From the automobile business to photovoltaic cells, Junda shares "A+H" listing prospects

On October 14, Hainan Junda New Energy Technology Co., Ltd. (hereinafter referred to as "Junda Shares"), the world's fourth largest professional manufacturer of photovoltaic cells, submitted a listing application to the Hong Kong Stock Exchange, which is another application after its submission failed in February this year. If it successfully lands on the Hong Kong Stock Exchange, Junda is expected to become the first photovoltaic cell manufacturer to be listed on "A+H".

The timing of Junda's impact on the listing of Hong Kong stocks is quite embarrassing. From the perspective of the company itself, Junda shares suffered losses in the first half of this year after two consecutive years of substantial growth in performance from 2022 to 2023. From the perspective of the industry as a whole, although the sales of photovoltaic cells and modules are still growing rapidly, the problem of overcapacity and corporate losses in the overall industry has been quite severe.

On October 14, when Junda shares were submitted to the Hong Kong Stock Exchange, the China Photovoltaic Industry Association held a symposium, and the participating companies discussed issues such as "strengthening industry self-discipline, preventing 'involution' vicious competition, strengthening the market survival of the fittest mechanism, and smoothing the exit channels of backward and inefficient production capacity".

Ditch the car and switch to photovoltaics

Junda shares have not been in the photovoltaic industry for a long time. Founded in 2003, Junda Co., Ltd. was initially mainly engaged in automotive interior and exterior decoration business, selling automotive instrument panels, front and rear bumpers and other products. In 2017, Junda shares were listed on the Shenzhen Stock Exchange.

After 2018, China's auto market has declined, and Junda shares are also facing downward pressure on performance. In 2019, Lu Xiaohong, the daughter of Yang Renyuan, the founder of Junda Co., Ltd., became the new chairman of the listed company. Under Lu Xiaohong's control, Junda began to promote the company's transformation.

In 2021, Junda Co., Ltd. spent 1.434 billion yuan to acquire a 51% stake in Jietai Technology, a leading photovoltaic cell company located in Shangrao, Jiangxi Province, and entered the photovoltaic industry. In 2022, Junda Co., Ltd. will further acquire the remaining 49% equity of Jietai Technology, and at the same time sell the automotive trim business, thus completely completing the transformation from the automotive industry to the photovoltaic industry.

In 2022, the photovoltaic industry will grow rapidly, and Junda will enjoy the transformation dividend, with revenue reaching 11.085 billion yuan that year, a year-on-year increase of 576%; The profit was 716 million yuan, compared with the loss of 178 million yuan in the previous year, and the loss was turned into a profit. In 2023, Junda's revenue will be 18.61 billion yuan and its profit will be 815 million yuan, both year-on-year.

In the photovoltaic market, Junda focuses on the research and development, production and sales of photovoltaic cells. According to Frost & Sullivan, in terms of shipments in 2023, Junda's N-type TOPCon battery has a global market share of about 46.5%, ranking first. Junda's global market share of photovoltaic cells is about 12.8%, ranking fourth.

From the perspective of equity structure, the Yang family behind the founder of Junda Co., Ltd. and Hainan Jindi are the single largest shareholder group of Junda Co., Ltd., in addition, the list of major shareholders of Junda Co., Ltd. also includes Shangrao Economic and Technological Development Zone Industrial Development Zone Industrial Development Investment Co., Ltd., Shangrao Economic Development Zone Talent Introduction Group Co., Ltd. and other local state-owned assets.

From 2021 to 2023, JinkoSolar was the largest supplier and largest customer of Junda, and in the first half of this year, LONGi became the largest supplier and largest customer of Junda.

The reason for the above phenomenon is that JinkoSolar and LONGi are both integrated manufacturers in the photovoltaic industry, and their businesses cover every major link in the upstream and downstream of the industrial chain. Junda shares admitted in the prospectus that its customers also compete with it to a certain extent.

The market is hot, and profitability is difficult

The dividends of Junda's transformation into the photovoltaic industry have not been extended to this year. In the first half of the year, Junda's revenue was 6.355 billion yuan, a year-on-year decrease of 32.3%, and a loss of 166 million yuan.

For the decline in performance, Junda shares mentioned the factors of technological change, and said in the prospectus that the photovoltaic industry has the characteristics of rapid technological progress and frequent product iteration. The market demand has accelerated from P-type PERC cells to N-type TOPCon cells. In the first half of this year, Junda's sales of P-type PERC cells fell year-on-year, resulting in a decrease in revenue.

On the other hand, Junda's N-type TOPCon battery business did not increase profits. According to the prospectus, although the sales volume of N-type TOPCon batteries increased by 148.4% year-on-year in the first half of this year, the decline in the average selling price of such batteries offset the effect of sales growth, resulting in an overall decline in revenue of Junda shares.

Incremental non-profit increase is not a problem for Junda shares, but a problem faced by the entire photovoltaic industry. On the one hand, the output of the photovoltaic industry continues to grow rapidly. According to the estimation of the photovoltaic industry standard announcement, enterprise information and industry associations, the national polysilicon output in the first half of this year was 1.06 million tons, a year-on-year increase of 74.9%; wafer output was 402GW, a year-on-year increase of 58.6%; the output of crystalline silicon cells was 310GW, a year-on-year increase of 38.1%; The output of crystalline silicon modules was 271GW, a year-on-year increase of 32.8%.

On the other hand, the prices of photovoltaic silicon materials, silicon wafers, cells and modules have all plummeted, and the output value of domestic photovoltaic manufacturing (excluding inverters) in the first half of this year was about 538.6 billion yuan, a year-on-year decrease of 36.5%. The China Photovoltaic Industry Association pointed out that the market price of photovoltaic products has continued to decline in recent times, and the entire industry has fallen into a vicious circle of irrational competition.

Liu Hanyuan, chairman of the board of directors of Tongwei Group, once publicly said: "Everyone wants to have more market share, greater sales and sales revenue in the industry competition, so the price will naturally go down." And due to the increasing degree of price decline, every order is basically a loss, so the more you sell, the more you lose, and the longer the industrial chain, the more you lose. ”

This year, the leading companies in the photovoltaic industry have generally seen a sharp decline in profits or losses. In the first half of the year, LONGi Green Energy's loss was 5.243 billion yuan, Tongwei's loss was 3.129 billion yuan, TCL Zhonghuan's loss was 3.064 billion yuan, Trina Solar's net profit attributable to the parent decreased by 85.14% year-on-year, and JinkoSolar's net profit attributable to the parent decreased by 68.77% year-on-year.

How to address existing challenges? Junda said in the prospectus that it strategically prioritized the delivery of more profitable orders and ceased production of P-type PERC cells, focusing entirely on the production of N-type TOPCon cells.

However, N-type TOPCon batteries will also face the squeeze of new technologies in the future. In the past two years, perovskite photovoltaic cell technology has moved towards mass production. It is understood that the manufacturing cost of all-perovskites is lower than that of common crystalline silicon materials, and at the same time, it is thinner, bendable, and has a wider range of potential application scenarios.

Huatai Securities research report pointed out that perovskite is still in the stage from 0 to 1, but the progress of industrialization has accelerated significantly, and it is expected that there will be close to 1GW of pilot line expansion this year, and the head participants are expected to start GW-level production line bidding this year, and it is expected to see a number of GW-level production lines land from 2024 to 2025.

The truce is not easy, increase overseas

In July this year, the relevant authorities issued the "Standard Conditions for the Photovoltaic Manufacturing Industry (2024 Version) (Draft for Comments)" and the "Administrative Measures for the Announcement of the Photovoltaic Manufacturing Industry Standards (2024 Version)", aiming to alleviate the temporary imbalance between supply and demand and curb the continuous decline in prices.

Regarding the above policies, Junda said in the prospectus: "Although these government drafts may not be implemented in a timely and full manner in their current form, or will not be implemented at all, the efforts made to adjust the balance between supply and demand may benefit industry participants in various fields to a certain extent." ”

Since the third quarter of this year, the bidding price range of photovoltaic modules has fallen from about 0.9 yuan/W at the beginning of the year to about 0.6 yuan/W. Recently, the winning candidates of the third batch of public bidding for centralized procurement of photovoltaic module equipment in 2024 of Guohua Investment were announced, and the bidding unit price of Tongwei Co., Ltd., the first winning candidate, was 0.662 yuan/W.

According to public information, the companies participating in the symposium of the China Photovoltaic Industry Association on October 14 include LONGi Green Energy, Tongwei Co., Ltd., Jinko Solar, JA Solar Technology, GCL Group, Aiko Co., Ltd., Chint New Energy, TCL Zhonghuan, Trina Solar, etc., all of which are the backbone enterprises of the photovoltaic manufacturing industry chain.

"It's not easy to reach a consensus, if I'm doing the whole industry chain, you're doing polysilicon silicon or cells, and you want to raise prices, and I'm an integrated one, so I don't want to raise prices." A person in the photovoltaic industry who understands the situation of the symposium told the Economic Observer. He said that the views and opinions of various photovoltaic companies at the meeting will be collected by the association, and should be summarized and reported to the relevant government departments in the future.

In addition to hoping to strengthen regulation at the policy level, Junda also said in the prospectus that in order to promote the implementation of the company's development strategy, it will strive to expand overseas business, focusing on regions and business opportunities with higher profit margins compared with the domestic market.

According to data from the China Photovoltaic Industry Association, in the first half of this year, the export volume of silicon wafers, cells and modules increased by 34.5%, 32.1% and 19.7% year-on-year respectively. Some leading domestic photovoltaic companies have begun to build factories overseas. Among them, GCL Technology has planned to build a 120,000-ton polysilicon project in the Middle East, its first overseas polysilicon plant is expected to be located in the U.A.E., and JinkoSolar has also been shortlisted for the bid for a 500-megawatt solar project in Oman, with an estimated investment of US$400 million.

According to the prospectus, from 2023 to the first half of this year, Junda has developed customers in Southeast Asia, Europe and other regions, with overseas sales revenue of 5.5 million yuan, 31.2 million yuan, 874 million yuan and 879 million yuan in 2021, 2022, 2023 and the first half of this year, respectively, and the proportion of overseas revenue has increased from 0.3% in 2022 to 13.8% in the first half of this year.

However, in overseas markets, from price wars to patent wars, the competition between Chinese PV companies is also very fierce. This year, Trina Solar, a Chinese PV module leader, filed a lawsuit in the United States against another Chinese PV cell and module manufacturer, Runyang United States Inc. and Runyang Alabama Inc., accusing Runyang of infringing two of its patents.