The PV industry's capacity scale is expanding dramatically, while price war is getting more intense, companies should enhance their competitiveness through innovation.
On the evening of October 30, LONGI Green Energy Techonology (601012:SH) disclosed the financial report for the third quarter of 2023. In the first three quarters of this year, LONGI realized revenue of CNY 94.1 billion, with a year-on-year increase of 8.55%; net profit of CNY 11.694 billion, also up by 6.54% year on year. For the third quarter solely, LONGI's revenue was CNY 29.45 billion yuan and net profit was CNY 2.515 billion, both of which presented a downward trend year-on-year.
In the report, LONGI indicated that in the first three quarters of 2023, the global photovoltaic market maintains strong demand, along with the rapid expansion of new production capacity through the industrial chain and the continuous decline in industrial chain prices, the competition in the photovoltaic industry has further intensified. Specifically, the slump in industry chain prices has affected corporate performance significantly. Given that LONGI has participated in the upstream silicon project while silicon prices fell sharply this year, the investment benefit obtained from participation in the silicon project is supposed to shrink.
In terms of industry competition, Zhong Baoshen, the chairman of LONGI, revealed during the SNEC Photovoltaic Exhibition in May 2023 that in the past 18 years, domestic enterprises have constructed almost 380GW of whole industrial chain projects. However, just in the last two years, the industry has achieved more than 380GW of industrial chain projects, which is the same as the development scale in the past 18 years.
Confronting the new situation of the PV industry's dramatic expansion of production capacity scale, overcapacity and potential vicious price wars have become a concern for the industry. Recent data from the Silicon Industry Branch demonstrated that the two first-tier companies' operating rates remain at 90% and 80%, the integrated companies' operating rates have dropped to between 80% and 100%, while the rest of the companies' operating rates have reduced to between 50% and 70%. Li Zhenguo, founder and president of LONGI, also pointed out that serious overcapacity problems has already arisen in PV industry, and the first to be hit will be those companies that are not adequately prepared for the impact, while companies with poorer financial status and less advanced technology face the greatest risk, and more than half of China's PV industry manufacturers may be forced to withdraw from the market in the near two to three years.
In addition, the bidding prices of some manufacturers in the recent component bidding conducted by Chinese central State-owned enterprises was below 1 CNY/W, worrying the industry. According to industry estimates, the price of the battery is approximately 0.6 CNY/kW‧h, encapsulation costs an average of 0.6 CNY/kW‧h, a minimum of 0.5 CNY/kW‧h, indicating that the manufacturing costs for component companies is at least 1.1 CNY/kW‧h, coupled with other costs to more than 1.2 CNY/kW‧h. Regarding the current industry situation, many strongly opposed the vicious competition, which will seriously damage the brand of China's photovoltaic enterprises, the industry should be shifted from price wars to technological innovation, to enhance the quality of production capacity and alleviate sightless productivity expansion.
In this context, LONGI has taken the lead in reducing the speed of production expansion since 2022, strengthening its differentiated competitive advantages, and accelerating the pace of industrialization of new technologies. On the one hand, according to the third quarterly report, LONGI has adhered to the "close to the customer" business strategy, based on meeting the needs of customers in a variety of application scenarios to enhance the value of the product, optimize customer service, and establish a sustainable differentiation competitive advantage. It is reported that from January to September this year, LONGI has realized monocrystalline silicon wafers external sales of 37.45GW, monocrystalline batteries external sales of 4.71GW, and monocrystalline module shipments of 43.53GW, of which external sales of 43.12GW, self-use 0.41GW.
On the other hand, in September 2023, LONGI officially announced that it would bet big on BC battery technology, becoming one of the most important industrial new trends. At the crossroads of technology iteration, LONGI is firmly optimistic about the BC technology investment, and has reversed the previous situation of BC technology, which was difficult and costly, by launching HPBC batteries to make BC technology competitive. In October 2023, LONGI released Hi-MO X6, an anti-dust accumulation module, and upgraded and evolved on the basis of Hi-MO 6 products, equipped it with the major features including aesthetics, high power generation efficiency, safety and reliability, and anti-dust accumulation. In the report for the third quarter, LONGI illustrated that during the reporting period, the company has focused on the iterative upgrading and industrialization of high-efficiency BC technology and continued to improve the mass production yield and conversion efficiency of HPBC products. Meanwhile, with corporate high-efficiency BC technology R&D in-depth and capacity construction advancement, the higher performance HPBC pro cell capacity is expected to put into production by the end of 2024.
From the perspective of industry analysts, based on the third quarterly report, TOPCon manufacturers are enjoying the dividends brought by the expansion of production, and from the viewpoint of LONGI's strategic decision, it has made efforts on shrinking the production expansion while switching to BC batteries with higher conversion efficiency. "LONGI is accelerating the switch from PERC capacity to BC technology, which can be proved by the company's fixed asset depreciation. At the same time, LONGI has a more long-term intention, hoping to realize the lead after storing power through BC capacity release and construct technological barriers," analyzed by industry professions.
It is worth mentioning that in addition to the disclosure of the third quarterly report, LONGI also announced that the company received a notice from the chairman of the board of directors, Zhong Baoshen, Zhong Baoshen intends to increase the company's shares through the SSE system allowed within 12 months from the date of the disclosure of this announcement, the amount of the increase in the company's shares is not less than CNY 100 million and not more than CNY 150 million, withno price range for this increase. Data show that as of October 30, 2023, Zhong Baoshen holds 98,358,000 shares of LONGI, accounting for 1.30% of the total number of shares.
As of press time, LONGI closed at CNY 24.31 apiece, with a market capitalization of CNY 182.9 billion.