Prosperity? Or is it an illusion?
Performance is the leading indicator of the prosperity and certainty of the industry and the company, and it is also the underlying logic of identifying high-quality companies. The disclosure period of the interim report is approaching, and it is time for each company to compete and see the real chapter.
The photovoltaic field has always been the direction we focus on, and the total output value of the photovoltaic industry will exceed 1.7 trillion yuan in 2023, which is quite large.
Although the downstream installed capacity demand is booming, from the performance point of view, the differentiation of each link is quite obvious:
In the module sector, JinkoSolar, Trina Solar, Astor and other companies have mostly turned from positive to negative net profit growth, while LONGi Green Energy, Tongwei Co., Ltd., JA Solar Technology and other companies have begun to lose money in the first quarter of 2024.
The auxiliary materials link is a different scene. In the first quarter of 2024, Arctech's profit growth rate was close to 300%, ranking first. Otway, Follett, Foster and other companies also maintained a growth rate of around 50%.
Some people may ask why the prices of polysilicon, silicon wafers, cells and modules in the same photovoltaic industry have been falling, which has affected the company's performance. However, the performance of glass, brackets, inverters and other links has increased sharply against the trend?
This is because in upstream industries such as polysilicon and wafers, companies have higher requirements for scale advantages and it is easy to expand production capacity. However, inverters, brackets and other products have a low degree of homogeneity and do not need to rely on expansion to seize the market, so the performance is more anti-cyclical.
Among the auxiliary material companies, Arctech, which is mainly engaged in photovoltaic brackets, has not been significantly explored:
Next, we will analyze Arctech from four dimensions:
First, the competitive dimension
Arctech's product composition is very simple, and there are three main types: tracking bracket, fixed bracket and BIPV.
From the perspective of the competitive landscape, there are currently 4 listed companies mainly engaged in photovoltaic brackets in China, namely Arctech, Qingyuan Shares, Zhenhua Shares, and Yihua Shares.
Arctech's tracking bracket has the most obvious advantages, and its shipments have ranked among the top 10 in the world for many times, and it has ranked first in Asia. Yihua has achieved rapid growth by supplying NEXTracker, a major customer in the photovoltaic field. Qingyuan shares have obvious advantages in the field of distributed photovoltaic brackets, and the market share in Australia has been the first for 14 consecutive years.
In the PV brand value released by PVBL, Arctech ranks fourth in the world and first in China, ranking higher than Trina Solar, which shows the competitive strength of the company's bracket products.
Second, the performance dimension
Of course, Arctech's performance is also very strong, since the performance bottomed out in 2021, it has continued to climb, with a net profit of 345 million in 2023, a growth rate of 676.58%.
In the first quarter of 2024, the company's performance will still maintain triple-digit growth, achieving revenue of 1.814 billion, a year-on-year increase of 122.47%, and net profit of 297.18%, a year-on-year increase of 297%.
Not only that, Arctech has abundant orders in hand, and its future performance is also guaranteed.
In 2020, Arctech's contract liabilities were only 28 million yuan, and in 2023, they have soared to 771 million yuan, an increase of 27 times. The company currently has about 7 billion orders in hand, an increase of 81% year-on-year.
Third, the profitability dimension
In addition to the rapid growth of performance, the company's profitability has also increased significantly.
Gross profit margin is affected by the cost side and the price side. Arctech is a company that makes photovoltaic brackets, and raw materials account for a large proportion of the cost, especially steel, which can reach up to 35%, and the company's profitability is greatly affected by the fluctuation of raw material prices.
From the cost side, stainless steel prices have been declining from March 2022 to May 2024. Coupled with the launch of self-built production capacity and integrated production lines, the cost of products has been diluted, and the scale effect has been highlighted.
From the price side, thanks to the adjustment of the product structure, the tracking bracket can adjust the angle according to the sun, and the technical content and unit price are higher. From 2022 to 2023, the revenue proportion of Arctech tracking brackets will increase from 43% to 56%, and the average sales price will increase.
Therefore, from 2022 to 2023, the company's gross profit margin will increase significantly from 12.44% to 18.11%, the expense ratio will not change much during the period, and the net profit margin will increase from 1.23% to 5.41%, and the profitability will be significantly enhanced.
Fourth, the growth dimension
1. The growth of photovoltaic installed capacity has led to an increase in the amount of brackets.
The price of photovoltaic modules will decrease from 2 yuan/watt to less than 1 yuan/watt from the end of 2022 to the first half of 2024.
This is a good thing for bracket companies, because after the price of modules drops, the cost of photovoltaics will drop rapidly, and the installed demand of ground power stations will increase, and the amount of brackets will increase. There is also this logic in the volume increase of inverters, which is inversely proportional to the price of modules.
In the second half of 2023, the demand for ground power stations exploded, and photovoltaic brackets began to rise.
It is estimated that in 2025, 260GW of new domestic PV capacity and 280GW of new overseas PV capacity will be added, driving the increase in the use of brackets, and the global PV bracket market will reach 97.4 billion yuan, with a very large space, and the shipment of brackets will reach 170GW in 2027.
Moreover, the global tracking stent penetration rate is about 35%, and the domestic is less than 15%, and it will definitely rise in the future.
2. BIPV products to create a new growth pole.
BIPV, or Building Integrated Photovoltaics, integrates photovoltaic products into the builder, and the power generation unit is integrated with the building itself. Compared with BAPV, it has obvious advantages in terms of LCOE and power generation efficiency, and can be used for photovoltaic curtain walls and photovoltaic greenhouses.
Arctech has a very early layout of BIPV products, almost at the same time as leading companies such as LONGi Green Energy and JinkoSolar. The products are also relatively complete, covering solutions such as Zhiding, Shuangding, and Ruiding.
From 2021 to 2023, the company's BIPV product revenue will increase rapidly from 130 million to 644 million, successfully opening the second growth pole.
3. Global layout to help open up overseas markets.
Photovoltaic, lithium battery, electric vehicle, also known as the three major pieces of new energy going to sea. The competition in the domestic market is fierce, and the performance and growth of new energy companies overseas are more worth tracking.
As of the end of 2023, Arctech has installed nearly 1,600 projects in more than 40 countries around the world, with a cumulative installation capacity of about 68GW, and has GW-level overseas project delivery experience.
India and North America are both markets with huge growth potential for photovoltaics, and the company has laid out delivery centers. At present, it has an overseas production capacity of 3GW and a planned production capacity of 6GW.
Finally, to sum up. There is no overcapacity problem in the photovoltaic bracket industry, benefiting from the high prosperity of downstream installed capacity and the rapid development of overseas business, Arctech has a high certainty of future performance growth, and it is enough to continue to pay attention to its orders and capacity release.