LONGi demonstrates strong resilience in the face of losses.
On April 29, LONGi (601012:SH) released its annual report for 2023, reporting an operating income of CNY 129.498 billion during the reporting period, achieving over CNY 120 billion in revenue for two consecutive years. Due to the rapid decline in prices across the industry chain and the impact of impairment provision, the net profit attributable to the company's shareholders, excluding non-recurring gains and losses, was CNY 10.834 billion, with a comprehensive gross profit margin of 18.26%. As of the end of 2023, the company's asset-liability ratio was 56.87%, with sufficient cash reserves, maintaining a sound financial condition and risk resistance amid industry operational fluctuations during the downward price trend.
Under severe supply-demand imbalances, the prices of photovoltaic products plummeted sharply in 2023, particularly since the fourth quarter of 2023, with module bidding prices repeatedly hitting new lows, dropping to below CNY 1 per watt. According to InfoLink data, in 2023, the price of polysilicon material fell by approximately 70%, silicon wafer prices by about 60%, and module prices by about 50%. Disorderly low-price competition greatly damaged companies' profit margins.
Affected by this, in 2023, LONGi conducted impairment tests on assets showing signs of impairment, intending to make impairment provisions of CNY 7 billion, mainly including a CNY 5.2 billion provision for inventory markdown and a CNY 1.6 billion provision for fixed asset impairment. The company achieved an operating income of CNY 17.674 billion in the first quarter of 2024, a year-on-year decrease of 37.59%.
During the reporting period, LONGi actively accelerated the capacity upgrade and production of HPBC and TOPCon, with the Xi'an annual capacity of 29GW and the Taizhou annual capacity of 4GW for high-efficiency HPBC battery production fully operational. Projects such as the Ordos annual capacity of 46GW silicon rod and silicon wafer, 30GW battery, and 10GW component production in Wuhu have been successively put into operation. With the accelerated transformation of capacity towards future technologies, the company expects to achieve a silicon wafer shipment target of 135GW and a battery and component shipment target of 90-100GW in 2024.
In addition to the imbalance in the value of the industry chain, the short-term performance fluctuations of LONGi are closely related to the iterative upgrade of old and new production capacities. This year, LONGi's Jiaxing Lighthouse Factory, representing the highest level of intelligent manufacturing and digitization in the global photovoltaic industry, was completed. The Jiaxing Lighthouse Factory has implemented more than 30 digital technologies to drive intelligent manufacturing, reducing unit manufacturing costs by 28% within a year, decreasing yield losses by 43%, and reducing production delivery cycles by 84%, with a 20% reduction in unit energy consumption. In the future, LONGi's other global production bases will take the Lighthouse Factory as an excellent case, continuously optimizing production cost reduction measures to promote broader cost reduction and efficiency improvements.
In 2023, LONGi achieved a shipment of 125.42GW of monocrystalline silicon wafers (of which 53.79GW were sold externally), 5.90GW of monocrystalline cells sold externally, and a shipment of 67.52GW of monocrystalline modules (of which 66.44GW were sold externally). In the first quarter of 2024, the company achieved a shipment of 26.74GW of monocrystalline silicon wafers (with 12.43GW sold externally), a year-on-year increase of 12.26%; 1.51GW of monocrystalline cells sold externally, and a shipment of 12.89GW of monocrystalline modules (with 12.84GW sold externally), a year-on-year increase of 16.55%.
The report indicates that LONGi has successfully developed the second-generation HPBC product, which can achieve a component power output 5% higher than that of the same specification TOPCon components, increasing the power generation throughout the entire life cycle of the power station by 6.5% to 8%, and is planned to be launched in the second half of 2024. LONGi Chairman Zhong Baoshen previously revealed that the efficiency of the new product will be at a globally leading level, breaking free from homogeneous competition. The company is accelerating the PERC capacity transformation, and its products are expected to be in a very significant leading position in 2025.
LONGi adheres to the concept of innovation for development. In 2023, the company invested CNY 77.21 billion in research and development, accounting for 5.96% of its operating income. Focused on cost reduction and efficiency improvement, the company upgraded its BC technology products and conducted research and development on next-generation technologies, continuously tracking investments in TOPCon, HJT, and tandem junction (TJ) technologies. This effort resulted in the creation of the world record "double champion" with a 27.09% efficiency for rear-contact monocrystalline silicon heterojunction solar cells and a 33.9% efficiency for monocrystalline-perovskite tandem solar cells, further solidifying the company's research and development capabilities and cutting-edge technological reserves.
In 2024, the industry is expected to enter an accelerated phase of elimination. The global operational capabilities of enterprises, including marketing, technological research and development, financing, operational management, and business model innovation, will become the focus of competition. The competitive landscape will accelerate differentiation, and short-term industry pains will not affect the long-term value of leading enterprises.
Affected by the rapid decline in industry chain prices and tightening market financing policies, highly leveraged enterprises with homogeneous products are beginning to exit the market. Longi’s founder and president, Li Zhenguo, stated in a program “Dialogue and Outlook for the New Year” on CCTV that being overly aggressive could lead to problems, while being too conservative could also lead to elimination. From 2021 to 2023, Longi’s asset-liability ratios were 51.31%, 55.39%, and 56.87% respectively. With excellent manufacturing capabilities and a healthy financial position, the company has consecutively received the highest financing rating recognized by PV ModuleTech for multiple years, maintaining an industry-leading financial health index, demonstrating a strong ability to cope with industry risks.
During the reporting period, the company optimized and enhanced its overseas production capacity layout. Overseas supply capacity was further enhanced, with projects such as the 2.8GW module in Malaysia, the 3.35GW battery in Vietnam, and the orderly progress of the 6.6GW silicon rod project in Malaysia. With the company’s 5GW module joint venture factory in Ohio officially put into operation in the first quarter of 2024, the company’s shipping capacity in the US market will be enhanced.
As the market clears out outdated production capacity, companies with leading products will gradually see their performance restored. Zhong Baoshen, Chairman of Longi, stated that the overall business of the company will show a low-to-high trend throughout the year, with incremental improvements each quarter. The overall shipping growth rate of Longi Green Energy this year will not be lower than the industry average, and product shipments will continue to grow steadily. Over the next three years, the company expects the annual production capacity of monocrystalline silicon wafers to reach 200GW, with Tai-Rui silicon wafers accounting for over 80% of the production; BC cell annual production capacity will reach 100GW; and monocrystalline module annual production capacity will reach 150GW.
As of the time of publication, Longi Green Energy's stock is priced at CNY 18.2 per share, with a total market capitalization of CNY 37.9 billion.