"Integration" has been a hot topic in the photovoltaic industry since 2022. Large-scale PV companies, except for a few leading TOPCon cell companies, almost all of them have turned to vertical integration.
However, judging from the 2023 annual report and the first quarter report of 2024, the advantages of integrated enterprises are no longer there, and specialized enterprises have not shown obvious disadvantages.
Judging from the financial reports, the wafer production capacity has become a drag on the integrated enterprises: as the silicon wafers entered the industry loss stage in the fourth quarter and the first quarter of this year, the performance of the integrated enterprises will be under greater pressure if the integrated enterprises have more silicon wafer production capacity.
In the first quarter of 2024, companies with relatively good performance - Trina Solar, JinkoSolar, Canadian Solar, and Junda all performed well in other aspects. This proves once again that on the issue of integration, sometimes if you only follow the trend, you may not be able to make money, but will be hit.
Here, through the information revealed in the 2023 annual report and the first quarter of 2024 (10 representative photovoltaic enterprises have been selected), we will discuss the laws of the photovoltaic industry and explore the survival and development of photovoltaic enterprises.
The bifurcation of the leading photovoltaic companies has finally come
First, wafer companies are bleak.
The performance pressure in the wafer segment is the greatest. Therefore, in the first quarter of 2024, the net profit of LONGi and TCL Zhonghuan, the two leading silicon wafer leaders, fell significantly, and both suffered losses. According to the year-on-year growth of net profit attributable to the parent company in the first quarter of this year, the top three are JinkoSolar, Astor and Trina Solar. Deducting non-net profit can more truly reflect the problem. In the first quarter of 2024, there are still three companies that have achieved positive earnings. In order of the year-on-year growth rate of non-net profit, they are Canadian Solar, Trina Solar, and JinkoSolar. These three companies also belong to the three companies with strong anti-cyclical ability. Of course, the three major indicators of each company's debt-to-asset ratio, monetary cash, and operating cash flow are also very important.
Second, PV deleveraging and debt reduction is underway.
JinkoSolar now has the highest debt ratio. The good news is that JinkoSolar's debt ratio has fallen by 1% in the first quarter of this year compared to the end of last year. In addition, the asset-liability ratio of Hongyuan Green Energy, Risen Energy, JinkoSolar, Junda Co., Ltd., and JinkoSolar in the first quarter of this year has decreased compared with 2023. This shows that the above companies have achieved certain results in reducing debt in 2023.
Third, cash flow is a key indicator.
It is still too general to look at the debt ratio, and it is necessary to look specifically at the nature of the debt and how much monetary funds are in hand. In the first quarter of this year, the company with the most monetary funds in hand was still LONGi Green Energy, with a total of 57.3 billion yuan, which was not only a decrease from last year, but also a slight increase. It can be said that Longgene has saved a lot of money because it has not expanded TOPCon with the industry trend, nor has it carried out large-scale transformation of the existing P-type production capacity. With abundant monetary funds, LONGi has the confidence to sign long-term contracts with GCL and Tongwei for a total of 1.29 million tons of polysilicon. It is also possible to stock up on the historical low price of polysilicon. What's more worth mentioning is Tongwei shares, the company's monetary funds in the first quarter of this year increased by 45.67% compared with the end of 2023. In addition, it should be noted that in 2023, Tongwei will pay a large proportion of cash dividends to investors, totaling 12.867 billion yuan, which can be said to be the most generous among all photovoltaic companies. Over the years, Tongwei has been the largest company in terms of cash dividends among photovoltaic companies. In addition, Tongwei has 28 billion yuan in cash, and LONGi has a long-term order of 860,000 tons of polysilicon, plus several long-term orders that are being executed. All these have become Tongwei's confidence in this round of polysilicon reshuffle.
Fourth, in terms of net operating cash flow, LONGi fell behind last year.
Whether enterprises can compete for the initiative in this round of reshuffle, in the final analysis, depends on the "hematopoietic ability" of enterprises. In the first quarter of 2024, there are not many photovoltaic companies with positive operating cash flow, only four companies: JinkoSolar, TCL Zhonghuan, Hongyuan Green Energy and Junda Co., Ltd. The largest decline in operating cash flow was LONGi Green Energy.
PV companies are struggling to survive in 2024
Low module prices are now commonplace. After repeated negotiations on the results of centralized bidding, module companies and even the entire industry have become accustomed to low prices. At present, the Chinese market is not profitable, and the European and Latin American markets are also very profitable. The only market that really makes money seems to be the United States. Last year, the profit of modules in the United States was at least 5 cents/W, and today the profit per watt is still 3 cents. The U.S. market is difficult, but the companies that can lead the U.S. market are the ones that excel in performance. Sungrow, JinkoSolar, Canadian Solar, etc., are all excellent representatives of this kind.
JinkoSolar reopened the route of shipments to the United States in 2023. According to the company's annual report, as of the end of 2023, Jinko has the industry's largest overseas integrated production capacity of more than 12GW of wafers, cells, and modules. The main market for these overseas production capacities is the United States.
Canadian Solar said at the investor conference that the North American market will account for 20% of the company's module shipments in 2023, second only to the Chinese mainland market. Canadian Solar shipped only 6.3 GW of modules in the first quarter and expects shipments to be between 7.5 and 8.0 GW in the second quarter and between 35 and 40 GW for the full year. Scale and profit, the latter may be more important now. Canadian Solar said that considering the current market price factors of photovoltaic products, the company has made a balance and trade-off between price and volume.
Atlas disclosed in its annual report:
(1) A 5GW N-type new technology PV module plant was established in Mesquite, Texas, U.S.A. The plant has been formally commissioned in 2023, and has recently started delivering 210-size products, and is expected to be in full production during 2024. (2) Newly built 6.5GW module capacity and 8GW TOPCon cell capacity in Thailand.
What's even more bullish is that Atlas’s energy storage business overseas, especially in the U.S. market, is starting to gain momentum. Atlas disclosed that in the first quarter of this year, Atlas energy storage products recognized revenue shipments of 1 GWh, energy storage business in a single quarter to achieve operating income has been basically the same as the full year of 2023 (last year's photovoltaic system product revenue of 1.87 billion yuan), the second quarter shipments are expected to 1.4 to 1.6 GWh, the full year is expected to be between 6.0 and 6.5 GWh. In fact, the energy storage market is as rolled up as the PV market. Thanks to its overseas presence, the gross profit of Atlas' PV energy storage system product revenues in 2023 was even higher than that of PV modules by 1.15% to 17.15%. By the end of 2023, Atlas Energy Storage Technology (e-STORAGE), a subsidiary of Atlas, has about 63GWh of order reserves for energy storage systems, with signed contracts on hand amounting to US$2.6 billion.
In addition to overseas production capacity, international brand image and international sales channels are also important. The four companies, JinkoSolar, JAO, Trina Solar and Atlas, have a long history and have all been listed in the U.S., so the international image of the company's products and international sales channels are broader.
New development model：Horizontal Integration
LONGi Green Energy is the pioneer of the last round of vertical integration. An important reason why Trina Solar has performed better than its peers in this round is horizontal integration. In 2023, Trina Solar's photovoltaic module business will account for only 67.42% of the company's revenue, and there will also be photovoltaic brackets, photovoltaic power plants, and energy storage accounting for a relatively high proportion. In terms of the intensity of market competition, at least in 2024, the two major businesses of photovoltaic brackets and photovoltaic power stations will be profitable. In fact, Trina Solar's energy storage business will also have positive returns in 2023, but the energy storage will lose a little money due to the huge R&D investment.
In fact, the head module enterprises are generally large, and have a considerable right to speak in the upstream and downstream links, as well as related auxiliary materials and equipment enterprises, and there are many opportunities to lay out the upstream and downstream of the industry and to the auxiliary materials and equipment. Moreover, investors can fully trust the vision of module companies, who have the most profound understanding of various auxiliary materials and equipment companies. The key is that leading module companies can directly provide orders for upstream and downstream and horizontal equipment and auxiliary material enterprises.
It is a pity that the horizontal integration investment of some enterprises often does not pass-through listed companies or listed companies do not benefit from this. Here we would like to mention the two leading companies of silicon wafers - LONGi and Zhonghuan.
LONGi Green Energy invested in Liancheng CNC, and then Zhong Baoshen, Li Chun'an, and Liancheng CNC performed prominently in the photovoltaic auxiliary materials and equipment market. However, these investment results have little to do with LONGi and LONGi's shareholders. According to incomplete statistics, Zhong Baoshen, Li Chun'an, and Liancheng CNC have a wide range of investment layouts in the photovoltaic market, and they have made a lot of profits.
Similarly, Shen Haoping, an alumnus of Lanzhou University, the founder of LONGi, controls TCL Zhonghuan, which is also successful in horizontal integration investment. Yuanshi New Materials and Oujing Technology are all enterprises supported by Zhonghuan, although after the business of these enterprises matured, Zhonghuan's equity plummeted.
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