In 2024, photovoltaic companies are losing money one after another, but how is this segment still so profitable?

I originally thought that photovoltaic companies would wait until the last trading day before the Spring Festival to release their 2024 annual performance forecasts, but unexpectedly, after LONGi Green Energy fired the first shot with its annual report, other photovoltaic companies also followed suit with their performance forecasts. Although most companies reported significant losses compared to the previous year, none of the companies that have released performance forecasts can be said to have experienced a disaster; all are within expectations.

The past year of 2024 has been a cold and painful experience for everyone in the photovoltaic industry. However, there is no need for those in the industry to lose heart. The past cannot be changed, but the future can still be pursued.

In fact, if one wants to make the performance of 2024 relatively bright, one only needs to lie flat; lying flat can reduce losses or even avoid losses. However, as a company, one cannot always lie flat; lying flat means losing customers, losing market share, losing competitive opportunities, and losing the chance to turn things around in the future.

In the brand new year of 2025, companies need to continue to stay at the table and also need to draw good cards, which requires being more proactive and choosing a development path suitable for themselves, a path that leads out of the trough first.

2025 is a key year for reshuffling in the photovoltaic industry and also a year of performance differentiation among companies.

With expectations for 2025, let's take a look at what information the performance forecasts for the photovoltaic industry in 2024 reveal.

01 Provisioning is an Art

Performance forecasts can only provide a simple analysis of a company's operating results; to analyze the quality of a company's operations, one needs to look at more detailed annual reports.

Among the companies that have released performance forecasts, about half mentioned provisioning as a reason for performance changes.

When companies make financial provisions, they are usually influenced by various factors such as profit adjustment, asset conditions, and tax planning.

In years when companies are profitable, in order to avoid excessive profits that could lead to operational pressure or to prepare for future poor performance, they may reduce current profits by over-providing for asset impairment, estimated liabilities, etc., thereby "hiding" profits to adjust them in subsequent years through reversals, making performance appear more stable.

Conversely, if a company has financing needs or wants to maintain its stock price, it may under-provide for asset impairment, estimated liabilities, etc., artificially inflating profits and assets, making financial statements look better, thereby enhancing the company's market image and financing ability.

As long as the necessary provisions are not made, it is not considered a loss. This is similar to the logic of stock trading: as long as you don't open (the account), it is not considered a loss. This can be seen as a form of disguise or a tactic.

In 2024, n-type will fully replace p-type capacity, and the prices of photovoltaic products will decline across the board. Photovoltaic raw material companies need to provision for equipment and inventory.

The performance of photovoltaic raw material companies is under pressure, and some companies have already fallen into operational difficulties or are about to do so, thus equipment companies and auxiliary material companies need to provision for inventory and accounts receivable. In 2024, we have been paying attention to the difficulties photovoltaic equipment companies face in collecting payments.

It is worth mentioning the provisioning of silicon material companies.

The top four silicon material companies are all publicly listed, with GCL-Poly Energy and Xinte Energy listed in Hong Kong, and Tongwei Co., Ltd. and Daqo Energy listed in A-shares (Xinte Energy is a subsidiary of the A-share listed company TBEA Co., Ltd.) Among them, Tongwei Co., Ltd. stated in its performance forecast: "The impairment of long-term assets for the whole year is expected to be about 1 billion yuan"; TBEA Co., Ltd. stated: "The company has made an impairment provision of 1.474 billion yuan for the scrapped fixed assets related to polysilicon and its by-products." Both companies may have impaired a portion of their polysilicon equipment and are fully investing in new equipment, new technologies, and new production capacity.

GCL-Poly Energy did not release a performance forecast but announced the latest progress in its granular silicon business. In the fourth quarter of 2024, the company's cash cost for granular silicon has once again broken the limit, creating a new industry low of only 28.17 yuan/kg. This is expected to exert pressure on the energy consumption standards and cost control capabilities of the entire silicon material market.

In the future, only advanced production capacity will be competitive in the silicon material market. Even companies like Xinte Energy, Qiya, and Dongfang Hope, which rely on self-built power plants to reduce electricity consumption, will find it ineffective, as the red line for silicon material energy consumption will continue to rise.

Among other popular companies, Daqo Energy and Shuangliang Eco-Energy emphasized that they have made provisions for inventory impairment. Dongfang Risheng stated that it has conducted a prudent assessment of the PERC battery and module production lines that show signs of impairment and has made corresponding provisions for fixed asset impairment losses.

A simple performance forecast cannot reveal whether the company's provisions are sufficient. If provisions are made sufficiently and objectively, it will help investors better understand the company's actual operating conditions. However, if the scale of provisions is particularly large, it indicates that the company’s market judgment for 2024 is inaccurate, while some companies with insufficient provisions may defer accounting for it, which could drag down performance in 2025.

02 In the fourth quarter, the operations of leading companies further deteriorated

In 2024, the silicon material segment faces the greatest pressure, with the lowest gross profit margin; silicon material companies are large in scale, so the overall loss amount is significant; while the battery segment has controllable losses, the module segment can still maintain some profit if managed properly. Therefore, in 2024, some module companies benefit from sourcing batteries externally, focusing their business on the module segment, and maintaining positive returns.

Hengdian East Magnetic benefited from business diversification and outstanding performance in the European market, while Canadian Solar benefited from its energy storage business, achieving the best performance among main material companies during the photovoltaic winter.

Although performance forecasts have not been fully released, the likelihood of profitability for other main material companies in 2024 is relatively low.

Similarly, the performance differences among loss-making companies are also significant.

From Wind

Based on the financial reports for the third quarter of 2024, the companies expected to incur the highest losses for the entire year should be LONGi and TCL Zhonghuan, the two leading silicon wafer companies. After all, the most overcapacity and lowest gross profit in 2024 will be in silicon wafers. LONGi Green Energy expects a net profit attributable to the parent company of -8.2 billion to -8.8 billion yuan; TCL Zhonghuan has not yet released a performance forecast.

It is somewhat surprising that Tongwei Co., Ltd. shows signs of an expanding loss in the fourth quarter of 2024. Tongwei Co., Ltd. expects a net profit attributable to the parent company of approximately -7 billion to -7.5 billion yuan for the year 2024 Based on this calculation, the net profit attributable to the parent company for the fourth quarter of 2024 is expected to be approximately -3.027 billion to -3.527 billion yuan.

Additionally, Tongwei mentioned that this includes the impact of approximately 1 billion yuan in long-term asset impairment and scrapping for the entire year. At the same time, the company maintains a net inflow of operating cash flow.

In contrast, Jinkosolar performed somewhat better.

Jinkosolar expects to achieve a net profit attributable to the owners of the parent company of 80 million to 120 million yuan for the year 2024, a year-on-year decrease of 98.39%-98.92%.

However, Jinkosolar's net profit attributable to the parent company for the first three quarters of 2024 was 1.215 billion yuan (with each quarter being positive). Based on this, the net profit attributable to the parent company for the fourth quarter of 2024 is estimated to be a loss of 1.09-1.13 billion yuan, indicating significant pressure in the fourth quarter as well.

It is worth noting that the operational strategies of leading companies and the environment they operate in have changed:

Before the self-regulatory actions initiated by the photovoltaic industry association, Longi and Zhonghuan in the silicon wafer industry had already begun to reduce their operating rates, abandon internal competition, and minimize losses. In addition, LONGi plans to make significant strides in 2025, hoping to break through through differentiated competition; after adjustments in management, TCL Zhonghuan will also bring new development strategies and management ideas.

The biggest change in the macro environment is that the export environment for China's photovoltaic industry will be more challenging in 2025. It is understood that by the end of 2024 and the beginning of 2025, the volume of overseas orders for companies is very low, far less than in previous years. In 2025, whoever can win high-margin orders from Europe and the United States and seize the emerging markets in Asia, Africa, and Latin America may directly impact the current landscape of the photovoltaic market.

03 The obscure bracket industry is surprisingly profitable!

Main material companies generally perform poorly, while non-main materials are experiencing a stark contrast.

Affected by the main materials in the photovoltaic industry, the pressure on films, backboards, pastes, and equipment is very high. The performance decline of films and backboards is particularly evident: Saiwu Technology expects a net loss of 200 million to 250 million yuan in 2024, compared to a profit of 104 million yuan in the same period last year, turning from profit to loss; Haiyou New Materials expects to achieve a net profit attributable to the owners of the parent company of -580 million to -480 million yuan for the year 2024, an increase in losses of approximately 351 million to 251 million yuan compared to the same period last year, with a year-on-year increase in losses of 153.75% to 110%.

In addition to poor performance, it is estimated that the cash flow of these auxiliary material companies is also not good. When the big river runs dry, the small river dries up; accounts receivable will still be a thorny issue for auxiliary material companies in 2025.

Currently, equipment companies have not released performance forecasts. Will there be any major issues with equipment companies?

Inverter companies have already shown performance differentiation in the third quarter of last year. The leading company, Sungrow Power Supply, has not yet released a performance forecast, so it should not be bad. The second-tier company, Deye Co., Ltd., expects a net profit of approximately 2.9 billion to 3.1 billion yuan, an increase of 61.92% to 73.09% year-on-year.

What surprised the carbon number this time is the performance of the bracket industry. The leading photovoltaic bracket company, CITIC Bo, expects to achieve a net profit attributable to the parent company of 635 million yuan in 2024, a year-on-year increase of 84.04%; It is expected to achieve a net profit attributable to the parent company after deducting non-recurring gains and losses of 610 million yuan, a year-on-year increase of 99.13%. As of December 31, 2024, the company has a total of approximately 4.65 billion yuan in orders on hand, including about 3.5 billion yuan for tracking systems and approximately 1.15 billion yuan for others.

It may be because the market does not pay much attention to brackets, and there are not many companies entering this field, which is why it is not so competitive. In the current market environment, being overlooked is also a kind of luck!

Source: GanTanHao Technology, original title: "In 2024, photovoltaic companies are losing money one after another, but why is this segment still so profitable?"

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