Is JinkoSolar's Rebound For Real?

On Friday, JinkoSolar (JKS -0.14%) will release its latest quarterly results. Given the sad state of the Chinese solar industry, JinkoSolar has a long way to go before it can demonstrate its ability to survive what's becoming a major shakeout among China's best-known solar companies.

JinkoSolar hasn't been profitable for a long time, and it doesn't look like it will become profitable anytime soon. But investors apparently hope that if it can get through the inevitable consolidation among China's solar players, then a better pricing environment will help it reach profitability soon enough to save it from ruin. Let's take an early look at what's been happening with JinkoSolar over the past quarter and what we're likely to see in its quarterly report.

Stats on JinkoSolar

Source: Yahoo! Finance.

How can JinkoSolar keep a lid on its losses this quarter?
Analysts have severely slashed their views of JinkoSolar's earnings prospects, more than doubling their loss estimates for the March quarter and widening their full-year 2013 loss estimates by more than $3 per share. Yet the stock has regained all the ground it lost during the month of March and then some, actually rising 6% since the end of February.

Perhaps the most surprising thing about JinkoSolar's performance is how it came in the face of a devastating miss in its previous quarter's results. The company missed revenue estimates by almost 25% and suffered a loss more than half again what investors had expected. Yet the stock actually gained on the news, due largely to guidance that JinkoSolar would ship 270 to 300 megawatts in modules during the March quarter.

More recently, investors have started to get more optimistic about the entire Chinese solar industry. A couple weeks ago, JA Solar (NASDAQ: JASO) saw its stock rise 65% after reporting a narrower than expected loss and successfully paying off convertible notes in full, managing to avoid the default issues that have hurt Suntech Power and LDK Solar (NYSE: LDK).

The problem for JinkoSolar is that it appears that Chinese banks are looking to keep most of its competitors afloat as well. With LDK getting a $58 million loan agreement with the China Development Bank to build new projects and Yingli Green Energy (NYSE: YGE) finding $165 million in loan funding, JinkoSolar's relatively debt-free balance sheet might not hold up long enough to outlast its peers. JinkoSolar's best bet might be to have those rivals go bankrupt, in the hopes of picking up their assets at fire-sale prices.

The other threat against JinkoSolar is that Europe recently imposed tariffs on Chinese solar panels. Although the current rates are lower than JinkoSolar and its peers had feared, there's no guarantee they won't rise if a resolution to the trade dispute isn't reached soon. Tariffs give U.S. giant First Solar (FSLR -2.09%) and other non-Chinese producers a competitive advantage that JinkoSolar can ill-afford to give them.

In JinkoSolar's report, watch for news on how the company plans to manage its near-term cash flow. With such large losses, it's critical for JinkoSolar to have financing in place to avoid the problems its Chinese rivals have had to deal with.

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