- JinkoSolar Holding Co., Ltd. deserves a buy recommendation. This is contrary to the consensus hold ratings of SA authors and Seeking Alpha Quant AI.
- Jinko’s TTM revenue CAGR of more than 140% makes it a growth stock. The 3-year average revenue CAGR of Jinko is 35.31%.
- A non-GAAP Forward P/E of 16.05x makes JinkoSolar a growth-at-a-reasonable-price stock.
- The solar panel market is worth $78.5 billion and is growing at 25.6% CAGR.
- Low profit margins are worthy if they contribute to high double-digit revenue growth rate.
The high price of coal and oil is why the $78.5 billion solar panel market is growing fast. I suggest you should go long on JinkoSolar Holding Co., Ltd. (NYSE:JKS). My thesis for JKS is not congruent with the hold consensus ratings it received from Seeking Alpha authors and Seeking Alpha Quant AI. I maintain the non-GAAP forward P/E of 16.05x makes JKS a growth-at-a-reasonable-price (or GARP) stock.
The TTM revenue CAGR of JKS is 148.88% and its 3-year revenue CAGR is 35.31%. I checked, and JinkoSolar has no recent acquisition that could be responsible for this huge revenue jump. The chart below explains my buy thesis for JKS.
JinkoSolar Holding is growing faster than its solar power-centric peers. Its 5-year revenue CAGR of 22.46% is higher than SunPower’s (SPWR) 15.83% and First Solar’s (FSLR) 2.34%. JKS should be on the radar of GARP investors. Jinko’s 22.46% 5-year revenue CAGR is lower than the 25.26 CAGR of the solar panel industry. I expect it to eventually improve because of the high TTM 148.88% revenue CAGR. The forward 3-year CAGR estimate is now 38.61%.
Jinko reported impressive Q3 beats last October 28. The stock still lingers below $52. My fearless forecast is that Jinko will again beat Q4 estimates. The Christmas shopping season sales boost could also apply to solar panels. The November/December months are usually when employees/managers get their Christmas bonuses and 13th month pay.
Why JinkoSolar’s Annual Sales Are Soaring
The low-margins approach of Jinko is likely why it’s enjoying a revenue CAGR higher than 20%. Management is not afraid to run on 15.43% gross margin and 0.2% net income margin. Growth before profit is an effective way to outpace the competition. Selling low-cost solar panels increases the Jinko brand’s international appeal. A low-margin approach helps poor Filipinos like me build affordable residential solar energy installations.
JinkoSolar is a trusted brand here because of its affordable Photovoltaic panels. The solar setup that powers our ref, electric fans, and desktop PC I am authoring this article on, was built using 200-watt Jinko solar panels.
A global expansion is easier when customers in developing countries like the Philippines can buy sub-$100 Jinko 200-watt solar panels online. It is worth investing in JKS because online e-commerce sites like Lazada sells sub-$200 Jinko 560-watt Tiger Neo solar panels. The exchange rate is $1 = 57.26 Philippine pesos. My point is that Jinko as a growth stock is justified. It is selling cheap solar panels to attract more customers.
It is Jinko’s long-term tailwind that it caters to tightwads like me. The solar power-centric companies should stop their affluent-centric pricing. My fearless forecast is that JinkoSolar can make it big in the U.S. and Europe if it starts flooding those markets with sub-$200 560-watt Tiger Neo panels. The average per-watt cost of monocrystalline solar panels in the U.S. is $1 to $1.50. Compare this to Jinko’s offering to Filipinos, 4,500 pesos ($78.79) for a 200-watt panel. We get $0.393 per watt on Jinko solar panels.
Global Presence Plus Low Adoption of Solar
The low-margin approach is probably why Jinko has customers in 160 countries. The global presence is why I rate JinkoSolar as a buy. The future scenario is Jinko’s high revenue CAGR can only get higher when it starts deep penetration of the United States and Canada. Jinko has factories in the United States.
The net income margin of Jinko will probably stay below 2% for the next five years because of its low-margin international expansion. I maintain that high growth at the expense of margins is justified. Perhaps Jinko’s Eagle brand of high-quality panels and batteries for the American market would eventually boost the low profitability of JinkoSolar.
The screenshot below convinced me Jinko’s solar storage products look like they are large enough to be used in data centers, government agencies, and military/corporate environments.
Go long on JKS while it trades below $60.There’s still very low adoption of solar-sourced electricity. As of 2021, solar contributes less than 5% of global electricity. This fact is why JinkoSolar has high growth potential. Its low pricing approach to solar panels will eventually pay off. Bundling affordable solar panels with residential and industrial Energy Storage Systems or ESS batteries is going to be efficient, like selling cheap razors and higher-margin blades.
The low net margin and the global marketing/ad expenses toward promoting the Jinko brand are long-term headwinds. Do not expect JKS to start paying dividends within the next five years. The management’s willingness to sell 200-watt panels for less than $0.40 per watt pricing is not going to make the company notably profitable soon. I do not expect JKS to jump above $70 soon because of the less than 1% net income margin.
JinkoSolar’s profitability will eventually improve after it is done conquering the world through cheap solar panels. Six years ago, JKS enjoyed a net margin higher than 8%.
Piotroski F-score is my top metric when evaluating stocks. I am happy to report that JKS has an F-score of 5. It is fairly- valued and efficient. The screenshot below shows JKS has a higher F-score than SNPR, FSLR, and other solar-centric stocks.
The low-margin approach of JinkoSolar is appealing in developed and developing countries. This business tactic is likely why JKS enjoys a revenue CAGR higher than 20%. If you are one of those GARP investors, kindly consider adding JKS to your portfolio. Bear the long-term pain of very low net income and just enjoy the high double-digit revenue CAGR.
My expectation is that Jinko will eventually package its cheap solar panels with higher-margin products like solar charge controllers, enterprise-class long-term storage batteries, and hybrid inverters. Jinko has complete solutions/packages for residential, industrial, and solar power plants.
JinkoSolar is a China-based solar energy company. It is unlikely to get included in the U.S. list of banned Chinese companies. Cheap solar panels do not threaten the national security of America. JKS is a buy because JinkoSolar is freely operating sales offices and factories inside America.
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