In 1994, Buffett warned investors at the shareholders meeting: "Only after the low tide can you know who is swimming naked." This year, the financial crisis broke out in Mexico, the US stock market crashed, and many investors were unable to withstand the rugged capital market boom, and the naked swimmers could see at a glance.
Today, Buffett's famous saying is suitable for China's photovoltaic industry. After experiencing the 2012 shocks, China's PV industry has ushered in a six-year-long boom. A large number of companies have entered this hot market. Most companies rely on subsidies from the government to support the quarterly earnings. . However, after the "531 New Deal" that was suddenly promulgated by the regulatory authorities on June 1 this year, the enthusiasm began to retreat.
On October 30, PV companies released their third-quarter earnings. This is the second financial report issued by the photovoltaic company after the "531 New Deal", and it is also the first financial report really affected by the New Deal. According to the financial report, in the third quarter, most PV companies showed a sharp decline in financial indicators such as revenue, net profit, ROE, gross profit margin and cash flow; while indicators such as asset-liability ratio and equity multiplier appeared. Increased to varying degrees.
The founder of a photovoltaic company said ridiculously: "Now, in addition to selling assets and storing winter ammunition, the rest can only be paralyzed. Then secretly go to see if others are going to die, and luckily think that they will be the last one. Live it."
However, for a small number of PV companies represented by the single-chip leading Longji shares, they insist on high R&D investment all the year round, and adhere to a prudent financial strategy. After the ebb tide, they have a more competitive advantage.
For these companies, photovoltaic bonfire is a challenge and may also be an opportunity.
After the New Deal
"531 New Deal" refers to the "Notice on Matters Related to Photovoltaic Power Generation in 2018" jointly issued by the National Development and Reform Commission, the Ministry of Finance, and the National Energy Administration on June 1. Because the notice date is May 31, the industry This is called "531 New Deal."
The "Notice" stipulates that, except for the power station connected to the grid before May 31, the 2018 ordinary photovoltaic power station index will be suspended. The industrial and commercial roof distributed project and the household household project that did not need the index will be changed to the 10GW scale index, and the new investment will be made. The on-grid electricity price of the transportation project was reduced by 0.05 yuan/kWh.
After the introduction of the "most stringent" photovoltaic policy in the history, it is like throwing a blockbuster in the entire photovoltaic industry, so that the newly developed segmentation industry in the hot state is immediately in a state of shock. .
After the introduction of this policy, Wang Si, deputy director of the Photovoltaic Committee of the China Renewable Energy Society, set up a letter to the Photovoltaic Special Committee, saying that the photovoltaic "531" photovoltaic on-grid price adjustment new policy will cause a devastating blow to such an excellent photovoltaic manufacturing industry.
In his view, the New Deal is "deliberately trampling on a compliance distributed PV project", which will cause the photovoltaic manufacturing industry to collapse, with losses exceeding one trillion yuan and affecting the employment of 2.5 million people.
First and foremost is the stock price of PV listed companies. Within one week after the New Deal came out, the market value of PV listed companies lost more than 300 billion yuan. Take the A-share listed company Tongwei Co., for example, the company's share price before the New Deal on June 1 was 11.27 yuan. After the New Deal was issued, the stock price fell all the way, the lowest was 4.96, and the stock price fell 56%.
"Many small companies have closed down, and it is not uncommon to stop production, cut production, limit production, layoffs. The most frightening thing is that next year may be more difficult than this year, and it will definitely not be a new beginning." Person.
Another direct impact is the sharp fall in the price of photovoltaic products.
In the first half of this year, the price of PV modules was 2.5 yuan / watt. After five months of the PV New Deal, the price of PV modules has dropped to 1.8 yuan / watt. "At the beginning of next year, everyone expects the price to fall by 1.5 yuan / watt, down 40% before and after, and can not see signs of price return." The founder said.
The data shows that as of October 22, the single crystal industry chain has cut prices ten times a year, and the price of monocrystalline silicon wafers has dropped from 5.4 yuan to 3.05 yuan per piece, a decrease of 43.5%; while the polycrystalline industrial chain has fallen from 4.7 yuan per piece. To 2.17 yuan / piece, the price cut is 2.53 yuan, a decrease of 53.8%.
The sharp drop in product prices was directly affected by the operating performance of PV companies, and the profits and revenues of many PV companies were significantly affected. For example, on October 27, Dongfang Risheng (300118) released its third quarterly report, showing revenue of 6.84 billion yuan in the first three quarters, down 8.49% year-on-year; net profit attributable to shareholders of listed companies was 211 million yuan, down 51.04% year-on-year. .
Although the entire photovoltaic industry is clamoring for the "531 New Deal," companies such as Longji and Tongwei (600438.SH) have been relatively small. Tongwei's third quarterly report showed that the company achieved operating income of 21.387 billion yuan, an increase of 9.04% year-on-year; the net profit attributable to shareholders of listed companies was 1.66 billion yuan, an increase of 8.59%;
On October 30, Longji’s third-quarter earnings report showed that the company achieved operating income of 14.671 billion yuan, a year-on-year increase of 35.26%. The net profit attributable to the parent company in the first three quarters reached 1.691 billion yuan.
Carnival sequelae
In a letter sent to the PV Special Committee, Wang Sicheng said, "China's new installed capacity of photovoltaic power generation has been the world's number one for five consecutive years, and its cumulative installed capacity ranks first in the world for three consecutive years."
According to industry insiders, the production capacity of China's photovoltaic industry has already been seriously oversupplied. "The new policy was introduced in order to limit the speed of development and step on the brakes," said a person close to the regulatory level.
Another reason for the introduction of the New Deal is that subsidies for new energy sources are hard to bear the growth rate of the photovoltaic industry, and subsidy arrears are increasing. Data show that as of the end of 2017, China's subsidies for new energy reached 150 billion yuan, of which the gap in photovoltaic subsidies accounted for more than 50%.
"These subsidies will last for 20 years, the amount of subsidies will be superimposed every year, the gap will be bigger and bigger, and the burden will be heavier and heavier," said the person close to the regulatory level.
The Chinese PV power plant market began in 2009. In order to accelerate the industrialization and large-scale development of domestic photovoltaic power generation, the regulatory layer launched the “Golden Sun Project†– a financial subsidy to support photovoltaic power generation demonstration projects of not less than 500 MW.
These demonstration projects are eligible for a 50% subsidy, and even subsidies in remote, unpowered areas are as high as 70%. High subsidies have made PV practitioners rush. In 2011, the project size included in the Golden Sun Demonstration Catalogue was 677 MW.
A year later, the scale soared to 4.54 GW, nearly seven times, but the proportion of real-time grid-connected power generation was less than half. This “investment subsidy†stimulus has been controversial, and the photovoltaic power generation market has been caught in various chaos.
In the first round of “enclosure movement†in the photovoltaic industry, under the expulsion of capital, in the Gobi Desert and the desert in the western provinces of China, solar photovoltaic ground power stations have risen to the ground and become a unique local landscape.
However, investors quickly discovered that because of the inability to absorb so much electricity in the local area, the electricity generated by these large-scale ground power stations is difficult to transport to the power grid system, and the power disposal in the western power stations is becoming more and more serious. In 2016, the average light rejection rate in western China reached 20%.
Another battleground for photovoltaic applications is in the household market, which began in 2016. Compared with the distribution of photovoltaic industry in developed countries such as Europe, America and Japan, the development of distributed photovoltaic power generation in China is relatively lagging behind.
According to the National Energy Administration, by the end of 2016, China's PV power plants had a cumulative installed capacity of 67 GW and a distributed cumulative installed capacity of 10.32 GW.
Since the beginning of 2016, the regulatory authorities have begun to introduce various support policies. According to the plan, in 2020, China's distributed photovoltaics will reach 60 GW. In 2015, this figure was only 6 GW.
Stimulated by policy support and subsidies, the development of distributed photovoltaics is like a dislocated wild horse, which has begun to stall and cause regulatory concerns. In 2017 alone, the installed capacity of photovoltaic power generation in China reached 53GW, and the total installed capacity of photovoltaic power generation in the country reached 130GW. Among them, distributed new installed capacity exceeded 19GW, an increase of 3.7 times.
The large and small PV companies in which they are located have been able to get a subsidy and start an “arms race†with continuous expansion of production capacity. However, after the carnival, the "sequel" began to stand out.
The most obvious "sequel" is reflected in the business data. Compared with 2015 and 2016, the operating data of PV companies began to decline significantly last year. "This is the result of seizing the market, price competition, overcapacity in the entire industry." The founder of the above-mentioned photovoltaic company said.
Through the statistics of the operating data of seven listed PV companies at home and abroad, it can be found that from 2015 to 2017, the six listed companies experienced a sharp decline in the return on net assets, net profit margin, gross profit margin and cash flow; The rate and asset-liability ratio have increased significantly.
For example, in the case of Jinko Energy, which ranks first in terms of shipments, the company's 2015-2017 ROE is 17.47%, 33.88%, and 2.16%, respectively; gross profit margin is 20.34%, 18.08%, and 11.30%; The net cash flow generated was 1.339 billion yuan, 1.803 billion yuan, and -1.777 billion yuan.
Since most of the PV companies were in an unknown state before the promulgation, the “531 New Deal†was controversial, but it also reflected the regulatory concerns about the current situation of the PV industry.
Challenges and opportunities
In order to cope with the aftermath of the "531 New Deal," the photovoltaic company began to sell the power of the power plant in hand to survive this year's "cold winter."
Less than 14 days after the introduction of the New Deal, Xingye Solar (00750.HK) announced that it is planning to sell a 25 MW photovoltaic power station in Minqin County, Gansu Province at a consideration of RMB 204 million. The statement is to improve cash flow and increase working capital.
From June to the present, similar sales behaviors are not uncommon. The founder of the above-mentioned photovoltaic company said that after the introduction of the 531 New Deal, the future will be prejudged. Once the cash flow deteriorates, bank lending may occur at any time, and it can only be forced to sell some high-quality power station assets to fill the air," the source said.
Although some small photovoltaic companies have been closed down since June, for the photovoltaic giants, "cold winter" is not necessarily a bad thing. Among China's PV companies, Longji's "Winter of the Winter" may be worth learning.
"Longji is willing to invest heavily in research and development, and it gives the outside world the impression that it has been relatively stable and will not show much fluctuations." An industry analyst said, "its success is worth learning from all PV companies."
Not long ago, the founder of Longji shares, Li Zhenguo and the president, revealed two secrets when they participated in an energy summit: high investment in research and development and healthy financial status. The company insists on investing 5%-7% of its operating income each year in research and development; at the same time, the company's debt ratio has remained at around 50%.
In terms of R&D investment, Longji shares have been ranked first in the industry. In the first half of this year, R&D expenditures of Longji shares were 719 million yuan, a year-on-year increase of 61.80%, and R&D expenditures accounted for 7.18% of operating income. In the photovoltaic industry, most companies account for only about 1% of R&D investment.
The emphasis on R&D investment has also led to a significant reduction in the company's product costs. Through the analysis of the financial data of 2015-2017, it is found that the business data of Longji shares are better than the peers.
In 2015-2017, the weighted average return on equity of Longji shares was 11.81%, 21.77%, and 30.14%, respectively; the gross profit margin was 20.37%, 27.48%, and 32.27%, respectively, both of which were the highest in the industry.
Since its listing in 2012, Longji has grown at a rate of more than 50% annually. In 2012, the company's operating income was only 1.7 billion yuan, and in the first half of this year it exceeded 10 billion yuan.
However, the rapid development rate has caused Longji shares to be controversial. However, Zhong Baoshen said in an interview last year that "the downstream development is fast and the prudent financial strategy is not contradictory. If the aggressive strategy is adopted, the company can develop faster."
Another "secret" of Longji shares is a cautious expansion strategy.
As can be seen from the financial data, in 2015-2017, the net cash flow from operating activities of Longji shares rose from 360 million to 1.24 billion yuan; and the data index representing the size of the company's financial leverage - equity multiplier, Longji shares It only rose from 1.81 to 2.31. In contrast, Jinko Energy's data is 4.28 in 2017 and Artes is 5.56.
The equity multiplier refers to how many times the total assets are the total equity of the shareholders. It reflects the size of the financial leverage of the enterprise. The greater the equity multiplier, the smaller the proportion of capital invested by the shareholders in the assets, and the greater the financial leverage. .
"After the introduction of the New Deal, everyone discovered that who is naked in the naked eye, those companies with food in hand can really do not panic. But it also forces the photovoltaic industry to focus on technological innovation from another level, this Perhaps it is the future of photovoltaics," said the founder of the photovoltaic company.
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