Longi Green Energy Technology (601012.SH), a leading photovoltaic (PV) company, hit a historical low in its stock price. On June 20th, the stock closed at 15.58 yuan, with a decline of 4.77%, and a total market value of 118.1 billion yuan, which is a significant drop of over 400 billion yuan from its peak value of approximately 550 billion yuan.
Over the past three years, Longi Green Energy has arguably been the most controversial top-tier PV manufacturer—characterized by a weak stock performance, slow deployment of the next-generation N-type technology, and a drop to the second position in global module shipment in 2023. One of the actual controllers of Longi Green Energy, Zhong Bao Shen, stated during the company's year-end dialogue in 2023 that 2024 would be the most challenging year for the company in nearly a decade.
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Market analysis suggests that with monocrystalline silicon wafer prices still falling and market production cuts, concerns about the mid-year financial reports of the main PV industry chain have led to a continuous decline in the stock prices of PV companies like Longi Green Energy.
The continuous decline in industry chain prices and institutional concerns about worsening losses in the mid-term report
The prices at various stages of the main PV industry chain are closely related to supply and demand patterns. This year, the main industry chain has continued to reduce production, leading to cost inversion for manufacturers in segments such as silicon materials and wafers.
At present, the continuous release of new silicon material capacity has driven the price of silicon material below the cost line of all operating enterprises, gradually approaching the bottom of the price range. Although there has been a significant reduction in production in this segment, the supply reduction is still lower than expected. Information released by the Silicon Industry Association on the evening of June 19th shows that, as of this week, there have been no separate transactions for P-type silicon material, and the price has remained the same as last week, ranging from 34,000 to 39,000 yuan/ton. The Silicon Industry Association believes that, from a supply and demand perspective, the degree of cost inversion for silicon material has further intensified, hence the price is approaching the bottom.
The price of silicon wafers downstream is inherently sensitive to the price of silicon material. Amid high inventory and cost inversion, the wafer production rate continues to remain low.
Since the second quarter, there has been an accelerated trend in the clearance speed of the main PV industry chain, with the price of silicon wafers continuing to fall. According to information released by the Silicon Industry Association, the price of P-type monocrystalline silicon wafers 210mm was about 2.15 yuan/piece on the week of April 11th, and recently, the price of these wafers has been about 1.72 yuan/piece, a decrease of 20%.
The impact of inventory and price declines on operational performance can be seen from the first-quarter results of various wafer-listed companies. Longi Green Energy's operating revenue in the first quarter of this year fell by 37.6% year-on-year to 17.673 billion yuan, with a net loss of 2.35 billion yuan, and a net cash outflow from operating activities of 4.89 billion yuan, marking the company's first quarterly loss since the first quarter of 2013. TCL Zhonghuan (002129.SZ), known as the "silicon wafer duo" along with Longi Green Energy, continued to suffer a net loss of 880 million yuan in the first quarter.
Public information indicates that multiple sell-side research reports have warned that the current supply and demand surplus in the wafer segment is severe, and if companies continue to maintain high production levels, the price of silicon wafers will remain in a downward trend."Silicon wafer manufacturers' loss-making deals were originally anticipated within the capital expectations, and facing the 'involution' to cash losses, with still no clear downward trend in uncertainty, investors are not only worried about the performance of the mid-term report, but also not optimistic about the industry expectations for the third quarter," a new energy industry analyst told the reporter: "When the production of silicon material is lower than the demand of the downstream silicon wafer link, this may be regarded as an important signal for the short-term price to stop falling. On the one hand, it depends on the extent of the reduction in production by silicon material manufacturers, some second and third-tier manufacturers may not resume production after being shut down for half a year. In addition, the utilization rate of the silicon wafer link also determines its demand for silicon material, but the paradox is that silicon wafer manufacturers are wary of cash pressure and losses, and will not rashly increase the utilization rate in the short term."
Northbound net selling of 170 million shares this year, Longi's trillion-yuan market value is in danger
Under the situation of the main industry chain's full-line loss, photovoltaic manufacturers hold cash as king, and the momentum of high-speed expansion in the past two years has obviously slowed down. As the industry's loss time extends, photovoltaic enterprises' demand for cash is getting higher and higher.
Longi Green Energy announced on June 6 that it plans to issue 10 billion yuan of corporate bonds (non-convertible bonds), and this fund is mainly used for investment in advanced capacity, including the construction of advanced capacity such as "Tai Rui" silicon wafers, BC second-generation batteries, etc., and accelerating the industrial iteration of new technologies such as BC through new technologies. At the same time, Longi Green Energy plans to increase the single-day maximum balance limit of its own funds entrusted to financial management in 2024 from 20 billion yuan to 30 billion yuan.
The above matters have quickly attracted widespread attention from the market, and Longi Green Energy has been questioned by investors for managing wealth on one hand and issuing bonds to raise funds on the other. After that, the company issued a relevant clarification announcement, explaining the company's financial situation, overseas factories, and capacity, etc.
According to the financial report, as of the end of the first quarter of this year, Longi Green Energy's monetary funds were 57.314 billion yuan, an increase of about 300 million yuan from the fourth quarter of last year, and the asset-liability ratio increased from 56.87% in the fourth quarter of last year to 59.38%, which is the highest level in the company's history. Looking at short-term debt repayment, as of the end of the first quarter, the company's short-term loans were 105 million yuan, and the interest-bearing liabilities due within one year were 1.541 billion yuan, with basically no short-term debt repayment pressure. It is worth noting that as of the end of the first quarter, Longi Green Energy's notes payable and accounts payable totaled 40.42 billion yuan, a slight decrease from 41 billion yuan at the end of the fourth quarter of last year.
The aforementioned new energy industry analyst said to the reporter that the main consideration for Longi Green Energy's bond issuance is still the challenge to cash flow in the industry's downward cycle. "The price drop in the industry chain has not yet reached the bottom, and the profit levels of the main links such as silicon wafers, components, and batteries may not see a significant recovery until 2025. Before that, spot losses, inventory write-downs, investment in labor and production, and the capacity construction that has already started will continue to consume the cash flow of photovoltaic manufacturers. At this stage, reasonable cash flow management is the top priority for photovoltaic enterprises."
Faced with the capacity clearance of the photovoltaic industry and the uncertainty of the mid-term report performance, northbound funds have recently continued to sell Longi Green Energy. Data shows that as of the close on June 19, the Shanghai-Hong Kong Stock Connect held 374 million shares of Longi Green Energy, a decrease of about 10 million shares from the beginning of this month. Looking back, as of the end of the first quarter of this year, the northbound funds held 437 million shares of Longi Green Energy, and this data was 550 million shares at the beginning of this year. In other words, since the beginning of this year, northbound funds have sold a total of about 176 million shares of Longi Green Energy.
As of the close on June 20, Longi Green Energy's share price was reported at 15.58 yuan, setting a new low since the first week of June 2020, with a total market value of 118.1 billion yuan. Longi Green Energy and SunPower (300274.SZ) are currently the only two companies in the photovoltaic sector with a market value of over 100 billion yuan, with the latter leading the sector with a total market value of 140.79 billion yuan. It should be noted that at the close of the first trading day of this year, Longi Green Energy's total market value was 166.5 billion yuan, about 43 billion yuan higher than SunPower.
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