In the context of the rising price of IGBT, the core device of photovoltaic inverter, Sungrow is obviously facing greater cost pressure, and the significant increase in the impairment loss of superimposed company assets is the reason for the "big change" of its performance in 2021. The big change in performance has also been bearish by a number of investment banks, among which Citi and CICC have significantly lowered their target prices, and CICC has even directly lowered the target price by 45%.
On April 20, Sunshine Power's stock price fell to a stop intraday, falling by 20%, and the latest market value was 107.1 billion yuan.
The main reason for the decline in the stock price may be because its performance in 2021 and the first quarter of this year is lower than expected, in this context, many institutions including CICC, Guotai Junan, Citi have lowered the target price of Sunshine Power.
The reason for dismantling the performance of Sungrow Power in 2021 is less than expected includes two aspects, on the one hand, the shortage of the core device IGBT of the photovoltaic inverter has caused the company's operating costs to increase by 26.5% year-on-year to 18.77 billion yuan in 2021, and the increase is higher than the revenue growth rate. On the other hand, the impairment loss of various assets accrued by the company increased significantly, directly deducting the operating profit of the year by 480 million yuan.
It is worth mentioning that the company's energy storage system business has become the "most beautiful boy" in the 2021 annual report, with revenue reaching 3.138 billion yuan in 2021, a year-on-year increase of 168.51%, accounting for 13% of total revenue from 6.06% in 2020.
The performance was less than expected, and CICC and Citi have sharply lowered their target prices
An annual report announcement caused Sunshine Power's stock price to fall to a halt.
Source: See exactly app
On the evening of April 19, Sungrow disclosed its 2021 annual report. Specifically, in 2021, the company's revenue increased without increasing profits, and the annual revenue was 24.137 billion yuan, an increase of 25.15% year-on-year; the net profit attributable to the mother was 1.583 billion yuan, down 19.01% year-on-year.
The performance is not as expected, but there are early signs. Judging from the single-quarter performance of the spin-off company, the net profit attributable to the mother fell by 0.19% year-on-year to 748 million yuan from the third quarter of 2021, and the net profit attributable to the mother in the fourth quarter fell even worse, only 77.9327 million yuan, down 89.73% year-on-year; the deduction of non-net profit has lost 117 million yuan, down 115.4% year-on-year.
(Source: Sungrow Bulletin)
At the same time, the company's first-quarter performance also "surfaced", and the performance was also lower than market expectations. Specifically, in the first quarter of 2022, the revenue was 4.568 billion yuan, an increase of 36.48% year-on-year, while the net profit increased by only 6.26% year-on-year to 410 million yuan.
In this context, many institutions, including Citi, CICC and Guotai Junan, have lowered their target prices.
CICC and Citibank lowered their price target forecasts for Sunshine Energy on April 20. Citi pointed out that Sungrow's 2021 profit is less than expected, mainly due to higher component costs. Therefore, the agency lowered the net profit forecast of Sunshine Power for this year and next by 25.3% and 23.6%, and lowered the target price by 23% to 123 yuan.
CICC also said that Sungrow's performance in 2021 and the first quarter of this year was lower than expected, taking into account the impact of rising supply chain costs on the company's profitability, lowering the company's profit forecast and reducing the target price by 45% to 105 yuan.
Guotai Junan Securities is no exception, it said that in the fourth quarter of 2021, the proportion of domestic shipments increased, the continuous shortage of upstream raw materials, the power station business small profit and cost increase and other factors, the performance of 2021 is lower than expected, lowering the target price to 115.2 yuan, compared with the last target price drop of 40%.
It is worth noting that even after encountering a drop stop and a reduction in the target price by securities companies, Sunshine Power is still a bull stock in the A-share market, which has risen 17 times in two years since the low point of 2020, and its market value once exceeded 200 billion.
In the process of soaring, many funds continue to increase their positions. According to choice data, as of 2021, there are 1148 funds in the market that hold the stock, with a total number of 315 million shares, and the stock market value reached 45.9 billion yuan, accounting for 21.66% of the outstanding shares.
GF Fund Liu Gesong can be described as a heavy position, its management of GF Technology Pioneer, GF Industry Strict Selection for three years, GF Double Engine Upgrade are listed in the top ten circulating shareholders of Sunshine Power, as of the end of the first quarter, the number of shares held was 12.3931 million shares, 10.6757 million shares, 9.2182 million shares, the market value of the position was nearly 3.5 billion.
Soaring raw material prices cannibalize profits
Since 2021, the photovoltaic industry has continued to have a high degree of prosperity, and the demand is increasing day by day. According to the National Development and Reform Commission and the National Energy Administration, by 2025, the proportion of non-fossil energy power generation will reach about 39%, and the proportion of electric energy in terminal energy consumption will reach about 30%, according to this calculation, it is expected that from 2022 to 2025, wind power and photovoltaics will still need to add an average annual installed capacity of 130GW+。
However, the supply has not caught up with the surge in demand, and the price of raw materials in the photovoltaic industry chain is rising, even if the photovoltaic inverter business, which is called "stable and profitable" in the photovoltaic industry by the institution, is also facing the same problem.
As a leading photovoltaic inverter company, Sunshine Power is no exception, and the price of IGBT, the core device of photovoltaic inverter, is constantly rising. This also means that IGBT shows a tight supply and demand pattern, which is expected to continue into the second half of 2023 according to CITIC Securities.
Many IGBT module manufacturers Infineon, Fuji have recently issued price increase letters, of which Fuji issued a price increase letter to agents on April 7, the supply and demand of various raw materials has not been alleviated, and the supply of raw materials is facing difficulties, so the company decided to adjust the price of some IGBT module products moderately, such as silicon wafer 6 inches The price increase is 10-15%, and 8 inches is 10%. Other mainstream import brands such as Mitsubishi and SEMIKRON have also raised prices.
According to the research of Jiwei Consulting, in 2021, sunshine power photovoltaic IGBT has nearly 70% production capacity to lock Infineon, and nearly 20% of the production capacity is supplied by Japanese manufacturers such as Rohm, Mitsubishi, fuji electric, etc., and the localization ratio is about 10%.
It is not difficult to see from this that Sungrow's photovoltaic IGBT relies heavily on overseas manufacturers, which is not an isolated case, the global IGBT market has long been monopolized by Infineon, Mitsubishi, Fuji and other overseas manufacturers, that is to say, there is a huge gap in domestic IGBT supply and demand.
This prompts Sungrow to face certain cost pressures, which can be more intuitively reflected from the data, and the company's operating costs in 2021 increased by 26.5% year-on-year to 18.77 billion yuan, which is higher than the revenue growth rate. Among them, the main cost of photovoltaic inverters was 5.991 billion yuan, an increase of 22.7% year-on-year.
Not only the increase in the cost of photovoltaic inverters, but also the power station business and energy storage system business, of which the operating cost of the power station business increased by 14.5% year-on-year to 8.526 billion yuan, and the cost of energy storage systems increased even more amazingly, from 912 million yuan in 2020 to 2.695 billion yuan in 2021, an increase of 195.55% year-on-year.
In addition, the company's sales expenses and research and development expenses increased significantly last year. Specifically, sales expenses increased by 62.58% year-on-year to 1.583 billion yuan; research and development expenses were 1.161 billion yuan, an increase of 44.03% year-on-year.
As Sungrow Chairman Cao Renxian said, in 2021, the company's estimation of chips and the epidemic situation is insufficient, internal management is not fine enough, there are hundreds of millions of yuan of exchange losses, and the growth of personnel and research and development has led to an increase in the level of expenses.
At the same time as the operating cost increased significantly, the gross profit margin of the company's three main businesses in addition to the power station business showed an increase, and the gross profit margin of photovoltaic inverters and energy storage systems showed a decline, of which the gross profit margin of the inverter in 2021 was 33.8%, down 1.23% year-on-year, and the gross profit margin of the energy storage system fell by 7.86% year-on-year to 14.11%.
The year-on-year increase in operating costs is greater than the increase in revenue, which is one of the important reasons for the company's performance in 2021 to "change face". Another reason that cannot be ignored is that the impairment losses of various assets recorded by Sungrow power in 2021 have increased significantly. According to its annual report, the amount of impairment losses and credit impairment losses of the company's assets was 274 million yuan and 208 million yuan respectively, an increase of 856.64% and 336.66% respectively.
Cao Renxian, chairman of Sungrow Power, also explained the reasons why the performance in 2021 was less than expected at the performance exchange meeting. Due to the epidemic, the Vietnam project was not connected to the grid in October, the implementation of the new electricity price led to the accrual, and the Myanmar project was cancelled, incurring some costs, superimposing the overseas energy storage business because of the impact of the epidemic, accepting fines, resulting in the overall evaporation of about 1 billion yuan in the performance of Sunshine Power.
Energy storage business into the second growth curve?
The company's energy storage system business has become the "most beautiful boy" in the 2021 annual report.
According to its annual report, the revenue of energy storage system business in 2021 reached 3.14 billion yuan, a year-on-year increase of 168.51%, accounting for 13% of total revenue from 6.06% in 2020.
In addition, the annual shipment of energy storage systems in 2021 "soared", and the global shipment volume reached 3GWh last year, an increase of 275% over the 800MWh in 2020.
The performance of the energy storage business exceeding expectations is inseparable from the continuation of the industry's high prosperity. According to Zheshang Securities, energy storage is the core asset of the new power system in the future, and the track has a high degree of prosperity. According to estimates, the global new energy storage is expected to reach 172GWh in 2025, with 15 times the space in 5 years.
Demand has shown a spurt of growth, and the expansion of solar power capacity has also followed. In September 2021, the company completed the fixed increase of 3.623 billion yuan for the construction of 100GW new energy power generation equipment manufacturing base, R&D innovation center expansion, global marketing service system and other projects, and the production capacity of photovoltaic inverters, wind power converters and energy storage inverters will be increased by 70GW, 15GW and 15GW respectively after being put into operation.
In fact, as early as 2015, Sunshine Energy aimed at the energy storage business and established a joint venture with South Korea's Samsung SDI in Hefei to engage in the development and production of lithium-ion battery packs, energy storage converters and energy storage systems for power.
In 2020, Sungrow has also provided overall solutions for a number of projects such as the Mendi 100MW/100MWh energy storage power station in the United Kingdom, the qinghai UHV transmission base power supply configuration project, the Shandong Laizhou optical storage fusion power station and the Anhui Chenbei wind storage demonstration power station. According to CNESA data, the company has ranked first among China's energy storage inverter providers and Chinese energy storage system integrators for many consecutive years.
In this context, the company's energy storage business ushered in a big outbreak in 2020, achieving revenue of 1.169 billion yuan, an increase of 115.17% year-on-year; the proportion of energy storage systems in total revenue has also gradually increased, from only 0.72% in 2017 to 13% in 2021.
Guolian Securities also said that the company's energy storage business will take over the photovoltaic inverter as a new driving force for the company's performance growth in the future.