The current photovoltaic industry is in a period of adjustment, and the shipment volume of N-type products has become the profit "winner" of the main industry chain (silicon industry chain, the same below) companies.
On April 22, leading component company Jingke Energy (688223. SH) released its 2023 annual report. With a significant increase in N-type component shipments, the company surpassed Longi Green Energy (601012. SH) after three years (2020 to 2022) and returned to the top spot in shipment volume.
The financial report shows that in 2023, Jingke Energy shipped 48.41GW of N-type components, a year-on-year increase of 352%. The company achieved 118.682 billion yuan, a year-on-year increase of 43.55%, and the scale of operating revenue exceeded 100 billion yuan for the first time; Realized a net profit attributable to the parent company of 7.44 billion yuan, a year-on-year increase of 153.2%. The company plans to distribute a cash dividend of 2.24 yuan (including tax) for every 10 shares, plus the amount of repurchased shares. The total annual dividend amount is 2.535 billion yuan, with a dividend ratio of 34.06%.
Looking at the quarterly profit performance of Jingke Energy, there was a rare year-on-year month on month decline since its listing in the fourth quarter of last year, mainly due to the sharp drop in industry chain prices, high proportion of domestic shipments, and year-end destocking work. As of April 23rd, the company's stock price was reported at 7.5 yuan, approaching its lowest point since going public (7.28 yuan), and has fallen by 15.35% this year, significantly underperforming the overall market.
Since the beginning of this year, the profitability of the photovoltaic main industry chain has bottomed out in the first quarter. Except for N-type batteries, all other links in the main industry chain have suffered losses, and it is difficult to clear the entire industry's production capacity in the short term.
Large volume of N-type products drives performance to new highs
The photovoltaic industry is undergoing a transition period from P-type products to N-type products, with intensified competition and supply-demand imbalance being the main tone of the current industry chain under the fluctuation of industry cycles. At this stage, for enterprises with a first mover advantage in N-type production capacity, their competitive advantage will be relatively amplified.
In 2023, benefiting from the increased shipment of N-type components, Jingke Energy's operating revenue, net profit attributable to the parent company, and net profit attributable to the parent company after deducting non recurring expenses all reached historic highs. According to the financial report, the company shipped a total of 83.56GW of solar photovoltaic products in 2023, including 78.52GW of photovoltaic module shipments. Among them, the shipment of N-type components was 48.41GW, accounting for about 62%, a year-on-year increase of 352%, which is the main reason for driving the growth of revenue and net profit.
Due to the theoretical extreme conversion efficiency of P-type products, the shipment proportion of N-type photovoltaic products has rapidly increased in the past two years, and N-type TOPCon has gradually become the mainstream technology. According to PVInfoLink data, the shipment of N-type high-efficiency products exceeded 130GW in 2023, accounting for approximately 25% of the total. According to SMM's forecast, the proportion of N-type battery production in the first quarter of 2024 has exceeded 60%.
A relevant person in charge of a leading component factory said in an interview with reporters that since the photovoltaic industry cycle entered a downturn, the imbalance between supply and demand has been the main contradiction, and it is expected that N-type products will still be the winner of the performance of the component sector in the next 1-2 years.
Scale effect is the advantage of leading enterprises, but it is also difficult to offset the negative impact of price reduction in the industrial chain. Last year, the prices of the main photovoltaic industry chain rose first and then fell, and some products experienced a cliff like price reduction that exceeded market expectations. The intensification of industry competition led to a sharp decline in profitability. Among them, the component price fell below 1 yuan/W, affecting the profitability of the component factory. Looking at the revenue and net profit performance of Jingke Energy from quarter to quarter, the impact of the industrial chain price drop is reflected in the income statement.
In the fourth quarter of last year, Jingke Energy achieved a revenue of 33.585 billion yuan, a year-on-year increase of 12.31% and a month on month increase of 6.71%, the lowest year-on-year growth rate of the year; Realized a net profit attributable to the parent company of 1.086 billion yuan, a year-on-year decrease of 13.97% and a month on month decrease of 56.75%, marking the first year-on-year decline since the third quarter of 2021; The net profit attributable to the parent company after deducting non recurring expenses was 857 million yuan, a year-on-year decrease of 24.13% and a month on month decrease of 65.87%.
Faced with a downturn in the industry, Jingke Energy stated that it will maintain a cautious pace of expanding production in 2024, prioritizing the landing of advantageous production capacity such as Shanxi's large base, while accelerating the elimination of outdated production capacity. Among them, the first phase project of the planned construction of a 56GW vertical integrated large base project in Shanxi's comprehensive transformation zone, 14GW, will gradually start production from March this year. The company revealed in the research summary that the second phase of the Shanxi base is expected to be put into operation by the end of July this year and is expected to be fully produced by the end of the year. It is expected that by the end of 2024, the advanced production capacity of silicon wafers, batteries, and components will reach 120GW, 110GW, and 130GW respectively, with N-type production capacity exceeding 100GW.
Downstream demand is expected to continue to grow this year, but it is difficult to break the supply-demand imbalance
Entering 2024, the main photovoltaic industry chain is still in a downward trend, with some links experiencing severe supply-demand imbalances, making it difficult for product prices to stop falling.
Based on the price performance last week (April 15-21), due to the extremely low volume of orders in the silicon material market, there have been no transactions for P-shaped and N-shaped rod shaped silicon, and no quotations have been formed. Silicon material companies have not signed large-scale orders for nearly three weeks.
The transaction volume in the silicon material market is light, mainly due to the almost cessation of raw material procurement for downstream silicon wafers, and the domestic silicon wafer production reached a new high in March. According to the Silicon Industry Branch, the domestic silicon wafer production in March was 69.75GW, a month on month increase of 9.04%, and the monthly output reached a new historical high. The imbalance between supply and demand has intensified, and the price of silicon wafers continues to decline. Last week, the average transaction price of M10 single crystal silicon wafers dropped to 1.76 yuan/piece, a decrease of 2.22% compared to the previous week; The decrease in the circumferential ratio of N-type monocrystalline silicon wafers is 7.10%; The cycle to cycle ratio of G12 single crystal silicon wafers decreased by 3.41%.
On April 22nd, the National Energy Administration released statistical data on the national power industry from January to March. From January to March this year, the newly installed capacity of photovoltaic power generation in China reached 45.74GW, a year-on-year increase of over 35.89%. The newly installed photovoltaic capacity in January and February reached 36.72 GW, a year-on-year increase of up to 80%, indicating a significant decline in the month on month growth rate in March, which has raised concerns in the market about the growth of demand for the whole year.
On the evening of April 23rd, Jingke Energy released the latest summary of institutional investor research. Based on this year's demand situation, the company predicts that the global market demand will increase by more than 20% this year, with an expected installed capacity of 500-550GW and component demand of over 650GW. China's demand growth is highly certain, and demand is expected to rapidly increase after European inventories decline. Regarding the current price performance of the component, there has also been a significant increase in product marketing inquiries for the component. The company estimates that the proportion of shipments from China in 2024 will be 30% to 40%, and the combined proportion of the US and European markets will increase from around 25% last year to 30% to 35%.
In the current downturn of the photovoltaic cycle, the progress of clearing production capacity determines when the prices of products in each link of the main industry chain will bottom out. This not only relates to the profitability of photovoltaic plants, but also involves the valuation and pricing of the photovoltaic sector. From the perspective of the first quarter of this year, only N-type batteries in the main photovoltaic industry chain achieved profitability, while other links suffered losses. Component products can only achieve profitability in a few overseas markets.
In terms of the clearance of component links, Jingke Energy stated in the research that the clearance of production capacity will be faster than people imagine. Production capacity without competitiveness, market capability, and technological iteration capability will accelerate the elimination.
"We believe that the stabilization and recovery of component prices is one of the signals that the industry has bottomed out. Component prices have rebounded to at least 1 yuan, and the current prices are too low. Overall, no matter how high the demand is this year, it cannot break the supply-demand imbalance, and there are still many production capacity plans in progress." said the relevant person in charge of the component factory.
As of the close on April 23, the stock price of Jingke Energy was at 7.5 yuan, a decrease of 15.35% for the year, and its valuation is at a low level since its listing. In the fourth quarter of last year, northbound funds increased their holdings of 48.7793 million shares of Jingke Energy, accounting for 1.19% of the total share capital. Guangfa Technology Pioneer Hybrid and Guangfa Industry Strict Selection have been newly appointed as the ninth and tenth largest circulating shareholders of the company for three years, holding 76.7804 million and 70.5857 million shares respectively.