① Among eight photovoltaic companies, the highest estimated loss of the mid-year report exceeded 1 billion yuan, of which Longi Green Energy's highest estimate of loss reached 5.5 billion yuan; ② The four links of the crystalline silicon industry chain are all showing losses, and the pressure on prices has led to a decrease in profitability. Provision for inventory impairment is an important reason for the losses; ③ Longi Green Energy believes that the price may stabilize or slightly increase in about three months. As capacity continues to clear, prices will return to manufacturing costs.
Caixin reported on July 10th that the mid-year performance forecast is being released in succession. The photovoltaic sector is at the bottom of the cycle, and head enterprises are generally turning losses compared to last year.
As of now, 8 photovoltaic companies have estimated losses of more than 1 billion yuan in the mid-year report, of which Longi Green Energy (601012.SH) has a maximum estimated loss of 5.5 billion yuan. The company's net profit was 9.178 billion yuan in the same period last year.
Many companies mentioned in the announcement that the continuous decline in product prices during the reporting period led to a decline in gross profit margins and a significant increase in inventory impairment caused by price reductions. Among them, Longi Green Energy expects to include inventory impairment of 4.5 billion yuan to 4.8 billion yuan, which is an important reason for its short-term profit pressure. TCL Zhonghuan (002129.SZ) stated in the announcement that in the second quarter of 2024, various industrial links are basically in a state of sales price and cost inversion, universal loss, and even cash cost loss, and its operating performance is under pressure.
In the first half of the year, the main industry chain of crystalline silicon generally lost money.
The photovoltaic crystalline silicon industry chain is roughly divided into four main links: polysilicon-silicon wafer-cell-module. From the disclosure of the performance forecast, almost none of the four links are spared: in the polysilicon link, Tongwei Co., Ltd. (600438.SH) expects to have a net loss of 3 billion yuan to 3.3 billion yuan in the first half of the year. Quarter by quarter, the company had a net loss of 787 million yuan in the first quarter, and the loss in the second quarter expanded. It is expected to have a net loss of 2.213 billion yuan to 2.513 billion yuan.
Silicon wafers are the "hard-hit areas" among the estimated losses for the first half of the year. TCL Zhonghuan expects to achieve a net profit attributable to its shareholders of -2.9 billion yuan to -3.2 billion yuan in the first half of the year. The "new forces" of silicon wafers that entered this expansion cycle have begun to undergo downward cycle tests: Shuangliang Eco-Energy Systems (600481.SH) expects a net loss of 1.03 billion yuan to 1.28 billion yuan in the first half of the year; Hoyuan Green Energy (603185.SH) expects a net loss of 0.8 billion yuan to 1.1 billion yuan in the first half of the year ; Beijing Jingyuntong Technology (601908.SH) expects a net loss of 0.756 billion yuan to 1.13 billion yuan in the first half of the year.
In the battery and module links, Shanghai Aiko Solar Energy (600732.SH) expects a net loss of 1.4 billion yuan to 2 billion yuan in the first half of the year; Longi Green Energy expects a net loss of 4.8 billion yuan to 5.5 billion yuan in the first half of the year.
In addition to the previously expected net loss of 800 million yuan to 1.2 billion yuan in the first half of the year for JA Solar Technology Co., Ltd. (002459.SZ), eight leading photovoltaic companies have already exceeded 1 billion yuan in the upper limit of estimated losses. Hainan Drinda New Energy Technology (002865.SZ) expects a net loss of 90 million yuan to 180 million yuan in the first half of the year; Eging Photovoltaic Technology Co., Ltd. (600537.SH) expects a net loss from 0.4 billion yuan to 0.6 billion yuan in the first half of the year; Mubang High-tech (603398.SH) expects a net loss of 152 million yuan to 187 million yuan, which turns to loss year-on-year.
Many companies mentioned that the impact of the imbalance between supply and demand in the industry and the intensified market competition have resulted in price pressure on products of the main industry chain, leading to a substantial decline in industry profitability. Hainan Drinda believes that the photovoltaic industry has entered a structural adjustment phase, and under the influence of the continuous expansion of the imbalance between supply and demand in the industry, market competition has further intensified, and the main industry chain product prices are under pressure, resulting in a significant decrease in industry profitability.
Longi Green Energy stated in its response to the exchange’s query that since the fourth quarter of 2023, tender offer prices for components have repeatedly hit new lows. The prices of mainstream products have fallen rapidly, and the decline has exceeded that of the industry's production cost, and signs of price deflation are obvious.
Hoyuan Green Energy also stated that under structural adjustments, market competition has further intensified, the main industry chain product prices are under pressure, and industry profitability has fallen significantly. The company's revenue has declined from the same period last year, and the gross profit margin of the main business products has decreased significantly. The provision for inventory impairment has increased significantly, resulting in negative net profit for the company.
Under the irrational competition of low prices, each segment of the photovoltaic industry has fallen below the breakeven point. As of late June, the prices of polysilicon dense materials and N-type G10L monocrystalline silicon wafers were 0.0346 million yuan/ton and 1.11 yuan/per wafer respectively, with a decrease of more than 30% compared to the beginning of the year. According to institutional calculations, under the current prices, most of the silicon wafers and solar cells are in a cash flow deficit state.
Currently, the "soul-searching" of the photovoltaic industry is how long can the "bleeding" state continue under the situation where price wars are no longer sustainable and operating cash flows are negative?
Top enterprises forecast that prices may stabilize or increase in three months.
The photovoltaic manufacturing industry has certain cyclical characteristics. How to get through the bottom of the cycle is the primary problem that many companies are currently facing. Previously, the person in charge of the top component factory said to the journalist of CaiLian News Agency that the bottoming out of profits indicates that the turning point is approaching, but this also indicates that real capacity clearance will gradually start in the second half of the year.
According to more conservative forecasts by institutions, due to the current significant oversupply of silicon wafers/solar cells and the relatively flat industry cost curve, the space for profit improvement is expected to be very limited until a considerable capacity scale clearance or "destructive" technological change occurs.
At present, the main segments of the crystalline silicon industry chain are still in the process of clearing inventory, and there is an expectation that the pressure on the supply side may ease. However, a significant rebound in product prices has not yet appeared. According to a report released by infolink in late June, domestic projects are still waiting to see, component prices are chaotic, and distributors continue to lower prices. The delivery prices of some mid-to-late stage manufacturers have fallen below RMB 0.8 per unit, and overall prices are still trending downwards.
The consensus in the industry is that the clearance of photovoltaic capacity is already "on the bowstring." Zhong Baoshen, the chairman of Longi Green Energy, said in an investor survey that looking just at the current industry situation, the current price is the bottom, and the entire industry has no ability to support further price declines in the short term.
As for when prices will rebound, Zhong Baoshen believes that given the current competitive situation, prices may stabilize or slightly rise in about three months. In the future, prices will return to the balance between cash costs and manufacturing costs. As capacity continues to clear, prices will return towards manufacturing costs.
Zhong Baoshen told investors that 2024 will be a very difficult year for the company and the industry. In 2025, Longi will be the first to return to the growth track, while the photovoltaic industry overall will still be struggling.
It is worth mentioning that while capacity clearance is accelerating, the expansion of the photovoltaic industry is also expected to be further guided. According to news from the Ministry of Industry and Information Technology, the Ministry of Industry and Information Technology has publicly solicited opinions on the "Normative conditions for the photovoltaic manufacturing industry (2024 version)" and the "Regulations for the management of announcements on normative conditions for the photovoltaic manufacturing industry (2024 version)" (draft for soliciting opinions), which aims to guide photovoltaic companies to reduce the number of photovoltaic manufacturing projects that simply expand production capacity.
Compared with the previous version, for newly-built and expanded photovoltaic manufacturing projects except for polysilicon, the minimum proportion of capital contribution has also been raised from 20% to 30%. Industry analysts believe that under the current severe supply and demand situation in the photovoltaic industry, strengthening supply-side regulation is a key measure to accelerate the restoration of supply and demand balance.