Performance decline and significant impairment of goodwill have emerged again, how can Solarmax Technology (SMXT.US) find a way out?

the road to listing of Solarmax Technology (SMXT) on the US stock market can be described as "high opening and low walking." On February 27, 2024, SolarMax Technology, Inc., the parent company of Jiangsu Zhonghong Photovoltaic Engineering Technology Co., Ltd. (referred to as "Zhonghong Photovoltaic"), successfully listed on the NASDAQ in the United States, with an issue price of $4 per share, issuing 4.5 million shares and raising $18 million. On the first day of trading, the company's stock price reached a high of $9.35 per share at one point, a 133.75% increase from the issue price; the closing price was $8 per share, a 100% increase from the issue price. However, the company's subsequent performance did not last long, and less than a year after listing, it began a downward trend, reaching a low of $0.6 per share, facing the risk of delisting. In October 2024, Zhonghong Photovoltaic received two warnings from the NASDAQ for not meeting the requirements of a minimum market value of $50 million and a minimum share price of $1 for listed companies. Facing both stock price and performance challenges, can Zhonghong Photovoltaic turn the tide?In NEM 3.0, the surplus on-grid electricity price of California residential photovoltaics is no longer equal to 100% of the purchased electricity price. Users will receive subsidies in the form of floating on-grid electricity prices when they supply electricity to the grid. Data shows that after the new policy is implemented, the average electricity price for household photovoltaic surplus on-grid will decrease from an average of 30 cents per kilowatt-hour to 8 cents per kilowatt-hour, a decrease of over 70%, resulting in a prolonged investment payback period for the CECEP Solar Energy system from 5-6 years to about 9-10 years.To address the slowdown in demand after the implementation of NEM 3.0, CHINT Solar fired some employees related to residential CECEP Solar Energy system design and installation in January 2024, with layoffs accounting for approximately 25% of the residential CECEP Solar Energy system design and installation team. In the financial report, the company pointed out that in the future, the company may need to lower prices to increase product attractiveness to users, but this may lead to a decrease in revenue and profits. Looking ahead, CHINT Solar expects residential sales revenue to continue to decrease in 2024. As a result, the company will start selling to residential customers through third-party leasing companies starting from the second quarter of 2024, offering more favorable conditions to customers. On the other hand, the potential tariff risk after Trump's administration has cast a shadow over the prospects of the CECEP Solar Energy industry in the United States. In December 2024, the Office of the United States Trade Representative (USTR) announced that tariffs on CECEP Solar Energy silicon wafers and polysilicon imported from China will increase to 50% under Section 301, while tariffs on certain tungsten products will increase to 25%. The tariff increase will take effect on January 1, 2025. Polysilicon is an essential raw material for producing CECEP Solar Energy products, mainly CECEP Solar Energy solar panels. The cost of silicon wafers and other silicon-based materials accounts for a significant portion of the costs related to CECEP Solar Energy solar panels. Inflation and the rise in raw material costs will bring more profit pressure to the company. According to the "2024 Q4 US CECEP Solar Energy Market Insights Report" released by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, the residential CECEP Solar Energy sector in the United States saw a 4% year-on-year decrease in installed capacity in the third quarter of 2024, continuing the downward trend since the end of 2023. SEIA estimates that the residential market in 2024 will shrink by 26% compared to 2023. The pressure on the US business and the lackluster performance in China have led to a situation of oversupply and excess capacity in the domestic photovoltaic industry in 2024. Product prices have dropped, and there is a backlog of inventory, leading to losses in various sectors of the photovoltaic industry. According to Soochow statistics, the total revenue of the photovoltaic sector in the first three quarters of 2024 decreased by 21% year-on-year to 761.1 billion yuan, with a net profit attributable to the parent company of 4.44 billion yuan, a decrease of 96% year-on-year. In the third quarter, the revenue of the photovoltaic sector was 253.6 billion yuan, a decrease of 24% year-on-year and 7% quarter-on-quarter; the net profit attributable to the parent company was 0.32 billion yuan, a decrease of 99% year-on-year and an increase of 113% quarter-on-quarter. However, since the second half of 2024, benefiting from factors such as the relaxation of consumption constraints, accelerated construction of ultra-high voltage, and continuous progress in the construction of large wind and solar bases, as well as the industry's self-reduction through production quota allocation in response to the call to prevent internal overcapacity, the future industry profits are expected to recover. Returning to the perspective of CHINT Solar, it can be observed that the improvement in the company's performance in 2023 was mainly due to the surge in demand before the implementation of NEM 3.0, so it is reasonable that the performance returned to losses in 2024. Although the losses in 2024 were influenced by one-time impairment of goodwill and stock compensation costs, the company's weak ability to generate internal funds is already a certainty. In this situation, the company's stock price in the secondary market is also unlikely to have upward momentum.