Solar Giant Jinko Falls as Plant Spending Outweighs Profit Surge

(Bloomberg) -- Jinko Solar Co., one of the world’s largest panel producers, fell as much as 12% after outlining plans to raise 9.7 billion yuan ($1.3 billion) for a manufacturing facility, underlining the sector’s ongoing need for major investments in new plants. 

A proposed share placement by the firm’s Jiangxi Jinko unit equates to about 8% of the parent company’s market capitalization, according to BOCI Research Ltd. analyst Tony Fei. Proceeds will be used on activities including the construction of a facility in Shanxi, Jinko said in a statement.

The plunge in Tuesday trading comes even after Jinko reported first-half profit surged 325% as lower raw materials costs helped the sector to cut prices and spurred demand. Jinko’s Shanghai-listed shares traded 12% lower as of 11:20 a.m. local time, the largest intraday decline on record. 

Solar manufacturers have seen their value fall in the past 12 months despite booming demand for panels. Investors have raised questions about competition in the industry and over the frequent need to fund plant projects to expand capacity or improve technology.

Jinko’s Monday fund-raising announcement followed a separate 10 billion yuan convertible bond issuance completed earlier this year. The total 19.7 billion yuan equity financing plan against a market capitalization of about 110 billion yuan caused investors to push back, said Dennis Ip, an analyst with Daiwa Capital Markets.

“It’s expected to create huge share dilution for the company going forward,” Ip said by email.

The Bloomberg Intelligence Global Solar Theme Peers Index, which includes Jinko and key competitors like Longi Green Energy Technology Co. and Trina Solar Co., has declined 19% this year. 

Jinko is expanding its manufacturing footprint and aims to have more than 12 gigawatts of solar wafer, cell, and module production capacity in Southeast Asia by the end of 2023, the company said Monday in an earnings statement. The firm also plans to build a factory in Florida capable of producing about 1 gigawatt a year of advanced panels.

The strategy is aimed at meeting demand and also designed to navigate trade barriers for China’s producers, including in the US. 

Sales reached 31 gigawatts of solar modules in the first half, with more than 60% sold outside of China. The producer forecasts full-year shipments of as much as 75 gigawatts, and flagged expectations that sales across the industry are likely to rise through the rest of the year. 

“Major projects were initiated and started construction in China. The low prices of modules also led to a surge in module demand in some overseas markets,” Chairman and Chief Executive Officer Xiande Li said in a statement. 

Net income jumped to 3.84 billion yuan in the six months to June 30 from 905 million yuan in the same period a year earlier.

(Updates from first paragraph with shares declining.)

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