quarter 2015.

Thank you very much.

Thank you, Arturo.

Good morning and evening to everyone on the call.

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

As Mr. Chen mentioned earlier, total solar production in the second quarter 2015 were 915 megawatts.

Total revenues were $516.2m, an increase of 16.4% sequentially and an increase of 31.6% year over year.

Gross margin was 20.7% compared to 20.3% in the first quarter 2015 and 22.6% in the second quarter 2014.

The sequential increase was mainly due to the continued cost reduction of solar modules and rapid increase of electricity revenue.

In-house gross margin relating to in-house silicon wafer, solar cell and solar module production was 26.3% in the second quarter 2015 compared to 24.1% in the first quarter 2015 and 25.4% in the second quarter 2014.

Income from operations was $38.2m compared to $37.1m in the first quarter 2015 and $40.6m in second quarter 2014.

Total operating expenses were $68.8m, an increase of 29.9% sequentially and an increase of 42.9% year over year.

The sequential increase in operating expenses was mainly due to the increase in R&D expenses, shipping and warranty costs associated with the increase of module shipments.

The Company's operating expenses, excluding stock-based compensation, the change in provision for doubtful accounts, represented 13.2% of its total revenues, representing an increase from 12.5% sequentially and an increase from 11.9% year over year.

Operating margin was 7.4% compared to 8.4% in the first quarter 2015 and 10.3% in the second quarter of last year.

Net interest expense was $12.8m, an increase of 26.3% sequentially and an increase of 11.2% year over year.

We recorded an exchange gain of $2.4m, primarily due to our foreign currency exchange gain of $2.1m and a change in fair value of forward contracts of $0.3m.

We recognized a loss of $9m from the change in fair value of convertible senior notes which was offset by a gain of $0.9m from the change in fair value of capped call options.

We recognized an income tax benefit of $0.3m compared to an income tax expense of $3.2m in the first quarter 2015 and an income tax expense of $3.4m during the second quarter 2014.

Net income was $12.3m compared to net income of $8.2m in the first quarter 2015 and net income of $22.3m in the second quarter 2014.

This translates into basic and diluted earnings per ADS of $0.40.

Non-GAAP net income was $33.4m compared to non-GAAP net income of $27.6m in first quarter 2015 and non-GAAP net income of $27.9m in second quarter 2014.

This translates into non-GAAP basic and diluted earnings per ADS of $1.08 and $1.04 respectively.

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

As of June 30, 2015, the Company had $367.5m in cash, cash equivalents and restricted cash.

As of June 30, 2015, total short-term borrowings, including the current portion of long-term bank borrowings, were $657.7m compared to $483m as of March 31, 2015.

Total long-term borrowings were $344m as of June 30, 2015, compared to $180.6m as of March 31, 2015.

As of June 30, 2015, the Company's working capital was negative $285.4m compared to a deficit of $195.9m as of March 31, 2015, which was primarily due to the reclassification of convertible bonds of $127m to current liabilities in the second quarter 2015.

For the third quarter 2015, the Company estimates total solar module shipments to be in the range of 1 gigawatt to 1.1 gigawatts, which includes 900 megawatts to 950 megawatt module shipments to third parties and 100 megawatts to 150 megawatts for its own downstream projects.

Revenues 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 raised the guidance of total solar module shipments to 4 gigawatts to 4.5 gigawatts, which includes 3.4 gigawatts to 3.7 gigawatts module shipments to third parties.

The Company expects to grid-connect solar power projects with a total capacity of 600 megawatts to 800 megawatts in 2013.

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

Operator?

(Operator Instructions).

Patrick Jobin, Credit Suisse.

Hi, guys.

This is [Jennifer Key] on the line for Patrick.

Thanks for taking the question.

Could you give us a little more color on ASPs by region Q2 and Q3?

Thank you.

ASP in the second quarter was $0.57, down slightly from $0.58 in the first quarter due to the shipment -- the change of shipment mix.

We have more shipments in China, around 45% in second quarter.

And in terms of the trend of ASP, we expect the ASP in the second half year will be flat or down very slightly.

If you look at the ASP by regions, China ASP is very stable, in the range of $0.53 to $0.55 with better payment terms, we anticipated very strong shipments in the second half year; and Japan, the ASP is in the range of $0.55 to $0.56 facing some very little pressure from the currency movement; and US in the range of $0.65 to $0.67 downward slightly due to the competition.

Great.

Thanks.

And could you give us some updates on the financing environment for downstream projects?

This is I think good question, and financing environment in China is very positive and favorable for the downstream solar projects.

Both commercial banks and the policy banks are active in providing the longer-term loans for the solar projects and we continued to diversify our financing resources for the downstream project business.

And recently we signed RMB3b credit line agreement with China Minsheng Bank and another RMB3b with Ping An Bank and this week on Tuesday we signed three year strategic agreement with ICBC Jiangxi branch.

And I think last time we released the news for the Jinko Power, we completed a $150m term loan for the reputable financial institutions.

The extra fund will help us to achieve 1.4 gigawatts in the future and which demonstrates the Jinko Power's competitiveness in the industries and the separate financing capabilities.

And back to the China environment, we are seeing more and more companies are coming into the solar sector.

For the first half year, the public companies in China raised around RMB26b in the capital market to develop the solar projects and the National Energy Administration is in discussion to advance the cumulative installation target to 115 gigawatts to 200 gigawatts.

Great.

Thanks, Charlie.

Welcome.

Philip Shen, ROTH Capital Partners.

Hey guys, thanks for taking my questions.

Can you update us on what percent of your operating projects are actually receiving electricity payments?

The [freighting chart] payment is still critical for the Chinese market.

And we are optimistic China will approve the next round subsidy catalog in the second half year and accelerate the payment schedule.

By the end of second quarter we have 725 megawatts in operation, around 100 megawatts is under subsidy catalog.

And if the NDA approve the next round subsidy catalogue, we expect around total cumulative 500 megawatts will be under the subsidy catalog.

Great and of your connected projects, how much is DG and are you receiving cash payments for all of your DG projects and given -- go ahead Charlie.

Sure, this is a good question.

So I think we target 5% to 10% in terms of rooftop DG and by the end of second quarter we have 725 megawatts total in operation, around 8% is distributed generations.

And for the DG you are right, I think the approval process and payment of feed-in tariff is better than the utility-scale projects.

And I think around in terms of the total DG capacity we operate, around over 60% we are receiving the feed-in tariff on regular basis.

Great.

And to what degree as a result of the more reliable payments coming from DG are you potentially shifting your downstream strategy for greater focus on DG?

Our target, 5% to 10% for the DG, and we are shifting our focus from last year to the east and south China for the projects with strong energy demand, particularly the utility DG and rooftop DG in the east and south China.

For the rooftop (multiple speakers) 5% to 10%.

Great.

Thanks, Charlie.

One more here and I'll jump back in the queue.

How do you expect the margins to trend in Q3 and Q4?

Gross margin we expect in the second half year will improve quarter by quarter with couple of policy factors.

Firstly, our overseas factories, Malaysia factories is ready for the US market.

The factory is running to 100% utilization now.

And we plan to ship around 200 megawatts to 250 megawatts to the US market without tariff and the gross margin for the 200 megawatts to 250 megawatts is in the range of 25% to 30%.

And for the downstream power revenues, we are the leading developers in China and we are on the track to achieve cumulative 1.1 gigawatts to 1.3 gigawatts by the end of this year.

So we expect our power revenue will grow very quickly in the second half year.

And for the third quarter we expect our electricity revenue will up 30% quarter by quarter.

And the last one is a stable ASP environment and we continued to cut the module cost.

On top of that, the RMB depreciated by 3% to 4% in the recent weeks which is very positive for the reduction of module cost and improve the gross margins.

Thank you, Charlie.

Thanks.

Sheng Zhong, Morgan Stanley.

Thank you for taking my question.

Just follow up on the third point of your cost cut of module.

Are you still looking for $0.41 by end of this year?

Yes.

The module cost, total in-house module cost was $0.42 in the second quarter, $0.08 silicon cost and $0.34 in our silicon cost.

We continue to see the room to cut the module cost and we are on the track to reach our total module cost to $0.40 by the end of this year.

So that means $0.01 by quarter is achievable.

Okay, so, I think that will mainly come from the non-silicon cost cut right?

Yes.

We're expecting a lower the material cost, continue investing in RMB.

We are implementing the [perk and RIE] technology and we plan to [allow us] to 100 megawatt to 200 megawatt by the end of this year, which will improve the [motor] conversion efficiency by 0.6% and we continued streamline our supply chain to get the applicable purchase price from our suppliers.

Yes, Cao Haiyun thanks.

And --

(multiple speakers) We expect will be quite stable in the range of $15 to $16 per kilowatt.

Thanks.

Okay, helpful.

And can you give some guidance on your outlook of the module shipment breakdown by geographic breakdown in the second half?

No.

Maybe I can give you shipment by region for the third quarter and maybe the full-year 2015.

For the third quarter, China is in the range of 30% to 35%; Asia Pacific region 15% to 20%; Europe 5% to 10%, emerging market 20% to 25% and North America 15% to 20%.

I just want to comment, a color of the demand of second half year.

We expect very strong demand from China and United States and a strong growth potential in emerging markets and the Asia Pacific region including Japan, Thailand, India and South Africa, Chile, Brazil and Mexico.

And the capacity for Jinko is almost sold out for the 2015 and we are taking order for 2016 particularly in the US market.

As of today we have signed around 750 megawatts for the US market for 2016.

We plan to sign up to in the range of 1 gigawatt to 1.5 gigawatts in the fourth quarter for the US markets for 2016.

Okay.

That sounds very great.

And the last question about the inventory.

Actually you have some increase in the inventory.

Do you have some specific color on this?

Yes, the inventory by the end of second quarter was $475m, up 50% quarter over quarter.

The inventory is for the anticipated very strong shipments in the second half year.

The inventory is in very good conditions, no any write-off risk, and we expect the inventory level will go back to a lower level by the end of this year.

Understood.

Thank you very much.

And we revised the full-year guidance by 20% and the third quarter party shipment guidance now is 3.4 gigawatts to 3.7 gigawatts.

So that's why we want to build the inventory to catch up the market demand.

Yes, very helpful.

Thank you very much, Charlie.

Thanks.

Paul Strigler, Esplanade.

Hey, guys.

I think you touched on this with Bill's question, but can you just quantify how much the Malaysian manufacturing plant cost you in gross margin in Q2?

Maybe how many basis points of margin it cost you because if you are ramping it obviously that's fully utilizing it the entire quarter.

There is inevitably some drag on margin.

Correct?

Yes.

In the second quarter, in May we just started the production for Malaysia factory.

So the impact, part impact for the second quarter is very small and we expect you will see the gross margin part impact in the third quarter and the fourth quarter.

No, I understand that, but how much did it cost you in gross margin in the second quarter?

Because it was likely dilutive to gross margins in the second quarter and obviously in the back half it will be higher, but in the second quarter, how much did that sort of hurt your gross margins?

Hi, Paul this is Sebastian.

Let me take this question.

So because in the second quarter definitely this factory has not ramped up to the full capacity yet and to the production is very limited.

It is very hard for us, so it is very hard for us to estimate the real cost and also the gross margin in Malaysia factory but like we discussed it before, the cost will be within $0.03 difference with our domestic facility.

So you can do the calculation.

So like Charlie said before that we expect that the gross margin for our Malaysia product shipped to US will be in the range of 25% to 30% if assume we under the current contract we signed with our customers.

Great and then one last question, you mentioned that you are already sort of seeing orders for 2016 and you may have already spoke about this but maybe I missed it, what does pricing look like for those contracts for 2016 or are you really just locking in volumes now and prices will be discussed sort of as we head to later in 2015?

The price for US market in 2016 is quite stable based on our latest contracts with customers.

Great.

That's great, great news guys.

Thank you.

Tyler Frank, Robert W. Baird.

Hi, guys, thanks for taking the question.

I was wondering if you can talk about what you see for the current tariff issues and do you see any resolution coming to that?

Can you also talk about what your thoughts are on the ITC and how that may impact market demand in US in 2017?

The tariff and the final results of tariffs 30.6% came worse than expected, but the impact to Jinko is very small because our overseas factory is ready to address the US market.

And for the ITC impact we are seeing, the US market actually now is on fire and we are seeing very strong momentum in US market in 2015 and 2016 and post 2016 we expect the US market will continue because the continued rapid reduction of total solar system cost.

And the [RPS] in the US market will continue to drive the growth particularly the distributed generation segment.

And we are saying both China, United States and India are taking more favorable policies to support the solar sectors.

US allowance to the green power plant, the Obama administration to further cut the carbon emissions and increase the renewable percentage in energy mix from 22% to 28%.

In India market, the government last week announced a detailed plan to reach 100 gigawatts by 2022.

So we think the policies are very favorable in the next few years.

Okay.

Thank you very much.

[Yang Liao], Goldman Sachs.

Thank you for taking my question.

My question is can you share with us the blended cost including outsourcing and duty if there is any kind of guidance for the full year.

Thank you.

The blended solar module cost is around $0.46 and to $0.47 and we continue to cut the module cost and maintain the cost leadership in the industry.

Just like the in-house silicon module cost we target to cut $0.01 per watt basis in each quarter.

Thank you very much.

And the second question is about the RMB depreciation just not your shared it will be beneficial since the cost will be lower, wondering if it's impacting the solar electricity sales as well, because it's a RMB sales exposure.

Thank you.

Our functional currency is RMB.

So in terms of the JinkoPower, because the assets, revenue cost structure is RMB so I don't see any impact on the revenue side.

But if you convert to US dollar of course, it will impact the revenue denominated in the US dollar.

But for the solar module business it's different.

We have over I think around 60% from international sales.

So there are depreciation, the cost is 100% denominated in RMB.

So which is very positive drive down the solar module cost, at the time we can get more revenues from the overseas sales market denominating in US dollar, Japanese yen, and the euro.

Okay.

Thank you very much.

And also if it ask for the total full year connection target of 600 to 800 megawatts, so it's approximately 500 left for the half year.

Is that equally distributed for the quarters or not towards year-end.

Okay, in the first half year, we connected around 220 megawatts solar projects for JinkoPower and we target to connect 150 megawatts to 200 megawatts in the third quarter for JinkoPower and for the fourth quarter we target 350 megawatts to 400 megawatts to make the total connection in the range of 600 megawatts to 800 megawatts.

By the end of the second quarter, we had around 500 megawatts already under constructions.

So we are very confident to achieve the target by the end of this year.

Thank you so much.

One last question, we see operating expense increasing as a percentage especially from SG&A, do you think for the full year the SG&A cost will trend for the full year?

Thank you.

So thanks to the strong shipment in the second half year, and we continue to see the operating leverage, we expect that the operating expenses as a percentage of revenue is in the range of 10% to 12%.

Thank you so much.

Thanks.

[Wen Zao Du], CICC.

Hello, hi.

Thank you for taking my question.

My question is, I noted that our 2Q ASP is $0.57 and our module shipment is around 800 megawatts.

I multiplied this two number let`s say the exchange rate is about 6.1 to 6.2 and then the revenue is about RMB2.8b but it is higher than our total revenue.

I don't know why.

I think you're talking about the revenue breakdown for Jinko.

That's right.

I think, the ASP is $0.57 and our shipment to third party is 823 megawatts.

The module revenue is around I think 91% and we also have in electricity power revenue of $29m, which is around 5% of total revenues.

The remaining 3% to 4% is coming from the sales of the wafer and the cells.

Hi, Wen Zao, this is Sebastian so, I think that the gap you are seeing of the revenue calculation is from the some small sales of our cells and wafers.

Okay.

Yes.

In the revenue breakdown, wafer revenue is around 2%, cell 1.4%, module is 91% and electricity power revenue is 5.5%.

Okay, got it.

Thank you.

Dan Ries, Ardsley Partners.

Hey, just a quick question.

I'm sorry if I missed it.

I see that you say that US sales were up 115% sequentially which is amazing, did you say what percentage of the total either shipments or revenues came from the United States?

And then I have two other really quick ones.

You mean 2015 or second half year?

No, just in 2Q.

But the second quarter right?

Yes.

Second quarter our shipments in the US market is 191 megawatts so, it's around that 23% and the US shipment is very backend loaded in this year.

We target an 800 megawatt from 900 megawatts in the US market this year and for the first half year our total shipments in the US market is around 300 megawatts.

Hi, Dan, this is Sebastian.

I understand your question and the percentage of our US shipment in the second quarter, a very small portion of that shipment is coming from our Malaysia production, so the number is very small because we just begin production in the second quarter so, the effect of the high gross margin will come out in the second half of the year.

We don't have to consider it as a factor.

Great and, Charlie, I'm looking at your debt level and your interest expense, are you guys able to capitalize what some of the interest on the projects that you're developing, I'm just curious the $12m of interest expense?

Yes, you are right, we can capitalize some interest expense based on the US GAAP and I think for the second quarter it's around $2m to $3m we capitalize in the project assets.

Great and I was surprised to hear that you are the leading market share in Chile, that's great, but I was curious maybe, Arturo, with your customers down in Chile, given that commodity prices have gone so low now around the world in copper in particular, do you view that as a risk to Chilean demand in the year ahead, not necessarily the quarter ahead, I assume that's all booked and things but what are your thoughts on 2016 given the Chilean economy is so dependent on commodities -- yes, miners where we thought to be part of the demand.

That's true that, that Chile is mainly supported by the demand on the commodities mainly for copper so they have -- is one of the top three countries in exporting copper.

So, the economy definitely with the reduction on the price of the raw materials is part of the GDP that has been impacted.

However, for us we're not seeing effect in the short term and mainly most of the plans that has been already permitted and contracted by our developers and [PC] companies that are mainly our customers, not the mining, because we don't have any mining as a company, but mainly utility companies, so far they have not been pulling back any of these plans.

It doesn't mean that in the next two years if continue the situation like this we could see the effect not for the next coming, let's say, eight months.

So this year, everything is contracted and we have also projects in 2016 for Chilean big companies that are firm and contracted and signed that will help us for the next half of the year in 2016.

So I don't see any effect on this regard.

Thank you very much.

You're welcome.

As there are no further questions at this time, I will like to hand the call back to Sebastian Liu.

Please go ahead.

Thank you, operator.

So on behalf of the entire JinkoSolar's management team, I would 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 or good evening, bye-bye.

Thank you.

That concludes this conference call.

Thank you for your participation ladies and gentlemen.

You may now disconnect.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call.

The interpreter was provided by the Company sponsoring this Event