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Recently, two successive announcements have confirmed the success of Lingda shares (300125. SZ) PV business losses. Following the temporary suspension of production by the subsidiary, the Tongling project was terminated, and the project cooperation agreement was signed less than a year ago.
Driven by the high prosperity of the photovoltaic industry, the rise of cross-border boom, entering the photovoltaic industry has become the best choice to raise stock prices and improve performance, and listed companies in many fields have set foot in the photovoltaic circle. However, the large number of players flocking to the market has led to the increasing overcapacity.
When the industry knockout tournament started, some cross-border players were the first to fall. Since the second half of 2023, a number of cross-border enterprises have announced the termination of investment in photovoltaic projects, involving an amount of about 38 billion yuan. Among them, the cross-border photovoltaic projects terminated in Anhui, a major photovoltaic province, reached 27 billion yuan. The reason for this is the lack of capital and technical support for cross-border enterprises.
When exiting the photovoltaic industry, which has invested heavily in the layout, many companies have also sold related assets. In the opinion of analysts, if the industry involution intensifies, overcapacity continues, or will intensify the industry's mergers and acquisitions.
27 billion cross-border projects in Anhui Province were stopped
Under the horn of "double carbon", photovoltaic rushed to the wind. The boom of cross-border photovoltaic of listed companies began around 2021, when the demand for photovoltaic industry grew strongly, the profit was quite profitable, and it was favored by capital.
According to statistics, in 2022, more than 70 listed companies announced cross-border entry into the photovoltaic industry. In 2023, although the cross-border "light chasing" army has decreased, it will still be in an endless stream.
However, companies are pouring into the PV industry one after another, and overcapacity is becoming increasingly serious. According to media reports, by the end of 2023, preliminary statistics have been made on the production capacity of each link, with more than 1.88 million tons of polysilicon, more than 892GW of silicon wafers, more than 844GW of cells, and more than 861GW of modules.
Under the imbalance between supply and demand, the industrial knockout competition has intensified, and cross-border enterprises have borne the brunt.
Since the second half of 2023, including Lingda Co., Ltd., Haiyuan Composite Materials (002529. SZ), sunflower (300111. SZ), Mubang Hi-Tech (603398. SH) and many other cross-border enterprises have stopped related projects. According to incomplete statistics, since the second half of 2023, 9 cross-border PV projects and financing have announced the termination or transfer of equity, involving a production capacity of about 89GW and a total investment of about 38 billion yuan.
Titanium media APP found that many of the investment sites of photovoltaic projects that died were located in Anhui. According to the data, Anhui Province is one of the earliest provinces in the country to attach importance to and develop the photovoltaic industry. Relying on the advantages of quartz sand resources and the advantages of convenient location for export, Anhui has cultivated the advantages of the industrial chain such as photovoltaic glass, cells, modules, and inverters. Among them, Hefei and Chuzhou have become the main agglomeration areas of photovoltaic enterprises. Photovoltaic enterprises that invest in Anhui enjoy the convenience brought by industrial agglomeration, suitable business environment, and government policy support.
According to the photovoltaic industry network, according to rough statistics, in 2023, a total of 30 projects will be signed in the silicon wafer, cell and module links of the photovoltaic industry chain in Anhui Province, with a contract amount of more than 170 billion yuan and a scale of more than 300GW, 16 projects will be started, and 29 projects will be put into production.
According to this estimate, the total investment of PV projects invested by cross-border enterprises in Anhui has exceeded 27 billion yuan, accounting for about 16% of the contract value, and the production capacity is about 63GW, accounting for 21% of the contract scale.
Capital and technology have become cross-border obstacles
In fact, the footprints of photovoltaic cross-border players are all over toys, dairy products, waste heat power generation, composite materials, coal and other fields. Behind the cross-border of many listed companies is the reality that the main business is in deep trouble. Therefore, accelerating the promotion of the second growth curve has become a new choice for many enterprises to save themselves.
In 2022, the company entered the photovoltaic industry through the acquisition of 100% equity of Haoan Energy, and the leading buffalo milk company, Royal Group (002329. SZ) also began to deploy photovoltaic in 2022 after continuous losses in its main business, and Aowei Communication (002231.SZ), which is in the communication equipment manufacturing industry, lost money three times in the five years from 2018 to 2022 and entered the photovoltaic business in early 2023.
According to industry insiders, compared with leading enterprises aiming at the vertical integration of the industrial chain, cross-border enterprises prefer cells and modules with lower entry barriers, higher valuations, and faster implementation. Cell and module projects do not even need to go through the municipal government, and the county-level NDRC can approve the project, which has a low investment threshold but is also difficult to control the scale of development. According to the combing, since the second half of 2023, the cross-border enterprises that have terminated the project have basically concentrated in the links of cells and modules 002769. SZ) is one of the few cross-border enterprises that have entered the downstream power station link.
The high cost of capital invested in photovoltaic manufacturing is one of the important reasons for the failure of cross-border enterprises.
It is true that the large investment of many cross-border enterprises cannot hide the constraints on the books. On March 18, Haiyuan Composite Materials terminated the project cooperation with the People's Government of Quanjiao County, Chuzhou City. It is reported that Haiyuan Composites, with its wholly-owned subsidiary Chuzhou Energy as the main body, has invested in 15GW N-type high-efficiency photovoltaic cells and 3GW high-efficiency photovoltaic module projects in Quanjiao County, with a total investment of about 8 billion yuan. Haiyuan Composite Materials said that the photovoltaic industry and market environment have undergone great changes in the process of promotion, and the termination of the project is to reduce investment risks and management costs and optimize resource allocation. In fact, this investment is under a lot of pressure for Haiyuan Composites. As of the end of the third quarter of 2023, the book money of Haiyuan Composite Materials is only 39.28 million yuan, and the total assets are only 1.287 billion yuan.
Mubang Hi-Tech fell into a strange circle of building and stopping. On January 15, Mubang Hi-Tech terminated the 10GW TOPCon photovoltaic cell production base project jointly built with the People's Government of Echeng District, Hubei Province, with a total investment of about 4.8 billion yuan. Immediately after March 23, Mubang Hi-Tech announced that it would spend 4 billion yuan to build a 16GW N-type high-efficiency monocrystalline silicon rod project in Xinzhou, Shanxi. In addition, Mubang Hi-Tech also has a number of photovoltaic projects under construction jointly invested with local governments, with a total investment of about 12 billion yuan.
When announcing the Xinzhou project, Mubang Hi-Tech admitted frankly that the company currently has a significant funding gap based on the investment agreement signed in the early stage, and has not yet specified the financing arrangements for the current project. At the end of the third quarter of 2023, the balance of Mubang Hi-Tech's monetary funds was only 169 million yuan, but the company currently needs to invest nearly 8 billion yuan.
Recently, Lingda shares, which have been on the cusp of the recent shutdown turmoil, are also troubled by funds. The 20GW-per-year high-efficiency photovoltaic cell industrial base project jointly funded by it and the Management Committee of Tongling Lion Rock High-tech Zone invested 9.15 billion yuan, but it was terminated on March 19, partly due to the impact of the financing environment. Under the tightening of refinancing, Lingda's funds are under pressure, and as of the end of the third quarter of 2023, the monetary funds on its books are only 74.55 million yuan.
On the other hand, technology iteration is a hurdle that is difficult to overcome. The P-type production capacity, which used to be the main shipment force, is gradually being replaced by the N-type production capacity. According to InfoLink, the market share of P-type cells will drop to about 23% in 2024, and the market share of P-type batteries will be in the single digits in 2025.
Taking Lingda as an example, before the termination of the Tongling project, Lingda had announced the temporary suspension of production of its subsidiary Jinzhai Jiayue high-efficiency photovoltaic solar cell production line until April 15, 2024. It is reported that Jinzhai Jiayue plans to invest a total of about 4 billion yuan, planning to build 10GW high-efficiency photovoltaic cell production capacity, the project is divided into three phases, the first phase has been completed and put into operation 3.5GW high-efficiency PERC crystalline silicon cell project, the second phase of investment in the construction of 5GW TOPCon battery smart factory, the third phase will be planned according to market conditions and the company's actual development strategy. At present, there is no substantive progress disclosure of the second phase of the TOPCon project.
The first phase of the P-type production line that Jinzhai Jiayue temporarily suspended is also the main source of income for Jinzhai Jiayue. According to the company, the price of monocrystalline silicon cells has fallen rapidly, and at the same time, in recent years, Jinzhai Jiayue's operating funds have not met expectations, resulting in a tight operating cash flow for Jinzhai Jiayue's existing PERC cell production line. In the first half of 2023, the operating income of Jinzhai Jiayue solar cells decreased by 25.75% compared with the same period in 2022, mainly due to the impact of the sales model and the decline in raw material prices.
M&A or increase under the "elimination tide".
In October 2023, LONGi Green Energy (601012. Liu Yuxi, president of the China regional department of SH), has said that the 2023 SNEC exhibition will be unprecedented, but we believe that in two or three years, this grand occasion may not be there, and there may even be an extreme phenomenon that 60%-70% of enterprises will be eliminated.
According to a report released by Bloomberg New Energy Finance a few days ago, new PV installations are expected to increase this year, and at a time when module prices remain at record lows, some manufacturers will sell at a loss. Given these cost pressures, three mid-sized manufacturers are predicted to go bankrupt due to their inability to compete in the current environment.
Competition in the industry has intensified, and the termination of projects in the entire PV industry is not optimistic. Some people in the photovoltaic industry told the titanium media APP that at present, the distribution of the industrial bases of many companies is relatively scattered, and many enterprises, including listed companies, are actually suspended, but because there are many industrial chains, cells and modules may be stopped, but accessories are left, and it cannot be said that all his production lines have been suspended.
Under the "wave of elimination", the disposal of terminated projects by the first cross-border manufacturers has gradually surfaced. Shanmei International (600546.SH) announced in December last year that it would terminate the first phase of the 3GW project for the industrialization of high-efficiency heterojunction solar cells, and the project construction land that had been purchased in the early stage was withdrawn by the Management Committee of Jinzhong Development Zone, Shanxi Transformation and Comprehensive Reform Demonstration Zone, in the form of land acquisition and storage, and the main investment of 230 million yuan in the project will be recovered through land acquisition and storage.
When Haiyuan Composite Materials terminated the Chuzhou project cooperation, it transferred 100% of the equity of Chuzhou Energy to Zhejiang Aiko Solar Technology Co., Ltd., a subsidiary of Aiko Co., Ltd., at a price of 38 million yuan, and the 15GW TOPCon cell production capacity will continue to be built.
In addition, at the same time as terminating the PV project, Royal Group transferred control of Anhui Green Energy, the company responsible for the TOPCon cell business, and was no longer included in the consolidated financial statements. The release of Anhui Green Energy has greatly affected the operating income of Royal Group during the performance appraisal period, and Royal Group has also lowered its company-level performance appraisal indicators for 2024-2025.
According to Yuan Shuai, executive vice president of the Institute for the Promotion of Agriculture, Culture and Tourism Industry, some companies may choose to optimize resource allocation, reduce risks and improve competitiveness through sales or mergers and acquisitions. At the same time, with the industry reshuffle and intensified competition, some weaker companies may face the risk of being acquired or exiting the market, which may also intensify the transfer and M&A activities in the industry.
Industry observer Hong Shibin believes that this requires observing factors such as the competitive landscape, market trends and policy changes in the photovoltaic industry. If competition in the PV industry continues to intensify and overcapacity is not addressed, some companies may be forced to sell assets to ease financial pressures. (This article was first published in Titanium Media APP, author: Lu Wenyan)