"Airstrikes" continue Longi Green Energy Technology (601012.SH) fell by 400 billion.

Leading photovoltaic giant LONGi Green Energy Technology (601012.SH) sees its stock price continue to decline. On June 7, the company's stock price plummeted by over 3% in the short term, hitting a new low in nearly 4 years. So far this year, LONGi Green Energy Technology has dropped by about 27%. If calculated from the peak in 2021, the cumulative decline is as high as 77%, with a market value evaporating more than 400 billion yuan. Recently, there have been rumors that LONGi Green Energy Technology has started to gradually shut down its component plant in Malaysia this week, and earlier last week, five production lines in the battery cell factory in Vietnam had also stopped working. In response to this, LONGi Green Energy Technology stated that the current industry environment is complex, and the company continues to analyze and evaluate key factors such as the global photovoltaic market and policies. In the eyes of outsiders, LONGi Green Energy Technology's involvement in rumors may be affected by the new US "516 Solar Policy", which will end the tax exemption policy for importing dual-sided CECEP Solar Energy panels from Malaysia, Vietnam, Thailand, and Cambodia after the expiration on June 6 this year. According to Huatai's research report, Chinese component companies currently mainly export to the United States through Southeast Asia. With the expiration of tax exemptions, they may face a significant increase in tariffs. In addition, in the context of overcapacity and supply-demand imbalance in the photovoltaic industry, prices of related products continue to decline. As a leading company, LONGi Green Energy Technology's performance has declined in recent years, with a net profit decline of over 27% in 2023, and a loss of over 2.3 billion yuan in the first quarter of this year. Challenges in overseas expansion Public information shows that LONGi Green Energy Technology has been expanding into overseas markets since 2015, entering Malaysia in 2016, and setting up photovoltaic silicon rod, wafer, cell, and module manufacturing in Kuching and Bintulu in Sarawak State. In March 2016, the company established its overseas monocrystalline production base through the acquisition of assets from SunEdison in Kuching, Malaysia. Starting from that year, the industrial chain was extended and expanded to cover major links such as silicon wafers, cells, and modules. Since then, LONGi Green Energy Technology has continuously increased its investments in Malaysia, gradually forming a closed-loop industry chain from monocrystalline silicon wafers to cells and modules. On October 17, 2023, LONGi Green Energy Technology announced on its official WeChat account that the first phase of the LONGi Green Energy Technology Dan Chong component factory had officially started production. The project is part of the CECEP Solar Energy manufacturing base in Selangor, Malaysia, on the west coast in Dan Chong. The component factory project covers an area of 140 acres, with an investment of 1.8 billion Malaysian ringgit (about 2.8 billion yuan), using the most advanced technology, processes, and equipment in the photovoltaic industry. It is built in two phases, with a total module capacity of 8.8 GW (2.8 GW in the first phase and 6 GW in the second phase) upon completion. Media reports show that as of mid-October 2023, LONGi Green Energy Technology had invested approximately 8.3 billion yuan in Sarawak State. LONGi Green Energy Technology's expansion in Vietnam started later. The company's 2020 annual report stated that on June 30 of that year, it acquired 100% of the equity of Ningbo Yize in cash for 1.78 billion yuan. At that time, it was reported in the media that Ningbo Yize's production capacity bases in Vietnam were alleged to have an annual capacity of over 3 GW for photovoltaic cells and over 7 GW for photovoltaic modules. During an investor relations event last year, LONGi Green Energy Technology mentioned that as of August, part of its overseas production capacity in Malaysia and Vietnam had started production. The latest annual report also revealed that the 2.8GW component and 3.35GW battery projects in Malaysia and Vietnam, respectively, were gradually put into operation as scheduled, while the 6.6GW silicon rod project in Malaysia was progressing in an orderly manner. At an earnings conference on April 30, LONGi Green Energy Technology Chairman Zhu Baoshen mentioned that previously, LONGi products could not enter the US market, causing a certain amount of loss orders. However, after a period of setbacks, the channel for LONGi to enter the US market has been clarified, and US Customs has accepted LONGi's new supply chain route. According to Zhu Baoshen's expectations, LONGi's US market will see significant improvement by the second half of this year. However, the situation quickly changed. Recently, there have been media reports that insider sources revealed that LONGi Green Energy Technology's component factory in Malaysia has started to gradually shut down, and earlier last week, five production lines in the company's battery cell factory in Vietnam have also stopped working. In response, LONGi Green Energy Technology stated that the industry environment is currently complex, and the company continues to analyze and evaluate key factors such as the global photovoltaic market and policies. At the same time, in order to promote the widespread adoption of the agile manufacturing model, the company continues to promote the digitalization and technological transformation of its global base factories, resulting in production plan adjustments in different regional bases. Although the company did not directly respond to the rumors, an undeniable background is that the United States has recently targeted...The immunity against evading investigation is about to expire.Huatai Research Report pointed out that on May 14, the Office of the United States Trade Representative (USTR) announced an increase in tariffs on CECEP Solar Energy batteries exported from China, from 25% to 50%; on May 16, it further announced the end of the duty-free policy for the import of some photovoltaic products from Cambodia, Malaysia, Thailand, and Vietnam starting in June 2022, which will expire on June 6 this year. The report believes that current Chinese component companies mainly export to the United States through Southeast Asia. With the expiration of duty-free status, they may face a significant increase in tariffs. Against the backdrop of increased tariffs in the United States, the import of overseas components into the United States may decrease. L Jinbiao, Deputy Director of the Silicon Expert Group of the China Nonferrous Metals Industry Association, also stated that domestic companies set up factories in the aforementioned four Southeast Asian countries mainly to meet the demand of the U.S. market. Currently, products from these four countries are unable to be exported to the U.S. market. Imbalance in supply and demand dampening performance With increasing uncertainty in overseas markets, and exacerbated industry competition, LONGi Green Energy Technology has also faced setbacks in terms of financial performance. In 2023, rapid release of photovoltaic industry capacity, imbalance in supply and demand, rapid iteration of new technologies, leading to a significant drop in industry chain prices, learning costs of new HPBC products, efficiency decrease due to rapid organizational expansion, coupled with complex geopolitical environments, have posed severe challenges to the company's development, wrote Zhong Baoshen in the 2023 annual report. From an industry perspective, in recent years, capacity in various links of the photovoltaic industry has increased rapidly in the short term, highlighting the issue of temporary imbalance in supply and demand. In this context, the prices of photovoltaic products dropped rapidly in 2023, especially since the fourth quarter of 2023, when bidding prices for components hit new lows, dropping to below 1 yuan per watt. According to InfoLink data, in 2023, the price of silicon materials (polycrystalline dense materials) decreased by approximately 70%, the price of silicon wafers and cells (PERC 182) decreased by about 60%, and the price of components (PERC 182) decreased by about 50%, causing significant damage to companies' profitability due to disorderly low-price competition. In addition to the impact of the decline in industry chain prices, asset impairment losses have also been a major reason for the company's decline in performance. The annual report showed that in 2023, LONGi Green Energy Technology achieved operating income of 129.98 billion yuan, a year-on-year increase of 0.39%; realizing a net profit attributable to shareholders of 10.751 billion yuan, a year-on-year decrease of 27.41%; and a non-net profit attributable to shareholders of 10.834 billion yuan, a year-on-year decrease of 24.84%. The company stated that due to the impact of product price declines and technological iteration, the company made provisions for inventory and fixed asset impairment of 6.757 billion yuan in 2023, including provisions for inventory impairment of 5.171 billion yuan (including approximately 1.35 billion yuan of provisions for inventory impairment due to the long-term hoarding of products caused by U.S. policies). In the first quarter of this year, prices of silicon materials and silicon wafers continued to decline, resulting in a rare loss in net profit for LONGi Green Energy Technology. According to the financial report, in the first quarter, the company achieved operating income of 17.674 billion yuan, a year-on-year decrease of 37.59%; and a net loss attributable to shareholders of 2.35 billion yuan. LONGi Green Energy Technology explained that the main reason for the decline in operating income in the first quarter of 2024 was the impact of declining prices of components and silicon wafers. In addition to reasons mentioned above, the decline in net profit attributable to shareholders was also due to the decrease in investment income from associates and the increase in asset impairment, among other reasons. According to the Shanxi Research Report, in the first quarter of 2024, the company made provisions for inventory impairment of 2.65 billion yuan and provisions for fixed asset impairment of 150 million yuan, which temporarily affected the company's performance. Looking ahead, the management of LONGi Green Energy Technology believes that the further decline in photovoltaic component prices will have limited stimulating effects on end demand. However, since May, reduction and suspension of production in the photovoltaic industry have gradually increased, which is expected to promote accelerated industry inventory digestion. Therefore, it is not ruled out that there will be a certain rebound in industry chain prices. However, in another report, Shanxi stated that the oversupply situation in the silicon wafer sector is severe, and if companies continue to maintain high production levels in the future, silicon wafer prices are likely to remain on a downward trend. Regarding cell slices, based on past trends in iteration product prices, the prices of M10-sized N/P cell slices are expected to reverse in the second half of the year; the price of components, affected by factors such as demand and raw material prices, is expected to continue to slightly decrease. Borrowing heavily while managing finances Just as the stock price hit new lows, LONGi Green Energy Technology made a controversial decision. After trading hours on June 6, LONGi Green Energy Technology issued multiple announcements, including one about the company holding the fifth meeting of the fifth session of the board of directors in 2024, where they approved the proposal to publicly issue 10 billion yuan of corporate bonds. These funds will be mainly used to meet the company's operational needs, supplement working capital, repay interest-bearing debts, support project construction and operation, equity contributions, and other purposes permitted by applicable laws and regulations. The issuance period and variety are yet to be determined. At the same time, the issuance of bonds mentioned above still needs to be submitted for review by the company's shareholders' meeting. In another announcement, LONGi Green Energy Technology disclosed that the board of directors had previously approved a proposal to limit the maximum daily balance for the company and its subsidiaries' purchase of bank wealth management products to 20 billion yuan this year. To fully utilize the company's own funds and further improve the efficiency of fund utilization, at the board meeting held on the 6th, the board of directors also approved a proposal to increase the maximum daily balance for the company and its subsidiaries' entrustment of temporary idle funds into wealth management to 300 billion yuan in 2024. While planning to raise 10 billion yuan through bond issuance for operational needs and working capital, and with up to 300 billion yuan available for wealth management, LONGi Green Energy Technology sparked controversy.With 30 billion yuan being entrusted for wealth management, this move by the company has left investors puzzled.Facing market doubts, LONGi Green Energy Technology responded to the media, stating that the issuance of bonds to raise funds is based on market analysis and the future strategic needs of the company, and is not related to increasing financial capacity. Looking at the financial reports, the company is not lacking in funds. The consolidated balance sheet as of the end of the first quarter of this year shows that LONGi Green Energy Technology still has 57.314 billion yuan in monetary funds, a slight increase from the end of 2023. However, the company's asset-liability ratio and total debt size have been rising in recent years. According to Hithink RoyalFlush Information Network iFinD data, the company's asset-liability ratios at the end of each year from 2021 to the end of the first quarter of this year were 51.31%, 55.39%, 56.87%, and 59.38%, with corresponding total debt amounts of 50.148 billion yuan, 77.301 billion yuan, 93.257 billion yuan, and 99.923 billion yuan. According to statistics, LONGi Green Energy Technology has raised a total of 39.391 billion yuan since it went public. Yang Delong, Chief Economist at Hithink RoyalFlush Information Network, believes that funds raised by listed companies should be used for their main business, and if a large amount is invested in financial products, it will not only give the impression of neglecting the main business to the outside world but also affect their operational stability and competitiveness. This article is reproduced from the WeChat public account "Radar Finance", GMTEight editor: Li Fo.