Business context and reporting period
JinkoSolar Holding Co., Ltd. filed an audited annual report on Form 20-F for the fiscal year ended December 31, 2022. This is a full-year filing, not a standalone 2022 fourth-quarter report. The Cayman Islands holding company conducts most operations through China-based subsidiaries; it owned approximately 58.62% of its principal operating subsidiary, Jiangxi Jinko, after that subsidiary’s January 2022 STAR Market listing. Financial statements are prepared under U.S. GAAP and reported in RMB; U.S. dollar conversions are for convenience.
The company manufactures solar wafers, cells and modules, with modules its principal product. At year-end, reported annual capacity was approximately 65 GW of mono wafers, 55 GW of cells and 70 GW of modules. Module shipments were 44.3 GW, up from 22.2 GW in 2021.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | RMB83.13bn | RMB40.83bn |
| Gross profit / margin | RMB12.28bn / 14.8% | RMB6.66bn / 16.3% |
| Operating income / margin | RMB429m / 0.5% | RMB1.10bn / 2.7% |
| Net income, consolidated | RMB1.57bn | RMB956m |
| Net income attributable to JinkoSolar shareholders | RMB621m | RMB721m |
| Cash flow from operating activities | $(RMB)5.80bn | RMB431m |
| Capital expenditures | RMB12.29bn | RMB8.69bn |
Module sales generated 96.5% of 2022 revenue. The company reported year-end cash and cash equivalents of RMB10.24bn, restricted cash of RMB1.03bn and working capital of RMB3.39bn. Available credit facilities were RMB59.82bn, with RMB32.68bn drawn and RMB27.13bn available.
At December 31, 2022, short-term borrowings, including current portions of long-term borrowings and failed sale-leaseback financing, were RMB12.42bn; long-term borrowings were RMB13.02bn. Convertible senior notes had a carrying value of RMB1.07bn, with US$69.3m principal outstanding. The filing reports total liabilities of RMB81.66bn and shareholders’ equity, including non-controlling interests, of RMB27.00bn.
Material changes versus 2021
- Revenue more than doubled, up 103.6%, primarily as module shipments nearly doubled. Module revenue rose 112.6% to RMB80.22bn.
- Gross profit increased 84.4%, but gross margin fell 1.5 percentage points to 14.8%, which management attributed mainly to higher module material costs.
- Operating expenses rose 113.3% to RMB11.85bn, including higher freight, asset impairment and share-based compensation. Operating income fell 61.1%.
- Consolidated net income rose, but income attributable to JinkoSolar shareholders declined to RMB621m from RMB721m. The filing attributes RMB945m of 2022 net income to non-controlling interests, reflecting in part the less-than-wholly-owned Jiangxi Jinko structure.
- Operating cash flow swung to an outflow of RMB5.80bn. Management identified growth in receivables, inventories and supplier advances as significant working-capital uses.
- Non-recurring, unconditional government subsidy income rose to RMB1.09bn from RMB466m. A RMB1.03bn foreign-exchange gain also supported 2022 results, compared with a RMB356m loss in 2021.
Outlook, risks and unusual items
Management said year-end cash, expected operating cash generation and available borrowing capacity should cover working capital and capital expenditure needs for at least 12 months from the filing’s financial-statement issuance date. The company expected year-end 2023 capacity of 75 GW for mono wafers, 75 GW for cells and 90 GW for modules. It reported that 60% of expected full-year 2023 module shipments were secured as of March 31, 2023. These are management expectations, not a guarantee of results.
Capital commitments were RMB13.59bn at year-end, including RMB6.36bn due in 2023. Management also cited volatile polysilicon costs, supplier concentration, customer credit and collection risk, module price pressure, and power and logistics disruptions. Inventory write-downs were RMB1.82bn in 2022; supplier advances were RMB3.58bn, and the five largest supplier groups accounted for 77.4% of silicon purchases by value, with the largest accounting for 34.0%.
Trade and supply-chain exposure is significant: the company reported that U.S. shipments were detained from time to time under forced-labor import enforcement, although some shipments were progressively released. Direct U.S. sales fell to 4.5% of revenue from 15.7% in 2021. U.S. trade duties and pending reviews, including an inquiry into possible circumvention through Southeast Asian manufacturing, create further uncertainty.
A customer arbitration in India seeks US$392m in damages; JinkoSolar disputes the claims and says it cannot estimate a reasonably possible loss. The filing did not consider a liability probable at the financial-statement date. Other disclosed proceedings include Singapore and Spanish customer arbitrations and patent litigation in Germany and Australia; outcomes or potential losses are uncertain. In the U.S. patent matter, the appellate court affirmed that the challenged products did not infringe the asserted patent, and the related district court case was dismissed.
Additional investor risks include PRC regulatory and legal uncertainty, restrictions on moving cash from China, dividend limitations, foreign-exchange movements, substantial debt, and possible future U.S. trading restrictions if PCAOB inspection access is again lost. The PCAOB reported full inspection access in December 2022; the company said it did not expect to be identified under the HFCAA after filing this report. The company paid no dividends and said it had no present plan to do so in the foreseeable future. The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Most important facts an investor should verify
- Whether module shipment growth can support margins despite higher material costs, freight, inventory provisions and competitive pricing.
- Whether working-capital needs and negative operating cash flow improve, and how the company funds RMB13.59bn of commitments while servicing debt.
- The status and potential financial impact of the US$392m Indian arbitration and other customer or patent disputes.
- Whether U.S. import detentions, trade duties, supply-chain rules and pending trade reviews affect access to key markets.
- How much of reported profit and cash generation is repeatable without the 2022 subsidy income and foreign-exchange gain.
- Whether PRC rules, subsidiary dividend capacity and foreign-exchange controls constrain cash transfers to the Cayman holding company.