Interface News Reporter Tao Zhixian

Interface News Editor: Chen Feiyao

Money-strapped JA Solar (002459. SZ) began to "reach out" to the Hong Kong market.

In order to further promote the global development strategy, accelerate the globalization construction of the trinity of market, supply chain and R&D, build an international capital operation platform, enhance the international brand image, and improve capital strength and comprehensive competitiveness, the company plans to issue H shares and apply for listing on the main board of the Hong Kong Stock Exchange.

This is JA Solar's fifth fundraising in the past five years. In November 2019, the company raised 7.5 billion yuan through private placement, 5.2 billion yuan through private placement again in October 2020, 5 billion yuan through private placement for the third time in 2022, and 8.96 billion yuan through convertible bonds in July 2023. Through private placement and convertible bonds, the company has "harvested" 26.66 billion yuan of funds.

Why does JA Solar frequently raise funds? Why is the Hong Kong market targeted?

Why Fundraising?

Lack of money is the main reason for JA Solar's fundraising in the Hong Kong market, and the company's current debt level is relatively high. As of the third quarter of 2024, the company's disclosed asset-liability ratio reached 72.15%, and the current ratio and quick ratio were 1.12 and 0.87, respectively, indicating high debt pressure. Specifically, JA Solar's interest-bearing liabilities are 33.8 billion yuan, which is 1.07 times the net assets attributable to the parent company. Among them, non-current liabilities due within one year were 1.6 billion yuan, short-term borrowings were 10 billion yuan, long-term borrowings were 13.6 billion yuan, and bonds payable were 8.6 billion yuan. It is precisely because of the large interest-bearing liabilities that a large amount of financial expenses are incurred. The annual financial expenses in the first three quarters were as high as 280 million yuan, which is also one of the important reasons for the company's losses.

Asset impairments also dragged down JA Solar's profits. In the first three quarters, the company made an asset impairment provision of 547 million yuan, and a loss of 484 million yuan in the same period.

In addition to the high level of debt, JA Solar also has hidden debts guaranteed externally. As of January 31, the balance of the company's guarantees for the subsidiaries within the scope of the consolidated statements, mutual guarantees between the subsidiaries, and guarantees provided by the subsidiaries for the company was 59.284 billion yuan (of which the guarantee amount is the foreign currency converted at the exchange rate at the end of the month), accounting for 168.82% of the company's audited net assets attributable to shareholders of listed companies in 2023.

It is worth noting that at the end of 2024, JA Solar provided guarantees for its subsidiaries within the scope of the consolidated statements, mutual guarantees between its subsidiaries, and a balance of guarantees provided by its subsidiaries for the company was 56.365 billion yuan, and the amount of JA Solar's guarantee was expanded in just one month.

Faced with the pressure of huge debt, JA Solar did not choose to shrink and continued to expand production. As of the end of June 2024, the company also has an annual output of 30GW of crystal pulling, 10GW silicon wafers and 10GW modules in Ordos High-tech Zone announced in June 2023, with a planned investment of 6.02 billion yuan and a construction period of 36 months.

In addition, at the end of December 2024, JA Solar announced that it plans to invest 3.957 billion yuan to build an annual output of 6GW of high-efficiency solar cells and 3GW of high-power solar modules in Oman, accounting for 11.27% of the latest audited net assets. In the face of financial pressure, the company also admitted that "the investment and construction of the above-mentioned projects may cause pressure on cash flow, and there may be a risk that the progress or scale of fund raising will not meet expectations, which will affect the investment scale and construction progress of the project." ”

With large debts and huge investments, JA Solar is in dire need of funds. Interest-bearing liabilities of 33.8 billion yuan were superimposed on notes payable and accounts receivable of 21.7 billion yuan, totaling 55.5 billion yuan; The company's account funds are 24.2 billion yuan, notes receivable and accounts receivable totaling 9 billion yuan, plus inventory of 12 billion yuan and prepayment and other receivables of 2.7 billion yuan, the total of the four is 47.9 billion yuan. In the future, JA Solar urgently needs to complete this investment project of nearly 10 billion yuan.

Why Hong Kong stocks?

In addition to the lack of money, JA Solar is also mired in losses. According to the performance report, the company's attributable net profit in 2024 will be a loss of 4.5 billion yuan to 5.2 billion yuan, and the non-net profit will be a loss of 4.16 billion yuan to 4.86 billion yuan. Considering the loss of 484 million yuan in the first three quarters of 2024, the company suffered a huge loss of 3.676 billion yuan to 4.376 billion yuan in a single quarter in the fourth quarter.

Regarding the loss, JA Solar explained that due to the continuous impact of the mismatch between supply and demand in the photovoltaic industry, the intensification of market competition, the sharp decline in the prices of major products in all links, and the increasingly severe international trade environment, the profitability of the company's main business continued to decline. At the same time, the company conducts impairment tests on long-term assets that show signs of impairment and makes provision for asset impairment, which has a greater impact on performance.

The PV industry has entered an era of overcapacity. According to CPIA analysis, under the optimistic scenario, the new installed capacity of the global PV market is expected to reach 430GW in 2024, an increase of 10%. It is estimated that in 2025, the global new PV installed capacity will reach 462GW (the increase is only in single digits), and the new domestic PV installed capacity will reach 237GW. In contrast, the production capacity of polysilicon, wafers, cells and modules all exceeded the total global demand.

Faced with the risk of falling prices in the entire industry, the disorderly expansion of the industry began to tighten. In July 2024, the official website of the Ministry of Industry and Information Technology issued the "Standard Conditions for the Photovoltaic Manufacturing Industry (2024 Edition)", which requires that the release of inefficient production capacity will be suppressed, photovoltaic manufacturing projects for the purpose of simply expanding production capacity will be reduced, and small and medium-scale production capacity that does not meet the standards will be gradually cleared; In October, the Photovoltaic Industry Association issued a document stating that "winning bids below cost is suspected of violating the law".

At the same time, the capital side has also begun to shrink. In July 2024, Trina Solar terminated its RMB 10.9 billion private placement plan; JinkoSolar terminated the RMB 9.7 billion private placement. Earlier, in September 2023, Tongwei cancelled its 16 billion yuan fixed increase plan. The huge fundraising in the A-share market in the photovoltaic industry seems to have pressed the pause button, which is the main reason why JA Solar chose the Hong Kong market this time.

It is worth mentioning that JA Solar, which borrowed money to expand, did not perform well on the business side. In the first three quarters of last year, the company's gross profit margin was only 5.4%, a new low in the past five years. In contrast, the main competitor JinkoSolar (688223. SH), LONGi Green Energy (601012. SH) and Trina Solar (688599.SH) gross profit margins were 9.68%, 7.98% and 12.46%, respectively, for the same period. JA Solar has the lowest gross profit margin among the first echelon of PV.

At a time when the whole industry is reducing leverage, JA Solar, which has a low gross profit margin, is "bucking the trend" and increasing leverage.