The photovoltaic and other new energy industries have fallen into a recession, and some companies are facing a business situation, but they still have to sprint to the market. Hainan Junda New Energy Technology Co., Ltd. (hereinafter referred to as "Junda New Energy"), which is mainly engaged in the manufacture of photovoltaic cells, "bucked the trend" and sprinted to list in Hong Kong.

Junda New Energy's performance in the first half of 2024 fell into the red, while LONGi Green Energy (601012. SH) and JinkoSolar (688223.SH) are the main suppliers and customers of Junda New Energy, and the performance of both companies in the first three quarters has fallen into regression, and LONGi has even suffered significant losses, and the decline in demand has led to a recession in the upstream and downstream of the industry.

On the other hand, when will the photovoltaic industry, which is mired in the dilemma of "involution", get out of the bottom? This has caused great controversy in the industry, and some senior industry insiders believe that it will take more than 5 years; There are also sell-side people who feel that industry self-discipline may end vicious competition and will improve in 2025.

Half-year performance loss

Junda New Energy focuses on the R&D, production and sales of high-efficiency photovoltaic cells.

According to the company's prospectus, according to Frost & Sullivan, in terms of shipments in 2023, the market share of Junda New Energy's N-type TOPCon batteries is about 16.1% among professional manufacturers and integrated manufacturers, ranking second in the world; The market share of photovoltaic cells is about 5.5%, ranking eighth in the world.

Junda New Energy's net profit increased by 32.2% from 617 million yuan in 2022 to 816 million yuan in 2023, mainly due to the expansion of business scale, and the company's net profit in the first half of 2023 was 955 million yuan, compared with a net loss of 166 million yuan in the same period in 2024, which the company said was mainly due to the decline in the market price of photovoltaic cells.

According to public information, JinkoSolar was the largest supplier of Junda New Energy for the three fiscal years from 2021 to 2023, and LONGi Green Energy was the company's largest supplier in the first half of 2024.

Junda New Energy said that due to the high concentration of market participants, the concentration of the industry is common in the photovoltaic industry. The concentration of the PV industry has naturally led to frequent purchases from leading suppliers, including Jinko and LONGi. According to Frost & Sullivan, in 2022, the world's top 10 wafer manufacturers accounted for 89.4% of global production. The top four companies, including Jinko and LONGi, account for 60.5% of global wafer production, indicating that the industry is highly concentrated.

JinkoSolar's revenue in the first three quarters of 2024 was 71.8 billion yuan, down 16% year-on-year; the net profit attributable to the parent company was 1.215 billion yuan, a year-on-year decrease of 80%; The net profit after deducting non-attributable to the parent company was 476 million yuan, a year-on-year decrease of 92%.

JinkoSolar said that in recent years, the photovoltaic industry has developed rapidly, and the leading enterprises in all links of the industrial chain have relied on the advantages of capital, technology, cost and channels to continuously expand their scale, expand production or extend the industrial chain around the upstream and downstream of the industry, and further concentrate industry resources on a small number of photovoltaic enterprises, making the competition in the photovoltaic industry more and more fierce. With the expansion of industry capacity and technological progress, the price of photovoltaic products has gradually decreased, and photovoltaic companies are facing more fierce competition in cost control and product performance. In addition, in recent years, some Chinese photovoltaic companies have built new production capacity in overseas regions represented by Southeast Asia and increased their efforts to develop overseas markets, which has intensified the competition in overseas markets.

"If the growth rate of the downstream application market is lower than the expansion expectation or even declines in the future, the above-mentioned capacity expansion will further intensify the disorderly competition in the industry, resulting in an unreasonable decline in product prices and a decline in corporate profits, so the photovoltaic industry may face the risk of supply and demand mismatch caused by competitive expansion." JinkoSolar said.

LONGi Green Energy said that in the first three quarters of 2024, it achieved operating income of 58.593 billion yuan, a year-on-year decrease of 37.73%; The net profit attributable to shareholders of listed companies and the net profit attributable to the parent company was -6.505 billion yuan, a year-on-year decrease of 155.62%. Since 2024, due to the continuous impact of the mismatch between supply and demand in the photovoltaic industry, the prices of products in all aspects of photovoltaic have fallen sharply, and the company has suffered a phased operating performance loss. In terms of the industry situation, LONGi Green Energy said: "The global new installed PV capacity has maintained rapid growth from a high base, but the mismatch between supply and demand in the industry has intensified, the price of the industrial chain has continued to decline, overseas trade barriers have continued to increase, and the evolution of technology iteration has accelerated, which has brought unprecedented severe challenges to the operation of enterprises." ”

When will the industry bottom? There is a lot of controversy in the industry

When will the "price war" in the PV industry end? When will the dilemma of large-scale losses in the industry be reversed? It has set off a big controversy in the industry.

A senior investment banker in Hong Kong told the first financial reporter that the industry overcapacity dilemma has led to some photovoltaic companies falling into losses, of course, they will also encounter the problem of shortage of funds, which is more necessary to raise funds to tide over the difficulties, but also to see whether investors have the patience to wait for the recovery of the industry, the industry downtide may give long-term funds a relatively favorable price of shares, investors should rationally look at the current predicament of the photovoltaic industry.

From December 4th to 6th, the 2024 Photovoltaic Industry Annual Conference co-sponsored by the China Photovoltaic Industry Association and the Yibin Municipal People's Government was held in Yibin, Sichuan. The heads of industry supervisory units, associations and leading enterprises said that the whole industry should strengthen self-discipline and carry out the work of optimizing stock, controlling increments and improving quality as soon as possible.

Li Hengyuan, an analyst at Guosen Securities, said that in the near future, relevant government departments and industry associations have actively promoted photovoltaic enterprises to strengthen industry self-discipline and avoid "involution" competition. Lu Rixin, an analyst at Orient Securities, said that the signing of the self-discipline convention means that photovoltaic companies will begin to control production capacity, achieve a balance between supply and demand, or stabilize market prices, avoid vicious competition, and promote the healthy and sustainable development of the industry.

Junda Energy's prospectus expresses uncertain concerns about this kind of industry self-regulation: industry associations promote, among other things, preventing vicious competition by selling products below cost, integrating market players in the PV industry, and ensuring the sustainable development of China's PV industry. "While these draft government comments may not be implemented in a timely and adequate 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 players in various sectors to some extent."

Similar to other fast-growing industries, the PV industry is also facing challenges from competition, resulting in significant price volatility since the fourth quarter of 2023, Junda New Energy said. "Compared to other renewable energy sources such as wind and hydropower, photovoltaics are more suitable for different scales, have a wide range of available resources, and have minimal geographical constraints. As a result, PV is expected to be the world's largest source of renewable electricity by 2027 in terms of cumulative installed capacity. ”

"It's hard to predict, we think it's going to be 5 to 8 years!" When talking about how the photovoltaic industry can get out of the price war dilemma in recent years, Chen Yonglan, managing director of Singapore Fullerton Fund, made the above prediction to reporters. Chen Yonglan said, "What I am worried about now is not the 'involution', but the 'out-volume' of Chinese enterprises. For example, many PV companies are clustered in some countries in Southeast Asia to produce PV cells or modules, and then eventually it becomes a price competition. Chen Yonglan suggested that the industry should set the rules of the game, as Chinese companies in industries such as photovoltaics account for 60% to 70% of the world's production capacity, and it is expected that some inefficient companies will be integrated and acquired by high-quality companies, or go bankrupt.