① Mubang Hi-Tech revealed last month that it plans to invest in a 7 billion yuan photovoltaic project in Tongling. Recently, it was also proposed that no specific funding arrangements have been clarified, and there is a risk of postponement, change, suspension or termination. ② The company has twice terminated the project after reaching a framework agreement with the local government. Continued termination will have a negative impact. ③ As a cross-border entrant, the company will undoubtedly face a major test this year when overcapacity in photovoltaic production has not been mitigated.
Finance Association, Feb. 22 (Reporter Wu Chao) Mubang Hi-Tech (603398.SH), which started with educational toys, has once again become the focus of market attention after entering the photovoltaic industry in recent years. However, its large-scale photovoltaic project is facing financial difficulties. After it was revealed last month that it would invest 7 billion yuan in Tongling City, Anhui Province, the company also recently proposed that the specific funding arrangements have not been clarified, and there is great uncertainty about whether it can proceed smoothly.
A CFA reporter noticed that Mubang Hi-Tech had already reached framework agreements with local governments twice before, and then terminated the project, respectively in Anyi County, Nanchang City, Jiangxi Province, and Echeng District, Ezhou City, Hubei Province. Industry insiders told reporters that if cooperation with local governments is terminated continuously, it may have a negative impact on the company's reputation image, resource costs, and investor confidence.
After experiencing a year of transformation last year, Mubang Hi-Tech's PV business already accounts for 90% of the main revenue. Although losses have been reversed, the net interest rate is low, and in order to raise capital, the company's balance ratio has reached more than 80%. Even in the asset-heavy photovoltaic industry, it is in a very high position. With the overcapacity still unmitigated in 2024, the company is undoubtedly facing a major test.
PV investment is full of ups and downs
Mubang Hi-Tech first disclosed the Tongling project on January 15 this year, stating that it has signed a “Project Investment Agreement” with the Tongling Shizishan High-tech Industrial Development Zone Management Committee and Tongling Hi-Tech Development Investment Co., Ltd. to build a production base project with an annual output of 10GW-N high-efficiency batteries and 10GW slices, with a total planned investment of about 7 billion yuan. The Tongling project is divided into two phases, with an estimated investment of 3.5 billion yuan for the first phase.
It is worth mentioning that the agreement puts forward clear requirements for the construction progress, investment intensity, and operating indicators of the project. Among them, in the first operating year after the first phase of the project is put into operation, the project sales revenue must reach no less than 1.5 billion yuan, with tax revenue of not less than 100 million yuan; the sales revenue for the second operating year should not be less than 2.5 billion yuan, and the tax revenue should not be less than 150 million yuan; and the third operating year should not be less than 4 billion yuan, and tax revenue should not be less than 250 million yuan.
At the time, the company stated in an announcement that the company's monetary fund balance at the end of the third quarter of 2023 was 168 million yuan (unaudited). Although the local government has promised to provide some financial support and related subsidies, it is still necessary to resolve financial issues through bank financing or other methods.
However, for companies that invest in photovoltaics across borders, it is common for the agreed investment amount to be much higher than the book monetary capital level, and most of them will also be solved through self-financing or other methods. Surprisingly, after only a month, the company issued another announcement alerting the risk. It can be seen that it has indeed experienced quite a few financial difficulties.
Recently, Mubang Hi-Tech issued an announcement stating that the investment amount for the company's annual production of 5GW-N high-efficiency batteries and the 5GW chip production base project (Phase I) project is far higher than the company's book monetary capital level. Currently, the company has not clarified specific funding arrangements. There is a risk that the implementation of this project will be postponed, changed, suspended or terminated due to changes in implementation conditions such as relevant national or local policies, EIA, project approval, financing environment, etc., and there is great uncertainty about whether it can proceed smoothly.
In fact, Mubang Hi-Tech's path of “chasing the light” was not smooth; the company had already reached a framework agreement with the local government twice before and then terminated the agreement.
In June 2022, Mubang Hi-Tech signed an “Investment Strategic Cooperation Framework Agreement” with the Anyi County People's Government to build an 8GW TopCon photovoltaic cell production project. After just two months, the framework agreement came to an end. Mubang Hi-Tech explained in this regard that the two sides had full communication and exchanges on the promotion of the project, but no specific cooperation agreement was reached.
In August 2022, Mubang Hi-Tech quickly revealed another agreement: it signed a “Strategic Cooperation Framework Agreement” with the Echeng District People's Government to build a 10GW TopCon photovoltaic cell production base project, with an estimated investment scale of 4.8 billion yuan. However, the Echeng project also ushered in the same fate: Mubang Hi-Tech said that after the agreement was signed, the two sides had full communication and exchanges on the promotion of the project, and no specific cooperation agreement was reached. After negotiations, the company decided to terminate the agreement signed with the Echeng District People's Government.
Mubang Hi-Tech also has another photovoltaic project jointly built with the local government. In July 2022, a plan was signed with the Wuzhou Municipal Government to invest in a 10GW TopCon photovoltaic cell production base, with a total planned investment of 5.2 billion yuan. Currently, the plant construction has basically been completed.
Continuous “variables” or damage to reputation or resource depletion
Regarding the risks of the Tongling project proposed by Mubang Hi-Tech, environmental protection and utilities analyst Xu Jie told the Financial Federation: First, photovoltaic projects usually require a large initial investment, and the payback period is long. If Mubang Hi-Tech's financial situation cannot meet the needs of the project, or if the company believes that the current return on investment is insufficient to support the continuation of the project, then suspending the project may be a rational choice.
Second, the PV industry's policy environment may also have an impact on projects. Due to the rapid expansion of PV production capacity in recent years, the government's support policy may change. If the profitability of the Tongling project is heavily dependent on government support and there are adverse changes in the policy environment, then the viability of the project will be questioned.
Furthermore, market competition is also a factor that cannot be ignored. The photovoltaic industry has become increasingly competitive in recent years, with many new entrants, leading to problems such as overcapacity and price wars. If Mubang Hi-Tech believes that the Tongling project does not have an advantage in market competition, or that it cannot obtain sufficient market share to support the project's profits, then suspending the project may become a strategy to avoid greater losses.
Judging from Mubang Hi-Tech's investment trajectory, the high-efficiency battery route it chose was mainly TopCon. A CIFA reporter noticed that as we enter 2024, the price competition in the PV industry chain is still extremely fierce. In particular, the average transaction price of N-type Topcon modules officially fell below 1 yuan/W.
According to reports, at the end of January, China Resources Electric Power opened the tender for 1.5GW photovoltaic module collection. The lowest price for TopCon single-crystal double-sided dual-glass photovoltaic modules in the bid was 0.85 yuan/W, and the average price was 0.904 yuan/W respectively. Compared with the opening bid price of CNNC's 8GW module in mid-January, the lowest price for N-type modules is 0.858 yuan/W, the highest price is 0.9755 yuan/W, and the average price is 0.917 yuan/W. With the opening of the tender, both the lowest and average component prices have declined.
Currently, the penetration rate of the TopCon route in the photovoltaic industry is increasing, but competition is also intensifying. Established and powerful companies such as Jingke Energy, Zhonglai, Tianhe Solar, Jingao Technology, and Tongwei Co., Ltd. are all speeding up the construction of TopCon production capacity. New players such as Junda Co., Ltd., Yijing Optoelectronics, and Lingda Co., Ltd. are also making strides in the field of TopCon technology and are starting TopCon production capacity planning and construction.
However, with regard to the possible “variable” impact of the Tongling project, market analyst Tao Ze told the Financial Federation reporter that the continuous termination of cooperation may damage the company's reputation and image to a certain extent. The conclusion and termination of the cooperation agreement involves the trust and commitment of both parties, and frequent changes may cause outsiders to question the stability and reliability of the company. This may affect the company's future partner choices and competitiveness in the market.
On the other hand, every time an agreement is reached with the local government, the company may need to invest certain resources (such as human, material, and financial resources) to carry out preliminary preparation and implementation work. If the partnership ends, these resources may be wasted, while increasing the company's costs. Frequent termination and initiation of partnerships may cause the company to face greater challenges in managing resources and controlling costs.
Furthermore, cooperation with local governments often involves the company's business development and strategic planning. Continued cancellation of cooperation may block the company's business development plans, and even require the strategic plan to be readjusted. “Therefore, when companies cooperate with local governments or other partners in the future, they need to more carefully assess the risks and viability of cooperation to ensure the stability and long-term nature of cooperation.” Tao Ze said.
Increased competition requires flexible response
According to public information, Mubang Hi-Tech started as a toy product manufacturer and entered the photovoltaic industry by acquiring Haoan Energy, whose main business is monocrystalline silicon rods, monocrystalline silicon wafers and other products in 2022. To this end, the company also “found” the “big players” in the industry. In September 2022, Mubang Hi-Tech announced the appointment of Guo Junhua as the company's general manager, who previously held positions such as Chief Operating Officer of Jingke Energy.
Meanwhile, the company has also made some progress in the photovoltaic industry. In particular, 2023 is regarded by Mubang Hi-Tech as the year of transformation of its main business. The semi-annual report shows that business revenue such as silicon wafers and silicon rods account for about 70% of the company's main business revenue. The annual performance forecast shows that the company's photovoltaic business accounts for more than 90% of revenue.
According to Mubang Hi-Tech's forecast, net profit attributable to 2023 will be between 30 million yuan and 40 million yuan, reversing losses from the previous year. However, net profit attributable to the same period last year was a loss of 229 million yuan. The company said that the main reason for the profit from operating performance is the increase in Haoan Energy's operating income and the increase in net profit.
However, apart from Haoan Energy, Mubang Hi-Tech's other photovoltaic projects may not perform well. According to the 2023 semi-annual report, Guangxi Mubang, the subsidiary responsible for the Wuzhou project, has yet to achieve revenue, with net profit of -25.6868 million yuan. Meanwhile, Bangbao Yizhi and Jiangxi Bangbao's net profit was -26.22,900 yuan and -114.1889 million yuan, respectively. The only profitable photovoltaic subsidiary is Haoan Energy.
In the new round of competition to clear production capacity, all links in the photovoltaic industry chain face the risk of declining profits in the short term. In particular, the uncertainty faced by crossovers has suddenly increased. Judging from the cross-border corporate performance reports released so far, with the exception of Mingpai Jewelry and Fengfan Co., Ltd. and Mubang Hi-Tech, which have made profits, all other companies have lost money to varying degrees. Although Mubang Hi-Tech expects to achieve a net profit of 30 million yuan to 40 million yuan in 2023, it is still worth nothing in the face of a total investment plan of up to 10 billion yuan.
In 2024, the PV industry will be more competitive. Industry insiders believe that the overcapacity situation has not been mitigated in 2024, and with the implementation of production capacity by various enterprises, N-type production capacity will also enter the overcapacity stage. This year, it is likely that companies will need to lower their profit levels in exchange for the market, and competition among enterprises will intensify. Faced with the new market situation, some cross-border companies have chosen to stop losses in a timely manner. For example, Sunflower recently decided to terminate the TopCon battery product project and cancel the project company.
Xu Jie believes that in the current context of the rapid expansion of production capacity in the photovoltaic industry, Mubang Hi-Tech should formulate a reasonable production expansion plan based on its own actual situation and market needs to avoid overcapacity and financial pressure caused by blindly following the trend. At present, the company has relied on milliamp energy to form a certain scale in silicon wafers, silicon rods, etc., and is investing in the Wuzhou project. It can pay more attention to optimizing and improving existing production capacity, integrating internal resources, and improving profitability.
Currently, Mubang Hi-Tech has indeed made certain adjustments in strategy. On February 21, the company announced that an initial fixed increase in capital raising has been completed. The total amount of capital raised by issuing shares to specific targets is no more than 1.706 billion yuan. After deducting the issuance fee, all of the capital raised in this offering is intended to be used for the following projects: the acquisition of 100% equity in Haoan Energy and the 10,000 tons/year intelligent silicon purification and recycling project to supplement working capital. After the news was released, the company's stock price rose and stopped on February 22.