Tuesday, November 2, 2010

Jinko Solar (NYSE:JKS) Should Push its Way to Higher Earnings

JinkoSolar Holding (NYSE:JKS) looks like after its third-quarter report they have a strong chance of pressing their way into higher earnings, according to analysis from Auriga.

Auriga said, "Jinko Solar's (JKS, Buy) 3Q10 results above Consensus and our recently raised estimates show the continuing potential upside from big capacity additions and better than expected cost reductions. While we do see declining margins into 2011 as a necessity, we also believe Jinko Solar's approach is correct by increasing capacity ahead of price declines and continuing down the cost curve. We raise our 2011 EPS estimate to $5.05 from $4.60 and increase our target."

"Risk increases on potential ASP and poly swings. Large potential variability in module ASPs vs poly costs represents the biggest risk to the stock - both upside and downside. Management spoke of module ASPs trending with poly cost, but this is not assured. While we model both poly price and module ASP declines, we also recognize that the two are not inextricably linked. Our model assumes JKS' poly cost peaks at $72/kg in 1Q11 and declines to $55/kg in 4Q11."

JinkoSolar soared in Monday's trading after smokin' the quarter, with revenue soaring by 261 percent to $215 million, smashing the $153.3 million analysts were looking for. Gross profit outperformed as well, increasing from $9.3 million to $72 million.

Two things the company has going for it in a slowing market is the continual commitment to lower costs, while also being able to land deal for 2011 when most the rest of the industry will struggle.

JinkoSolar closed Monday at $35.14, gaining $4.99, or 16.55 percent. Auriga raised their price target on JinkoSolar from $37 to $40 a share.

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