晶科能源 (JKS) 2019 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to JinkoSolar First Quarter 2019 Earnings Conference Call.

(Operator Instructions) I would now like to hand the conference over to your speaker today, Ms. Ripple Zhang.

Thank you, please go ahead.

Thank you, operator.

Thank you, everyone, for joining us today for JinkoSolar's First Quarter 2019 Earnings Conference Call.

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

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

On the call today from JinkoSolar are Mr. Chen Kangping, Chief Executive Officer; Mr. Charlie Cao, Chief Financial Officer; and Mr. Gener Miao, Chief Marketing Officer.

Mr. Chen will discuss JinkoSolar's business operations and company highlights, followed by Mr. Miao, who will talk about the sales and marketing; and then Mr. Cao, who will go through the financials.

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 U.S. 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 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 the applicable law.

It's 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.

(foreign language)

[Interpreted] Thank you, Ripple.

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

(foreign language)

[Interpreted] Module shipments were 3,037 megawatts during the quarter, an increase of 50.7% year-over-year and a decrease of 19.1% (sic) [16.1%] sequentially.

Overseas shipments accounted for over 90% of the total shipments during the quarter.

Total revenues were $868 million, an increase of 27.5% year-over-year and a decrease of 24.6% sequentially.

Gross margin was 16.6%, up from 14.7% sequentially and 14.4% year-over-year, as we increasingly benefit from a higher proportion of sales being generated by our high-efficiency mono products and further reductions in production costs.

(foreign language)

[Interpreted] As grid parity approaches, global solar demand continues to generate rapid and long-term sustainable growth momentum.

Growth during the quarter was primarily driven by strong continuous demand from overseas markets and the anticipated kickoff of the domestic market during the second half of the year.

(foreign language)

[Interpreted] European markets continue to perform well, following the cancellation of the minimum import price policy and the demand from price-sensitive projects, in particular, has surged.

Overall, European markets are expected to install 17 gigawatts this year, exceeding the previous estimate of 15 gigawatts.

(foreign language)

[Interpreted] The solar energy market in the U.S. is huge.

Recently, policy changes exempting bifacial solar modules from Section 201 tariffs are expected to support medium- and long-term demand and significantly increase the application of bifacial modules.

The market opportunity in the U.S. is massive and we intend to expand our presence there by leveraging our overseas high-efficiency capacity in Malaysia and the U.S., strong brand recognition, high-quality products and our best-in-class customer service.

(foreign language)

[Interpreted] On the domestic front, policies recently laid out by China's National Energy Administration are expected to create a surge in demand during the second half of the year.

The total amount of subsidies, excluding poverty alleviation projects, was set at RMB 3 billion.

Other than on separate subsidies [bill] for residential solar systems and poverty alleviation projects, the plans laid out require that all projects must win a bid in order to be subsidized.

The introduction of a fully competitive mechanism for project bids aims to create the largest market share with the existing subsidies bill and accelerate grid parity by cutting nontechnical costs.

China is expected to install 40 gigawatts this year.

As the leading manufacturer, we will focus on promoting the adoption of high-efficiency products across the domestic market, particularly for products that reduce the cost of energy.

This will support the transition of the Chinese market towards grid parity without subsidies and provide our customers with industry-leading products and solutions that offer high efficiency, high performance and high reliability.

(foreign language)

[Interpreted] Other markets are also very active.

I will let Gener go into further detail on this.

(foreign language)

[Interpreted] Global solar demand for our high-efficiency mono product is growing significantly and has resulted in them being in short supply continuously.

We are accelerating the expansion of our high-efficiency mono capacity and estimate they will account for over 70% of our total shipments for the year.

(foreign language)

[Interpreted] Turning to the high-efficiency capacity, we successfully raised USD 160 million last month, which has been deployed to further expand our high-efficiency mono production capacities.

Our wafer, cells and module capacity reached 10.5 gigawatts, 7 gigawatts and 11 gigawatts, respectively, at the end of the first quarter.

We are increasing output of both wafer and product capacity.

Our new 5-gigawatt mono wafer production facility in Leshan, Sichuan Province, began trial production this month and will ramp up to full capacity by the fourth quarter of this year.

This new production facility will serve as a benchmark for the industry with its industry-leading cost structure and cutting-edge technology.

The additional mono wafer capacity will allow us to significantly increase the proportion of our high-efficiency products we manufacture and improve overall profitability.

We expect to reach wafer, cells and module production capacity of 15 gigawatts, 10 gigawatts and 16 gigawatts, respectively, by the end of the year.

Of this, approximately 11.5 gigawatts will be mono wafers and approximately 9.2 gigawatts will be PERC cells.

(foreign language)

[Interpreted] On the high-efficiency technology front, our customized monocrystal (sic) [monocrystalline] furnace performs much more efficiently and requires lower CapEx, which help us ensure the premium quality and competitive pricing of our mono products.

The integration of our proprietary acceleration technology into our grid processing and automated systems has allowed us to further increase crystal (sic) [crystalline] growth rate and sharply reduce [grating] costs.

On the cells side, the maximum conversion efficiency of our Cheetah-size cells and N-Type cells reached 24.38% and 24.58%, respectively, in the June 2019.

Additionally, power generated by our version 72 high-efficiency monocrystalline module reached 469.3 watts during testing conducted by TÜV Rheinland, a respected 3-party (sic) [third-party] institution.

We are clearly making significant breakthroughs and setting new industry standards when it comes to developing high-efficiency and power cells and modules.

This year, we also launched the latest addition to our premium Cheetah range of products, the Swan bifacial module with a new DuPont Clear DuPont Tedlar-based backsheet.

Lightweight materials alleviate a number of problems during the installation process and help lower initial cost of our customers.

Demand for bifacial transparent backsheet products will grow rapidly as they become more mainstream going forward.

We will continue to increase the proportion of bifacial products we produce to meet this demand.

(foreign language)

[Interpreted] Before turning the call over to Gener, I will quickly go over our guidance.

Based on current estimates, we estimate our total solar module shipments to be in the range of 3.2 gigawatts to 3.3 gigawatts for the second quarter and 14 gigawatts to 15 gigawatts for full year.

(foreign language)

[Interpreted] Thank you, Ripple.

With that, I will turn it over to Gener.

Thank you, Mr. Chen.

The total shipments during this quarter was 3,037 megawatts, exceeding our guidance and an increase of 50.7% quarter-over-quarter.

Demand outside China during the quarter accounted for over 90% of total sales.

Particularly, shipment growth of mono products was 2.4x higher than the same period last year.

In terms of geographic mix, shipments to the Asia Pacific region accounted for the largest portion followed by European markets and then North America and emerging markets.

With over 70% of our order book already filled, we have great visibility for the second half of 2019.

Due to later-than-expected announcement of this year's policy, total PV installations in China were only 5.2 gigawatts in the first quarter.

With the new policy's final release, demand is expected to surge in the second half of the year, with poverty alleviation and the residential expected to be proceeded first.

For the full year 2019, we expect total solar installation to be around 40 gigawatts.

We will further reinforce our position in the largest PV market in the world by promoting our high-efficiency premium Cheetah and Swan products and facilitate the market's transition towards grid parity.

The U.S. market has been heating up over the last 2 years.

The ITC played an influential role in stimulating demand.

U.S. installation is a record high in the first quarter.

Due to the trade barriers and the supply shortage, we anticipate that the market price will remain stable.

Recently, it was announced in U.S. that bifacial solar modules were exempted from the Section 201 tariff.

The tariff exemption on the bifacial modules will increase the product's competitiveness and help its proliferation in the U.S. market.

The bifacial solar modules will likely become the mainstream choice in the future.

In particular, companies with fully integrated bifacial cell and module capacity outside China, such as Southeast Asia, will likely to benefit tremendously.

We have been focusing on U.S. market and we will continue to secure long-term orders with key U.S. clients.

Grid parity has been achieved in a number of European countries.

Traditionally, markets like Germany, France and Spain continue to display strong demand.

In Spain, the major form of projects without subsidies are merchant PPAs, while distributed self-supplied projects are also growing rapidly.

We have noticed that distribution projects are growing rapidly in countries with limited land resources, like Netherlands.

In other European markets, such as Poland, Greece and Hungary, demand is growing as well.

The European market has great potential and we will strengthen our market position and market share by continuously providing our clients with superior products, premium service and cutting-edge technologies.

Turning to Asia Pacific market.

Full year demand in the Japanese market is expected to be around 8 gigawatts.

The proposed cancellation of subsidy has resulted in a surge of demand in the near term.

The demand in Indian market is -- this year, is expected to close to 10 gigawatts.

The Indian government has launched several rounds of protection policies, but module demand for foreign manufacturers remains strong.

We are also focusing on Australian and the Vietnamese markets and are making [progress].

In Australian market, industrial projects will take over residential projects to become the next growth driver.

In Vietnam, the new round of subsidy policies has increased the confidence in the sustainable development of the renewable energy market.

Various Southeast Asian markets are projecting strong growth and we will continue to anticipate opportunities and deploy resources to markets with strong potential to seize a first-mover advantage.

We are also confident about our position in key emerging markets.

The scale of Latin America markets is expected to be around 6 gigawatts to 7 gigawatts, mainly driven by growth in Mexico, Brazil and the Chile market.

Demand in the next 2 or 3 years is expected to remain stable at the similar level.

Continuous rounds of the gigawatt level tenders are taking place in the Middle East region.

Gulf nations, led by Saudi Arabia, are reducing their reliance on oil for energy.

So we are very optimistic about the prospects in the region and we'll invest in more resources to explore those markets.

The ASP in Q1 remains stable when compared to the previous quarter.

Prices for the whole year are expected to be stable, given the strong demand.

As Mr. Chen has just mentioned, we will continue to make technical advances and capture market demand with leading innovation and new products.

At the same time, we will continue reducing our cost to support a competitive energy cost, as industry moves towards grid parity.

In general, the global solar market will continue generating sustainable rapid growth momentum for the rest of 2019 and beyond.

Based on the first quarter data, our classic Cheetah module series is in high demand and are very popular, making up 70% in second half orders.

We launched our new Swan bifacial module at 2019 SNEC with the ability to provide higher yield gains and lower cost of energy.

The module is also easier to install and greatly enhances reliability during operation.

Thanks to these advantages, the Swan transparent backsheet bifacial module was awarded the Intersolar Award 2019, the only module product to earn this acknowledgment in the industry.

In addition, for the fifth consecutive year and in 2019, we have been ranked as the top performer in PV Module Reliability Scorecard published by PVEL in partnership with DNV GL, a testimony of our continuous commitment towards product quality.

We are leveraging position in the industry to strengthen our reputation as a thought leader.

In March, JinkoSolar was the only renewable Chinese corporate thought leader invited to attend the 2019 B20 Summit in Tokyo.

As the solar industry representative, we were able to offer deep insight into the global green economy and the transformation of the energy industry, which was widely covered by media.

In terms of the product marketing, during the first quarter, we attended 13 important conferences, 35 core marketing events with key partners across the globe and hosted a further 9 key customer events around the world.

Our active global marketing events continue to allow us to reach and educate new customers about JinkoSolar high-quality products.

With that, I will pass over to Charlie.

Thank you, Gener.

Firstly, I'd like to walk you through our Q1 results.

Total solar module shipments were 3 gigawatts, down 16% sequentially and up 51% year-over-year.

Total revenue was USD 868 million, down 23% sequentially and up 28% year-over-year.

The change was due to the decrease of solar module shipments.

Gross profit was USD 144 million compared to USD 165 million in Q4 2018.

Excluding the CVD reversal benefit, gross profit in Q4 2018 was USD 155 million.

The change was due to the decrease in the shipment of solar modules.

Gross margin improved to 16.6% compared to 14.7% in Q4 2018.

The sequential increase was attributable to a higher proportion of self-produced high-efficient mono products and further reductions of our production costs.

The operating expenses was USD 109 million, representing 12.5% of total revenue compared to USD 130 million, which was 11.6% of total revenue in Q4 2018.

The increase of operating expenses as a percentage of revenue is due to the increase of shipping costs as a percentage of revenue associated with the significant higher percentage of shipments to oversea markets.

EBITDA was USD 49 million compared to USD 54 million in Q4 2018.

Net income was USD 6 million compared to USD 16.7 million in Q4 2018.

Non-GAAP net income was USD 5 million.

This translates into non-GAAP diluted earnings per ADS of $0.12.

Moving on to the balance sheet.

The company had USD 659 million in cash, cash equivalents and restricted cash compared to USD 506 million at the end of Q4 2018.

The accounts receivables were USD 872 million, down from USD 889 million at the end of Q4 2018.

Inventories were USD 966 million compared to USD 835 million at the end of Q4 2018.

The increase of inventory is for the continued strong demand from international markets in the second quarter.

The total debt was 100 -- USD 1.8 billion compared to USD 1.4 billion at the end of Q4 2018.

The net debt was USD 1.1 billion compared to USD 0.9 billion at the end of Q4 2018.

The increase was due to the short-term borrowings for the working capital purposes and long-term borrowings for the capital expenditure.

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

Operator?

(Operator Instructions) Your first question is from Philip Shen from Roth Capital Partners.

In terms of the Q1 shipments, I was wondering if you could break down into multi-modules, mono modules and mono PERC models, similar to what you do annually?

And also, can you share what the in-house vertical costs were in Q1?

I think in Q4, you guys talked about $0.193, but if you could share that for Q1 as well, that would be great.

And then how do you expect your overall cost structure to trend by the end of this year and also the end of 2020?

All right.

So it's a long one.

So let me take the first half first.

For the mix of different technology, I think our -- in Q1, our shipment for the poly product are below 50% and the rest will be the high efficiency -- high-efficient products.

For the detailed numbers, we don't plan to disclose that.

And what's the other part of the question about shipments?

Sorry, can you repeat?

I think that's it for shipments.

I mean, can you share how much was mono PERC?

I think you guys do it annually, so if you can do it for the quarters, that would be helpful.

Philip, I think in our prepared remarks by our CEO and our planning for the shipment of mono high-efficient products is roughly 70%.

This is for the full year 2019.

Great, thanks, Charlie.

For the quarter-by-quarter basis, the percentage is increased by quarter-by-quarter throughout the year.

Good.

And then in terms of the in-house vertical cost structure for Q1?

And then expectations by year-end and year-end '20?

Sure, sure.

And I just can give you some highlights, but I -- we are not in position to disclose the detailed numbers, given the consideration of competitiveness.

And this year, and we are doing a lot of things to help to drive our cost.

But given the strong demand throughout the international markets, anticipated in China kick off in the second half year, and I think the material cost is very sticky, right, like the glasses and even the polysilicon price is stable.

So we're targeting the blended -- not blended, in-house production cost is 5%, 8% to 8% improvement this year.

And on top of that, I just want to highlight our -- the new capacity.

This is the key profitability driver for Jinko, because this year, it's a transition year for Jinko, transforming to mono-based, high-efficient capacity.

And our new mono wafer capacity in Sichuan, we just started small-scale trial production, which will be very competitive and build a strong foundation for Jinko to get a very strong advantage in future years.

Okay, Charlie.

Can you talk about -- I think the CapEx for the quarter was $60 million.

How do you expect the CapEx to trend by quarter for the rest of the year?

The total budgeting CapEx throughout this year is roughly USD 450 million and the key investment this year is the mono wafer as well as the PERC cell capacity.

And we are almost doubling our high-efficient capacity focused on the mono wafer and PERC cell.

If you look at our capacity Q1, mono wafer, roughly 6.5 gigawatts; and PERC is 5.4 gigawatts.

It's almost double by the end of this year, reaching to 11.5 gigawatts, mono wafer; and 9.2 gigawatts, PERC cell.

So you can think about from -- I just highlight the mono wafer and PERC cell integration capacity is the key driver for our profitability, and now we roughly have 5 gigawatts integration capacity throughout the mono wafer, PERC cell and module.

And by the end of this year, we are going to reach to roughly 10 gigawatts, right?

Right.

Okay.

Just another quick one here for me.

Q2 is almost over, as you look to Q3, how much of Q3 shipments have been booked?

And are you starting to see bookings from China with the policy now in place?

When we met in SNEC, the demand had not yet improved yet in China.

I know that the outlook for Q4 is better, but are you actually getting bookings for China now?

And then another one, can you talk about the margin profile for Q2 and the margin profile for Q3?

Phil, this is Gener.

Let me take your China demand question.

So firstly about second half, I think in my remarks, I already disclosed that we -- I think we have approximately 70% booked by the second half.

That's covered both Q3 and Q4.

I think Q3 booked level is higher, slightly higher, than Q4.

And regarding the demand from China, we see strong demand from China or from Chinese customers.

So -- but for sure, the total number is not comparable compared with last Q4, because the late announcement of the policy in China.

Personally, I expect the demand from China Q4 will be stronger than Q3.

I think you have another question about margin, right?

That's right.

Yes.

In terms -- yes, just to supplement, I think China demand, Q3, we are seeing more activities, right, from the residential markets as well as projects without subsidies.

And we are expecting China is going to release the list for the projects with subsidies by the end of July and maybe early August and are expecting very strong installations in Q4 this year.

In terms of gross margin, in general, I am very optimistic for the second half year, because what I emphasize as key revenue driver for Jinko is integrated mono-based capacity.

We are going to almost double quarter-by-quarter starting from Q3 and Q4.

And for the Q2, the gross margin is estimated in the range of 14% to 15%.

It's relatively lower than Q1.

And Q1, the gross margin is pretty good and exceeding our guidance.

And for the Q2, it's basically because our new capacity is still in the construction stage and we will not have contributions to the profitability in the second quarter.

Second one is the total shipments increased quarter-by-quarter and as well as the shipment percentage is shifting very quickly to mono PERC shipments.

So if you look at -- calculate the in-house self-produced, mono PERC versus total shipments, it's a little bit lower in second quarter as well as PERC cell price is relatively higher throughout the second quarter.

So the blended gross margin is relatively lower quarter-by-quarter in the second quarter.

But I just said, I'm very optimistic second half year, and we have almost booked over 70% in the second half year, fixed price, international markets, anticipated strong China demand and the new capacity coming in.

Your next question is from Maheep from Crédit Suisse.

So just on CapEx, so you said it's $450 million of CapEx for the full year, it's in line with your prior comments.

But when looking at capacity structure, you said in the press release, you'll have 1 gigawatt of extra module capacity this year, so you increased it from 15 gigawatts to 16 gigawatts.

Is that part of the CapEx?

And also wanted to see if any bifacial capacity expansion is part of the CapEx as well?

Okay.

So in general, total CapEx, including everything, including wafer cell and module, in terms of allocating a key investment, allocating is the mono wafer and PERC cell.

For the module capacity, we increased from 10.8 gigawatts to 16 gigawatts, but the majority part, 80%, incremental part is from the increased output, it's not new capacity.

We just add very small scale, roughly 1.2 gigawatts new capacities for the module, the CapEx is very small.

But for the remaining part, roughly 4 gigawatts is throughout our upgrade equipment, increased output, decreasing bottleneck of production.

And for the bifacial capacity, in general, our existing PERC cell capacity and do the bifacial, and in cell, for some facilities, we just need to do a very small, small minor agreement -- minor upgrades to make sure the capacity can do the bifacial product.

So it's -- I think it's very, very small, you can ignore the CapEx.

Got it.

And then just on -- sticking on bifacial, so our understanding is that the exemption is only for bifacial cells and not monofacial cells with transparent backsheet.

Can you confirm if that's in line with your understanding?

And then also on bifacial, just wanted to understand what would be the incremental cost for a bifacial mono PERC solar module for the U.S. market?

So I think, for us, when we read all this descriptions across exemption files, we don't see any special things to rule out the transparent backsheet.

For sure, lawyers will be in a better position to confirm that.

And for us, our understanding is as long as the module can generate a power both from front side and rear side, it could be exempted from 201.

Got it.

So it's for your regular transparent backsheet monofacial cells you're saying, all right.

And then just in terms of cost, like, how much extra cost -- production cost do you anticipate for a transparent backsheet?

No.

It's -- no, of course, there are supposed to be additional production costs, but because of additional output, the bifacial product, we think it's mainstream, providing more benefits to our developers.

And one I can give you today is bifacial, one that we are promoting, bifacial transparent backsheets, is very competitive compared to the traditional bifacial double glass as well as because the module we are promoting is lighter and easy to install, so we think we can very easy to increase our penetration in bifacial in the U.S. market, given the favorable policy.

That is helpful.

And just regarding your order book.

Have you -- or apart from the 70% in the second half, are you seeing any [increased] orders for the next year for Q1 or for 2020?

You mean the order book for 2020?

Yes.

I think right now, I don't have exact figures, but we do have built up a pretty solid fundamental part of the order book in 2020.

I think, for sure, it depends on our shipment targets, but I think that several gigawatts order book has been built for sure.

(Operator Instructions) Your next question is from Brian from Goldman Sachs.

Couple of modeling ones for you, Charlie.

I guess first on the OpEx, up almost 30% year-on-year.

I know you mentioned the shipping charges and overseas demand, but just wondering how we should think about that line item as you move through the year, because it sounds like 2Q is also going to be pretty heavy non-China demand and then, based on your comments, it sounds like you really see a pickup in 4Q, even relative to 3Q.

So just generally speaking, how should we be thinking about the OpEx line given the pretty meaningful uptick year-on-year you saw here in Q1?

The operating expenses will continue to be in the 11% to 12% second quarter, because it's still significant international markets.

Looking for the Q3, Q4, given more shipments to China and as well as more total shipments, the percentage will be decreased a little bit quarter-by-quarter starting from Q3.

Okay.

So for 2Q, 11% to 12% is the way to think about it.

So you're running roughly 100 to 150 basis points higher on that metric year-on-year through the first half of the year?

Is that fair?

Yes.

Okay.

Second question, just on inventory.

I know there is anticipation of a big second half build here, that was also up 30% year-on-year and volume shipments for 2Q are being guided up only slightly sequentially.

So I guess, 2 questions related to that.

First, will inventory be up again in 2Q versus 1Q?

And then secondly, did the higher factory loading flow through to benefit gross margins this quarter?

In terms of inventory, in general, it's a -- will be stable quarter-over-quarter.

But because of international markets, we're shipping over 100 countries, like in the U.S. taking a bigger and bigger proportion.

And given the longer delivery time, particularly the shipping time, so if you look at the inventory, Q1 -- end of Q1 versus last year-end and it's increased a little bit, but will be very stable.

And we -- internally, we manage the inventory very carefully and we produce the inventories based on the front orders, so we don't see any risk.

Okay.

And just secondly on the inventory build, I would imagine it would have benefited the factory loading throughout the quarter, maybe that's not a benefit in 2Q, since the inventory is going to be stable, but can you give us some sense whether qualitatively or quantitatively, what kind of positive impact it had on your gross margins in the quarter?

You mean the second quarter or the second half year?

No, 1Q, you are at 16.6%, you are saying it's going to be 14% to 15% for 2Q and I know there is some mix issues and what-have-you, capacity ramp that you mentioned.

But again, I'm assuming that the better factory loading from the inventory build probably benefited you in 1Q?

Just trying to get a sense for what that might have been?

Yes.

Yes.

But in general, I think you need to think about from this perspective, is the ASP is very stable, both for the mono PERC high-efficient products as well as the multiproducts.

And starting from the production perspective and we have more capacity, when we have more capacity come out and we have more integrated products, mono wafer and the PERC cell produced by ourself, our blended cost will be dropped a lot, because we will rely on the external PERC cell lower and lower.

And so we can deliver very decent gross margin if we produce everything by ourself.

So I don't think the inventory will be a big lumping point for quarter and over quarter gross margin fluctuations.

Okay.

Fair enough, and then last one from me, I'll pass it on.

The -- I'm not sure if you can say anything new on this, but the Hanwha lawsuit, can you give us some update on where that stands and what your positioning is?

It's a very standard procedure.

But it's taking 1.5 year and we're taking the same positions and we think that Hanwha, the litigation for patent, they don't have a legal and technical basis and we defend the litigation claim very firmly.

Recently, if you look at the public news and we filed the application to challenge the Hanwha patent itself.

So we are very confident and we will continue to expand our market share in the U.S. market.

If for some unexpected reason, it sounds like from your end, this would be a surprise, but if for some unexpected reason, it did come back as an unfavorable ruling for you, do you have any mitigation plans that you're starting to contemplate?

It's a very common practice for any company who is facing the patent issues.

And we have -- basically have the plan B, but I cannot dig into the details.

(Operator Instructions) As there are no more questions in queue, I'd like to hand the call back to Ms. Zhang for closing remarks.

Please go ahead, Ms. Zhang.

On behalf of the entire JinkoSolar 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 and a good evening.

Thank you, and goodbye.

Thank you, Ms. Zhang.

Ladies and gentlemen, that does conclude our conference for today.

Thank you all for your participation.

You may all now disconnect.