In 2023, the price fluctuations of the industrial chain will have a significant impact on the overall performance. The price war in the industry intensified in the fourth quarter. Affected by the decline in cell and module prices and the provision of asset impairment losses, Aiko shares (600732. SH) last year's Q4 net profit attributable to the parent company turned into a loss of 1.131 billion yuan, dragging down the annual performance.
According to the financial report, in 2023, Aiko will achieve an operating income of about 27.17 billion yuan, a year-on-year decrease of 22.54%; the net profit attributable to the parent company was about 757 million yuan, a year-on-year decrease of 67.54%; The net profit after deducting non-profits plummeted by 85.11% year-on-year to 323 million yuan. Not only that, this decline continued to the first quarter of this year, and the net profit attributable to the parent continued to lose.
After Aiko Co., Ltd. launched its self-developed N-type ABC battery products for the first time in 2021, it held high the clear banner of ABC technology, and planned to spend 10 billion yuan to expand production and continue to "bet" on the BC technology route. However, there has been a "swing" in the path selection of Aiko shares recently, and it has continued to increase the TOPCon capacity construction project.
Carbon Neutrality Daily noted that the reasons behind this are none other than the following: the overall contribution of ABC's module business last year was not high, and it was difficult to carry the banner of the second growth level when sold at a loss; Forced to make changes based on existing customers.
However, the cost of transformation is still high, among which the funding gap and financing pressure are the primary tests faced by Aiko shares.
Q4 "cliff-like" plummeting
Behind the big decline in Aiko's revenue and net profit attributable to the parent company last year, everything happened in the fourth quarter of 2023: the financial report shows that in the first three quarters of 2023, Aiko shares have achieved a net profit of 1.887 billion yuan attributable to the parent company, an increase of 35.77% year-on-year, and in the fourth quarter, it turned into a negative 1.131 billion yuan, a year-on-year decrease of 220.09%, setting the largest loss in a single quarter of the year. This means that Aiko shares lost an average of 12.2896 million yuan per day in just over 90 days in the fourth quarter.
Such a speed of loss can be called the speed of light. Why? Aiko's products include cells and modules, and from the beginning of 2023, the entire photovoltaic industry chain has reversed from undersupply to oversupply, and the market price of products has since entered a downward mode.
By the end of 2023, the global module production capacity has exceeded 900GW, much higher than the global demand value of 525GW in the same period. In particular, in the fourth quarter of last year, quotations or transaction prices below RMB 1/W were recorded in many module procurement businesses in the market. Li Zhenguo, vice president of module leader LONGi Green Energy, has warned that irrational prices below 1 yuan/watt will make it difficult for the entire industry to make a profit.
Aiko further explained that after the fourth quarter of last year, the price reduction of all links has accelerated, among which the P-type battery has increased significantly due to the industry's demand for N-type batteries, the supply and demand relationship of stock capacity has deteriorated, and the price of PERC batteries has dropped by more than 40% in the fourth quarter, which has brought greater sales pressure and inventory price loss to industry manufacturers.
According to the annual report, Aiko's monocrystalline PERC solar cell business in 2023 will achieve revenue of about 26.1 billion yuan (accounting for 96% of total revenue), a year-on-year decrease of 23.77%.
According to the price statistics of Infolink, a third-party organization, the average market transaction price of 182-size PERC cells at the end of 2023 was 0.36 yuan/W, down 68% from the year's high of 1.14 yuan/W. The average market transaction price of 182-size PERC modules at the end of 2023 was RMB 0.95/W, down 48% from the year's high of RMB 1.83/W.
It is conceivable that the sharp decline in prices will inevitably bring impairment pressure to the company's inventory of some raw materials and finished products, so the provision for impairment losses of various assets of Aiko shares increased significantly year-on-year during the reporting period.
Last year, Aiko Co., Ltd. made a total of about 1.419 billion yuan of asset impairment provisions, and the impairment provisions in the fourth quarter alone were as high as 1.1 billion yuan, of which the inventory impairment provisions amounted to 894 million yuan, which was three times that of the inventory impairment provisions in the first three quarters of last year.
Aiko shares believe that as the industry price falls below the profit and loss cost line of each major link, some backward production capacity in the industry has begun to be optimized and cleared, which has brought about a bottoming out of the industry competition pattern and prices, and enterprises with scale, products, costs and channel advantages are expected to regain profitability after this round of industry fluctuations. The company said that leading enterprises with technology research and development innovation will take the lead in stepping out of the downward cycle of the industry.
However, judging from the market of the first quarter, it is still in adjustment. In the first quarter of this year, Aiko achieved operating income of 2.514 billion yuan, a net profit loss of 91.217 million yuan attributable to the parent company, and a net profit loss of 759 million yuan after deducting non-profits, a year-on-year decrease of 67.55%, 113% and 215.54% respectively. According to the company, the market is down, and the decline in sales unit price has led to lower revenue and lower profitability.
To add insult to injury, in the first quarter of this year, Aiko Co., Ltd. made an impairment provision of 560 million yuan for various assets, and the impairment provision for inventory in the current period reached 549 million yuan.
The performance has changed, and the stock price is difficult to strengthen. Since November 2022, the share price of Aiko has continued to fall from the highest 51.22 yuan/share to 11.98 yuan/share, a decrease of more than 70%.
ABC components are not yet profitable
In the era of accelerated transformation of the photovoltaic industry and conversion efficiency is king, N-type photovoltaic cell technology represented by TOPCon, HJT and XBC has accelerated the replacement of P-type products since 2023 and quickly occupied a dominant market position due to its advantages of high power generation, high efficiency and lower LCOE.
According to TrendForce, the total number of N-type module tenders in 2023 reached 124.7GW, accounting for about 43.4% of the total. Under the huge potential difference, this N-type to P-type technology iteration continues to move into 2024 with an unstoppable attitude. According to the forecast of a third-party research institution, "in 2024, N-type is expected to account for 70% or even more in the photovoltaic industry chain." ”
In the development trend of N-type technology, a variety of technical routes show a trend of a hundred flowers blooming and competing against each other. JinkoSolar and Trina Solar both believe that TOPCon will be one of the most cost-effective and commercialized battery technology routes for a long time to come, with higher mass production efficiency, better mass production costs, and a clearer path for efficiency improvement and cost reduction. HJT is popular with iKang Technology, but it still can't avoid the disadvantages of high unit cost affecting the application, and it is not yet possible to use normal temperature silver paste and must use low-temperature silver paste (currently it can only be imported from Japan), and the supply of raw materials is limited; The BC class battery has a theoretical energy conversion efficiency of more than 25%, but the technical difficulty and cost are far from commercialization, mainly promoted by Aiko shares.
It is reported that Aiko has built a sales team at home and abroad, and will start the batch sales of ABC modules in 2023.
In 2023, Aiko's ABC module business will achieve revenue recognition sales of 489.24MW, and achieve a total revenue of 598 million yuan from domestic and foreign ABC module sales excluding tax, accounting for only about 2% of the total revenue.
As of March 2024, the company's ABC module has signed various agreements involving sales of more than 10GW. However, Aiko's ABC modules are still sold at a loss, with a gross profit margin of -5.16% last year, and it is also the only product that lost money.
The author noted that in 2023, the sales expenses of Aiko shares will soar from 56.3879 million yuan in 2022 to 255 million yuan, a year-on-year increase of 352.33%. The sales expenses in the first three quarters of 2023 will be 142 million yuan, and the investment in Q4 alone is close to the overall level of the first three quarters. However, it is not difficult to see from the revenue and profit indicators in the fourth quarter that the role of high sales expenses in promoting sales has been significantly weakened, and the help and promotion of profits are obviously not as good as in the first three quarters.
The cost of transformation and the pressure on capital are highlighted
The photovoltaic industry is cold, and the pace of industry expansion has slowed down but has not stopped. Following the end of last year, photovoltaic giants such as Tongwei Co., Ltd. and LONGi Green Energy successively announced the expansion of production, and Aiko Co., Ltd. also accelerated the pace of expansion.
As early as April 2023, Aiko Co., Ltd. signed a strategic cooperation agreement with the Jinan Municipal Government to build a 30GW high-efficiency crystalline silicon solar cell project and its supporting 30GW module project in the starting area of new and old kinetic energy conversion in Jinan in three phases, and build 10GW of cell and module production capacity in each phase.
On the evening of February 25 this year, the board of directors of Aiko Co., Ltd. deliberated and approved the proposal on investing in the construction of Jinan Phase I with an annual output of 10GW of high-efficiency crystalline silicon solar cells and modules, and the related projects ushered in substantial progress.
According to the announcement, the total investment amount of the project is expected to reach 9.978 billion yuan, including 7.498 billion yuan in fixed assets and 2.48 billion yuan in working capital. The construction period is about 15 months, and construction is scheduled to start in the first quarter of 2024, with production expected in the first half of 2025. After full production, Aiko will add 10GW of N-type ABC high-efficiency solar cells and 10GW of module production capacity.
In the past, Aiko shares, which held high the clear banner of ABC technology, seem to be "friends and enemies" with TOPCon. Today, the big gamble strategy of betting on BC batteries has shown signs of loosening. In the announcement on March 13, Aiko invested 2.715 billion yuan to upgrade the 25GW PERC cell production capacity of the existing Yiwu base to TOPCon cell production capacity; On March 18, Aiko Co., Ltd. announced that the company signed an investment cooperation agreement with the People's Government of Quanjiao County, Chuzhou City, Anhui Province, to implement the construction of the first phase of Chuzhou high-efficiency crystalline silicon solar cell project, with an estimated total investment of 6 billion yuan. After the first phase of the project is fully completed, Aiko will add 15GW of N-type TOPCon high-efficiency crystalline silicon solar cell production capacity, and the investment of 4 billion yuan in the second phase is still being planned.
In the annual report, Aiko Co., Ltd. proposed that "the layout of ABC and TOPCon go hand in hand to meet the N-type era". According to the company, as N-type batteries are rapidly replacing P-type batteries as the main demand in the market, a large number of the company's customers have also expressed their urgent desire to purchase TOPCon batteries from the company.
An industry insider believes that due to the advantages of technology and investment costs, TOPCon has become the main beneficiary technology route from P-type to N-type technical transformation. However, not all PERC lines can be upgraded.
The person mentioned that process compatibility is one of the factors restricting the upgrading of production lines. Specifically, TOPCon technology requires the introduction of nanoscale perovskite materials and related processes, so the compatibility of the old and new processes needs to be considered when retrofitting the existing production line to avoid process conflicts or production instability. Secondly, equipment investment costs and production costs are also important constraints, and TOPCon technology requires new equipment, including nanoscale perovskite coating equipment, etc., which have high investment costs and may increase production costs. As a result, if the company does not have sufficient financial backing, or does not have an effective cost containment strategy, then the upgrade may become unrealistic.
In other words, the cost of the transition is still high, not only in terms of new technology development and reserves, but also in terms of the huge investments required to build new production lines. As of the end of the first quarter of this year, Aiko's monetary funds were 3.411 billion yuan. At present, the financing environment is tightening, and the funding gap and financing pressure of Aiko shares are facing considerable pressure.
Regarding the issue of financial guarantee for the project, Aiko Co., Ltd. once said in the announcement that there is a certain uncertainty about whether it can raise sufficient funds for project construction in a timely manner in the future. At the same time, the financing of construction funds may also lead to an increase in the asset-liability ratio and financial costs, which in turn increases the risk of debt repayment.
It is worth mentioning that as of April 25, 2024, the total amount of guarantees provided by Aiko and its subsidiaries and still in existence is 28.071 billion yuan (if different guarantee entities provide guarantees for the financing of the same guaranteed entity, the guarantee amount will not be double-counted), accounting for 323.4% of the company's latest audited net assets. Among them, the actual debt balance under the above-mentioned guarantee balance is 18.605 billion yuan, accounting for 214.34% of the company's latest audited net assets.
At present, the photovoltaic market is still in a downward trend, and high guarantees are potential risks to future profitability and cash flow.