Description of the event

On September 10, during the 2024 Taiyuan Energy Low Carbon Development Forum, the “2024 Global New Energy Enterprise Competitiveness Analysis” and “2024 Global Top 500 New Energy Enterprises” were released. LONGi Green Energy ranked 6th with continued deep development in the clean energy sector and was on the list for 10 consecutive years.

Incident reviews

Shipments were relatively steady, and declining prices in the industrial chain and inventory impairment affected Q2 performance. In the first half of 2024, the company achieved revenue of 38.53 billion yuan, or -40.4% year-on-year; realized net profit to mother of 5.24 billion yuan, or -157.1% year-on-year. Among them, Q2 achieved revenue of 20.86 billion yuan, or -42.6% year-on-year, and +18.0% month-on-month; realized net profit to mother of -2.89 billion yuan. Due to falling prices in the industrial chain, the company accrued asset depreciation of 2.97 billion in Q2 2024, which had a certain drag on performance. Competition in the industry has intensified. As a leading enterprise, the company actively adjusts the pace of production and marketing, and the shipment volume is relatively steady. In the first half of 2024, the company achieved 44.44 GW of silicon wafers (21.96 GW of external sales); 2.66 GW of external battery sales; and 31.34 GW of modules, with sales in the Asia-Pacific region increasing by 140%. The company's financial situation remains stable, and it has the ability to cross the cycle during the downturn in the industry. The net cash outflow from the company's operating activities in the first half of 2024 was 6.41 billion yuan, with a net outflow of 1.52 billion yuan in Q2, which narrowed from month to month. Furthermore, as of the end of June 2024, the company had cash capital of 54.48 billion yuan and a balance ratio of 59.2%, which is at a relatively low level in the industry.

Differential competition broke through, and BC modules shipped about 10GW in the first half of the year. Product efficiency, scenarioization, and differentiation are the keys to breaking the competition of homogenized supply in the industry. In the first half of 2024, the company shipped about 10GW of BC modules. In the first half of 2024, based on high-efficiency HPBC 2.0 battery technology, the company launched Hi-Mo 9, a double-sided component product for the centralized market. The mass production power of the module was as high as 660W, which is more than 30W higher than that of TopCon modules of the same specification. As of September 2, 2024, 1.6 GW of BC second-generation components have been ordered and are expected to be delivered in 2025; in terms of cost, the cost of HPBC 2.0 and TopCon is basically the same on the battery side. In terms of production capacity, the company's HPBC 2.0 products are expected to be launched on a large scale by the end of 2024. By the end of 2025, BC production capacity will reach 70 GW (of which HPBC 2.0 production capacity is about 50 GW), and all domestic battery bases plan to upgrade to BC products by the end of 2026.

Investment advice

The phased imbalance between supply and demand in the industry, irrational prices, and increases in asset impairment preparations have had a negative impact on the company's profits. In the context of current product prices and industry supply and demand, we lowered the company's profit forecast. The company's 2024-2026 EPS is -0.65\ 0.55\ 0.91, respectively, corresponding to the company's closing price of 13.32 yuan on September 19, and PE in 2024-2026 is -20.4\ 24.6\ 14.7, respectively, giving a “buy-B” rating.

Risk warning

Risk of policy changes; risk of increased industry competition; risk of price fluctuations of products and raw materials; new PV installations falling short of expectations; risk of technological change, etc.