20200312-博力达思-NEW_EVIDENCE_THAT_JKS_IS_A_FRAUD_20页_3mb

JinkoSolar Summary: Fraud Allegations and Key Findings

Core Content

This report presents new evidence suggesting that JinkoSolar, Inc. (NYSE: JKS) is a fraud, with fabricated financial statements and undisclosed related party transactions. The report highlights inconsistencies in financial disclosures, the secretive transfer of assets to Chairman Li, and the lack of credibility in JKS's response to the allegations.

Main Points and Key Information

1. 4Q'19 Financial Results Flip-Flop

• Initial Guidance (November 19, 2019): JKS expected lower ASPs, lower costs, and higher gross margins for Q4'19.
• Revised Guidance (March 6, 2020): JKS announced higher ASPs and higher costs, resulting in lower gross margins.
• Contradiction: The significant change in guidance occurred shortly after the publication of the report, raising concerns about the credibility of the revised figures.
• Claim: The report suggests that the revised guidance may have been fabricated to discredit the findings.

2. Zhejiang Leasing Secretly Sold to Chairman Li

• Transaction Details: In November 2016, JKS sold Zhejiang Leasing at a loss for RMB 183 million (USD 26.4 million).
• Collection Status (as of FYE'18): Only 8% of the agreed consideration (USD 2 million) was collected.
• Name Change (2018): Zhejiang Leasing changed its name to JinRi Leasing, which is now associated with Chairman Li.
• Location Evidence: JinRi Leasing is located within the JKS manufacturing facility, suggesting it is under Chairman Li's control.
• Email Address Overlap: JinRi Leasing and other entities use JinkoPower and JinkoSolar email addresses, indicating possible ties to JKS.

3. Yanshan Power Sold to Chairman Li Two Months After Acquisition

• Acquisition (August 2016): JKS acquired a 57MW PV power project in Shangrao, Jiangxi from Uniex for RMB 72 million.
• Sale (October 2016): The project was sold back to Chairman Li.
• Shared Email Addresses: Entities involved in the transaction use JinkoSolar email addresses, suggesting a connection to JKS.
• Common Registered Address: Many of these companies share the same address in Shangrao, indicating possible coordination.

4. Weak Response from JKS

• Lack of Substantive Evidence: JKS failed to provide any new evidence to refute the allegations.
• Repetition of Old Statements: The response relied on previously disclosed information without addressing the new evidence.
• Unsubstantiated Claims: JKS claimed that the discrepancy in Australian sales was due to a change in sales recording methods, but the report suggests otherwise.
• Unexplained Valuation Discrepancy: JKS claimed that JinkoPower was sold at a fair price, but the report shows a significant discount compared to a later valuation.

5. Xinruixin Controlled by Chairman Li's Brother

• Claim by JKS: Li Xianhua has no affiliation with Xinruixin.
• Evidence Contradicts: Chinese filings show that Li Xianhua and Chairman Li's brother benefited from controlling Xinruixin via Xinruixin Wire.
• Valuation Discrepancy: Xinruixin received a valuation of RMB 3.2 billion (USD 455 million) from JKS, but later received a higher valuation of USD 788 million from a different firm.

Summary of Allegations

• Fabricated Financial Statements: JKS is accused of falsifying 4Q'19 financial results.
• Undisclosed Related Party Transactions: Assets like Zhejiang Leasing and Yanshan Power were secretly sold to Chairman Li.
• Misleading Valuation: JinkoPower was sold at a significant discount, and Xinruixin is controlled by Li Xianhua.
• Weak Corporate Governance: The report criticizes JKS's independent directors for failing to detect fraud, citing previous failures with Hexindai.

Conclusion

The report concludes that JKS is a fraud, with fabricated financial statements and undisclosed transactions siphoning value from the company to Chairman Li. The lack of a credible response from JKS further supports these allegations. Investors are advised to be cautious and not rely on JKS's disclosures.