On August 20, Financial Associated Press (Reporter Luo Yichen) reported that upstream photovoltaic equipment leader Zhejiang Jingsheng Mechanical & Electrical (300316.SZ) is gradually being impacted by the urgent need to reduce costs and increase efficiency in the context of intensified competition in the photovoltaic industry. Following slowed growth in 2023, the company's net income attributable to shareholders of the parent company began to decline in the second quarter of this year, with a year-on-year decrease of 22%.

Jingsheng Mechanical & Electrical announced tonight that it achieved a revenue of 10.147 billion yuan in the first half of the year, an increase of 20.71% year-on-year, and a net income attributable to shareholders of the parent company of 2.096 billion yuan, a decrease of 4.97% year-on-year. Corresponding to the decrease in profits, the company's cash flow is under obvious pressure. During the reporting period, its net cash outflow from operating activities decreased sharply by 71.83% year-on-year.

Previously, several brokerages predicted that Jingsheng Mechanical & Electrical's full-year revenue this year is expected to be around 22.799 billion yuan, with a year-on-year increase of approximately 26.78%, while its net income attributable to shareholders of the parent company is expected to reach around 5.7 billion yuan, with a year-on-year increase of approximately 25.91%.

From a quarterly perspective, the company's performance was still relatively acceptable at the beginning of the year, but it declined significantly in Q2. In the first quarter, the year-on-year growth rate of the company's revenue and net income attributable to shareholders of the parent company both exceeded 20%, and the overall performance was basically flat with Q4 of the previous year. However, in the second quarter, although the revenue scale increased by 17.29% year-on-year to reach 5.638 billion yuan, a significant increase from the 4.51 billion yuan in Q1, the net profit attributable to shareholders of the parent company declined to 1.027 billion yuan, which was less than the 1.07 billion yuan in Q1.

As for the reason for revenue growth without an increase in net income, the company did not give a clear explanation in its interim report, but mentioned that "since the fourth quarter of 2023, short-term supply and demand mismatches have intensified competition in the photovoltaic industry, and product prices in all sectors of the industry chain have fallen due to the unfavorable impacts of international trade." Jingsheng Mechanical & Electrical's performance trends are similar to changes in the photovoltaic industry's business climate. The company's overall performance has shown a season-by-season growth trend since 2020, with net profit attributable to shareholders of the parent company peaking in Q2 2023 and beginning a significant decline in Q4, which continues to Q2 of this year.

In order to find new growth engines, in addition to core business of photovoltaic equipment, the company has been focusing on semiconductor equipment as well as material businesses such as sapphires, silicon carbide, and diamond wire. In terms of actual results, the company's semiconductor equipment orders have reached a certain scale. Public data shows that as of the end of 2023, the company's outstanding equipment orders amounted to 28.258 billion yuan, of which outstanding orders for semiconductor equipment amounted to 3.274 billion yuan (including tax). However, considering that about 70% of the company's revenue comes from equipment, with photovoltaic equipment as the core, it is expected that the short-term performance will be difficult to be untangled from the overall downturn of the photovoltaic industry.