"Having experienced an upward cycle over the past three years, the photovoltaic industry entered a downward cycle starting from the third quarter of 2023, and the environment for industrial development has undergone fundamental changes." TCL Zhonghuan (002129.SZ) stated this in its latest disclosed annual report.
The entire photovoltaic industry chain has seen a price reduction, and the performance of the silicon wafer leader has also "cooled down". According to statistics by First Financial Daily reporters, within the past six months, TCL Zhonghuan has incurred a total loss of approximately 3.652 billion yuan, with losses of 2.772 billion yuan in the fourth quarter of last year and 880 million yuan in the first quarter of this year.
Consecutive quarterly losses
On the evening of April 26th, TCL Zhonghuan released its first quarter report for 2024, showing that the company achieved a revenue of 9.933 billion yuan in the first quarter of this year, a year-on-year decrease of 43.62%, and a net loss attributable to the shareholders of the listed company of 880 million yuan.
TCL Zhonghuan believes that the main reason for the year-on-year decrease in the company's revenue in the first quarter of this year is the reduction in photovoltaic products, which led to a decrease in operating income.
The 2023 annual report disclosed at the same time shows that the company achieved a revenue of about 59.146 billion yuan in 2023, a year-on-year decrease of 11.74%; and a net profit attributable to the shareholders of the listed company of about 3.416 billion yuan, a year-on-year decrease of 49.9%.
In the first three quarters of 2023, TCL Zhonghuan's net profit was 6.188 billion yuan. Based on this calculation, TCL Zhonghuan incurred a loss of 2.772 billion yuan in the fourth quarter of last year.
The "sign" of the decline in net profit began in the third quarter of 2023.
Looking at the performance on a quarterly basis, in the first three quarters of 2023, TCL Zhonghuan's net profits were 2.253 billion yuan, 2.283 billion yuan, and 1.652 billion yuan, respectively. The net profits in the first and second quarters of 2023 maintained growth, with growth rates of 72% and 43%, respectively, and the net profit in the third quarter decreased by about 21% year-on-year. In the fourth quarter, not only did it fail to maintain profitability, but it also suffered a large-scale loss.
According to TCL Zhonghuan's analysis, the sustainable growth potential of the future market space in the photovoltaic industry has attracted a large influx of capital, with new and old players continuously expanding investments, leading to an accelerated release of capacity in various segments of the photovoltaic manufacturing industry. By the end of 2023, the capacity scale of each segment of the industry chain reached 900GW to 1000GW, with more than 80% concentrated in China, and the supply-demand ratio of the industry chain evolved from 1.02:1 in June 2023 to 2:1 by the end of the year.This has also led to a decline in product prices. Taking the photovoltaic silicon wafer products of TCL Zhonghuan, which account for more than 70% of its revenue, as an example, according to data from Tonghuashun, the average price of wafers, calculated based on the mainstream variety, has experienced a continuous rise in 2021 and 2022, and then an average price reduction of more than 50% in 2023.
The reporter also noticed that for another terminal product, the mainstream price of photovoltaic modules dropped from 1.8 to 1.85 yuan/watt at the beginning of 2023 to 0.9 to 0.95 yuan/watt by the end of the year, with a reduction of nearly 50%.
How to Navigate Through the Cycle
"By the end of the first quarter of 2024, the capacity scale of various links in the photovoltaic industry chain exceeded 1000GW, and there was a phase of supply and demand mismatch between the supply side and the terminal installation." TCL Zhonghuan believes that the photovoltaic industry is still at the bottom of the market cycle, with backward capacity accelerating elimination, driving the industry into an innovation-led technology iteration cycle, which poses a comprehensive test to the product technological innovation capability, industrial capability, operational capability, and globalization capability of enterprises.
Starting from 2023, the transformation of new photovoltaic product technologies such as large sizes and N-type has accelerated. According to statistical data from Shanghai Metals Market, the proportion of N-type products in domestic photovoltaic module procurement bidding increased from 13.9% in January 2023 to 66.7% in December 2023.
Looking forward to 2024, Li Dongsheng, Chairman of TCL Zhonghuan, believes that the photovoltaic industry will still be at the bottom of the market cycle in the short to medium term, with a serious imbalance in supply and demand, accelerated product technology transformation, and capacity survival of the fittest driving the elimination of backward capacity.
"The way for enterprises to survive and develop returns to focusing on the basic competitiveness and relative competitiveness based on the internal self-technological innovation capability and industrial capability of the enterprise." TCL Zhonghuan stated in its annual report.
TCL Zhonghuan's top two main businesses are photovoltaic silicon wafers and photovoltaic modules, accounting for 70% and nearly 20% of revenue, respectively. The company's main products include new energy photovoltaic silicon wafers, photovoltaic cells and modules, other silicon materials, and the development and operation of high-efficiency photovoltaic power station projects.
In 2023, TCL Zhonghuan's wafer shipments increased by 68% year-on-year to 114GW, with an overall market share of 23.4% for wafers; photovoltaic monocrystalline capacity was increased to 183GW; by the end of 2023, the photovoltaic module capacity reached 18GW, with a full-year photovoltaic module shipment of 8.6GW, a year-on-year increase of 29.8%.
In the first quarter of 2024, the company's photovoltaic materials business segment achieved a sales scale of approximately 34.95GW, a year-on-year increase of 40%; the photovoltaic module segment's shipments were 1.6GW, a year-on-year increase of about 16.8%.Data from China's National Energy Administration shows that in the first quarter of 2024, the national cumulative new installed capacity reached 45.74 gigawatts (GW), a year-on-year increase of 35.9%. During the same period, China's photovoltaic (PV) module exports amounted to 59.85 GW, marking a 27.4% increase compared to the previous year. It is projected that the global new photovoltaic installations for 2024 will be 525 GW, representing a 33% increase over the previous quarter.
It is worth mentioning that from 2018 to 2022, the stock price of TCL Zhonghuan had skyrocketed by tenfold, with its market value peaking at over 200 billion yuan. As of today's article submission by the First Financial reporter, the market value of TCL Zhonghuan stands at 42.1 billion yuan, which, when calculated from the stock price high point in July 2022, indicates a loss in market value of over 150 billion yuan.