LONGi Green Energy wants to issue tens of billions of bonds to "replenish blood"

City Boundary

2024-06-27 11:04Official account of the city

Photovoltaic giant LONGi Green Energy decided to issue tens of billions of bonds to "replenish blood".

On June 18, LONGi Green Energy announced that it had passed a proposal to publicly issue 10 billion yuan of corporate bonds. This is also the largest bond financing of the former photovoltaic "first brother". On the one hand, the company still has more than 57 billion yuan of monetary funds lying on its books, and on the other hand, it has issued bonds to "replenish blood", which makes investors wonder: Is LONGi Green Energy, a leader with a revenue of 100 billion yuan, short of money?

On the other hand, to the anxiety of many shareholders, the share price of LONGi Green Energy is still declining. On June 6 this year, LONGi Green Energy suddenly flashed, and on June 14, LONGi Green Energy fell to a three-year low of 16.25 yuan per share in intraday trading. As of June 20, LONGi Green Energy closed at 15.58 yuan per share, with a total market value of 118.1 billion yuan. Compared with the market value high of 528.7 billion yuan reached in 2021, the market value has evaporated by more than 400 billion yuan.

In the first quarter of this year, LONGi Green Energy also became the listed PV company with the highest loss in the quarter. However, in the first half of 2024, LONGi has made frequent moves in product and technological innovation in an attempt to break the market's concerns.

Earlier this year, Zhong Baoshen, chairman of LONGi Green Energy, said: "2024 is the most difficult year for LONGi in the past decade. But in a media live broadcast a month ago, Zhong Baoshen showed optimism: "The most difficult time has passed. ”

Can LONGi Green Energy really get rid of the "growing pains"?

01. Issuing bonds while managing money?

On June 17, nearly 100 investors braved the scorching sun to come to Xi'an to participate in the 2023 annual shareholders' meeting of LONGi Green Energy. In addition to the Q&A with Li Zhenguo, founder and president of LONGi Green Energy, the investors also visited the LONGi PV exhibition hall in Weiyang District, Xi'an, and had a light meal of four dishes and one soup in the company's canteen.

By showcasing photovoltaic products and technologies, LONGi Green Energy hopes to increase investors' trust in the company. "At a time when the photovoltaic industry is facing a dilemma, listening to the voice of the industry leader is also a kind of confidence in coping with an uncertain tomorrow." One investor wrote on Snowball.

Prior to this, LONGi Green Energy had just experienced a round of "storm" in the secondary market. Before midday on June 6, LONGi's share price suddenly dived, falling by 6.02% on the day. On June 13, LONGi Green Energy's closing price was only 16.51 yuan per share, a new low since June 2020.

What happened to LONGi Green Energy?

Before LONGi's stock price plummeted on June 6, a piece of news had just exploded in the PV circle. According to the self-media "Alpha Factory Research Institute", a person close to LONGi revealed that LONGi's module plant in Malaysia began to gradually shut down; Earlier, all five production lines of LONGi's cell factory in Vietnam have also been suspended. This is also the first time that LONGi Green Energy has reported the news of overseas factory adjustments.

LONGi's overseas layout was launched as early as 2015, and Malaysia was its first stop in the Southeast Asian market. As of October last year, LONGi's cumulative investment in Sarawak has reached $8.3 billion. According to LONGi's official information, the first phase of the module plant will be put into operation in October 2023. The cost of the entire project has reached 2.8 billion yuan, and the production capacity can reach 8.8GW after completion. The layout of the Vietnam factory is a little late, but according to LONGi Green Energy's 2023 financial report, its 3.35GW battery project in Vietnam has been fully put into production, with a total investment of 757 million yuan.

At a time when the photovoltaic industry is structurally overcapacity and the price war is becoming increasingly fierce, the layout of the Southeast Asian market is of more important significance for enterprises to expand their overseas sales. The production capacity of domestic photovoltaic enterprises matches the demand of the global photovoltaic market, especially the US market, which has strong bargaining power and less competition, which is the object of expectation of many enterprises. According to the Huatai Research Report, the current domestic photovoltaic modules are mainly exported to the United States through Southeast Asia. In 2023, LONGi Green Energy will achieve revenue of 129.498 billion yuan, about 37% of which will come from overseas markets, of which the Asia-Pacific region is the largest part of the revenue.

At the performance exchange meeting at the end of April this year, Zhong Baoshen, chairman of the company, also said that the channel for LONGi products to enter the US market has been straightened out, and it will usher in a significant improvement in the second half of this year. The financial report also shows that in the first quarter of 2024, with the official commissioning of the 5GW module joint venture factory in Ohio, the company's shipment capacity in the US market will be improved.

However, once the shutdown in the revelations comes true, it means that the significance of LONGi Green Energy's market layout in Southeast Asia will be discounted. The United States has launched anti-dumping and anti-subsidy investigations on photovoltaic products in Southeast Asia, and LONGi Green Energy may not be the only domestic photovoltaic company that has a layout in Southeast Asia that has been affected. At a time when the PV industry is experiencing volatility and companies are "trying to survive at their limits", this news has also pushed the market panic to a high point.

On June 7, LONGi Green Energy quickly issued a statement: after verification, the company has laid out the production capacity of silicon ingots, silicon wafers, cells and modules in Malaysia, and the factories are currently in production. The company has deployed cell and module production capacity in Vietnam, of which the module plant in Vietnam is currently in production; The battery plant in Vietnam has temporarily suspended production due to market reasons, and will be evaluated and made decisions based on market conditions in the future, which will have little impact on the company's overall operating performance.

At the shareholders' meeting, Li Zhenguo also admitted frankly when answering investors' questions that the company's production capacity in the United States and Southeast Asia has lost tens of billions of yuan in the past two or three years. Moreover, the negative impact of the capacity adjustment in Southeast Asia has not yet been reflected at the operational level, which will have a dual impact on LONGi's production capacity and performance.

Just when LONGi's share price fell into a downturn, two other pieces of news added a touch of anxiety to investors.

After the market on June 6, LONGi Green Energy issued two announcements in a row. First, the company intends to issue bonds with a scale of no more than 10 billion yuan with a maturity of no more than seven years. On the other hand, the company announced that it would increase the maximum daily balance limit of its own funds entrusted to wealth management in 2024 from the previous 20 billion yuan to 30 billion yuan.

After the news was released, some investors questioned in the company's stock bar: when the cash flow is sufficient, the huge amount of money in hand still has to finance and issue bonds, "this wave is really stunned by LONGi".

After all, according to the company's financial report, LONGi Green Energy has no obvious financial pressure: as of the end of the first quarter, the company still had 57.314 billion yuan of monetary funds on its books, accounting for 34.06% of total assets; The total current assets were 101.559 billion yuan, the company's short-term borrowings were only 106 million yuan during the reporting period, and the non-current liabilities due within one year were 1.541 billion yuan.

With one hand issuing bonds and one hand managing money, the increase in wealth management also happens to be 10 billion yuan, which has caused more speculation in the market.

As a result, on the evening of June 7, LONGi Green Energy responded that the company did not have a large amount of money idle for a long time. The 10 billion yuan corporate bond project launched by the company is mainly used for the construction of advanced production capacity such as "Tererick" silicon wafers and BC second-generation batteries, and accelerates the industrial iteration of BC and other new technologies through new technologies.

LONGi Green Energy also said that the company's increase in wealth management quota has nothing to do with the funds raised by the proposed issuance of corporate bonds. The company mainly due to the change of the terms of some deposit agreements, the adjustment of some of the original bank deposits and other means of its own monetary funds to entrusted wealth management products, which is due to the adjustment of the classification of cash management, and the actual amount of cash management has not been increased.

In 2023, LONGi Green Energy has purchased wealth management products, all of which are short-term structured deposit wealth management products with a maturity of less than three months. For the purpose of wealth management, LONGi Green Energy said, "In order to improve the efficiency of capital use, part of the self-owned funds that do not need to be paid externally in the short term are used for short-term financial management, so as to reduce financial costs and improve capital returns and shareholder returns." ”

Yang Delong, chief economist of Qianhai Open Source Fund, told "City Boundary" that compared with fixed increases, enterprises will not dilute the company's shares by issuing bonds, which is generally regarded as a financing method to reduce costs. It is also a common practice for enterprises to use idle funds to obtain certain returns, but they should also focus on the future use of funds to avoid risks.

At the same time, it is worth noting that on June 18, LONGi also announced that Li Zhenguo, the company's president and controlling shareholder, pledged 70 million shares of the company held by him, accounting for 6.56% of his shares, for personal capital turnover.

Investors are also more concerned: Is LONGi Green Energy really "not bad for money"?

02. With a loss of 2.3 billion yuan in a single quarter, LONGi "stored grain for the winter"?

Among the leading domestic photovoltaic companies, LONGi is not only rich, but also the "richest" - the monetary funds on its account are the most sufficient. However, LONGi Green Energy's decision to issue tens of billions of bonds on a large scale may also be aimed at broadening more financing channels and reducing future capital risks.

LONGi is at a critical juncture in its development. Behind the recent sharp reaction in the secondary market is investors' anxiety about the company's performance.

In 2023, LONGi Green Energy will continue to maintain revenue of more than 100 billion yuan, but in the fourth quarter, the company ushered in the first loss in a single quarter in a decade. In the first quarter of this year, LONGi Green Energy achieved operating income of 17.674 billion yuan, a year-on-year decrease of 37.59%; The net profit loss attributable to the parent company widened to 2.35 billion yuan. In the first quarter, PV companies collectively entered the "darkest moment", but LONGi's losses were relatively high.

In 2024, the imbalance between supply and demand in the photovoltaic industry will continue, and the price involution of photovoltaic products will also intensify. At the end of May, the average price of modules was RMB 0.803/W, and the lowest price was even reduced to RMB 0.76/W. You must know that at the beginning of 2023, the average industry price of photovoltaic modules is still 1.8-1.9 yuan/W. Li Zhenguo said frankly, "We didn't expect the price competition to be so fierce, and now at this price, any link in the whole industry will inevitably lose cash." ”

There is no expectation when the market will bottom. Who will be able to carry it to the end is also unknown. Everyone wants to know what kind of attitude and expectations LONGi, as the former "first brother", will persevere.

In LONGi's view, the decline in performance in the first quarter is due to the decline in module and wafer prices in the market, as well as the decline in investment income of associates and the increase in impairment of assets such as inventory.

Although LONGi is not short of money, it has also encountered difficulties. Affected by the decline in product prices and technology iteration, as of the end of the first quarter, LONGi's inventory was as high as 22.61 billion. In the first quarter of this year, LONGi made an impairment provision of 2.649 billion yuan for inventory assets and 152 million yuan for impairment of fixed assets.

High inventories also ate into LONGi's cash flow. According to the financial report, at the end of 2023, LONGi's net cash flow from operating activities was 8.117 billion yuan, a significant decrease of 66.69% year-on-year. In the first quarter of 2024, this figure will be -4.889 billion yuan.

At the end of the first quarter, LONGi's accounts receivable was 10.383 billion yuan. In addition, the company's current liabilities totaled 71.455 billion yuan, of which contract liabilities were 10.845 billion yuan.

"Steady" has always been LONGi's traditional style. Now for it, it is particularly important to "dig deep holes, accumulate grain", prepare with multiple hands, and reserve more funds for winter.

In recent years, LONGi did not participate in the PV "price war" at the beginning, which allowed it to accumulate rich monetary funds. But this also means that LONGi will "lose" some opportunities - Li Zhenguo concluded in 2023 that when friends seized the market with low-price orders last year, the company did not follow up.

According to the summary of different investors, at the shareholders' meeting a few days ago, Li Zhenguo also admitted the company's problem: LONGi Green Energy adheres to long-termism, but its ability to "bet" on short-term changes in the industry and the prediction of irrational competition are still insufficient.

03. BC battery, will eventually become the mainstream?

LONGi's "conservative" and prudent strategy in expansion has relatively reduced the risk of business operation. However, in the technological iteration period of the industry, LONGi must step up its efforts to break the situation.

In recent years, the general consensus in the industry is that according to the different technology divisions of crystalline silicon cells, the original mainstream P-type PERC cells have been "dying", and major companies are standing at the fork in the road of how to choose the next generation of battery technology. In September last year, LONGi Green Energy announced that it would bet on a relatively "niche" BC battery. When three of the "Four Little Dragons" of domestic PV module companies bet on the N-type TOPCon cell route, LONGi has become the most maverick.

In particular, at present, it seems that the "TOPCon faction", represented by the two major module leaders JinkoSolar and Trina Solar, has achieved a phased victory: JinkoSolar has replaced LONGi Green Energy and won the championship of global module shipments in 2023; Among them, N-type TOPCon cells shipped 48.41GW throughout the year, a year-on-year increase of 352%, making great contributions to surpassing LONGi.

Is the company missing out on the window of opportunity for TOPCon batteries? At the shareholders' meeting, Mr. Lee responded that the company had "not made a mistake." He believes that at present, the enterprises that invest in TOPCon on a large scale are basically in a state of negative gross profit, and the Topcon technology route has not yet been able to establish barriers, and it is still a "transitional technology". He also confirmed that LONGi "will not do it" for businesses that will obviously lose blood.

The issuance of tens of billions of bonds once again shows LONGi's firm determination to bet on the technical route of BC batteries. Li Zhenguo said at the shareholders' meeting that in terms of realizing the research and development and marketization of BC batteries, "the company has recently been discussing whether it can do it faster, and the issuance of bonds is also for this."

In LONGi's view, BC technology will inevitably become an important technical direction in the development of photovoltaics. "In another 4-5 years, we will find that the market is all about BC technology." Zhong Baoshen said at the 2023 performance exchange meeting.

More than a month ago, LONGi released a new generation of module Hi-MO 9, which is based on LONGi's HPBC 2.0 cell technology, which has the advantages of higher power generation capacity and higher reliability, with a maximum power of 660W and a conversion efficiency of up to 24.43%, which is also the most efficient product under the current mainstream version. Therefore, as LONGi's Hi-MO series products, the model number has simply jumped from the previous "7" to "9", which is the largest number in the Chinese tradition.

She Haifeng, vice president of LONGi Green Energy, said that three years ago, the company began to commercialize the first-generation BC, opening up the path to low-cost process manufacturing, and today's second-generation BC products are the products that LONGi believes are close to the ultimate product on the monocrystalline technology platform, "A photovoltaic market belonging to BC technology is coming." ”

It is worth noting that LONGi's current production capacity layout is not a single bet on BC batteries. Previously, LONGi invested in the construction of a 30GW TOPCon cell project in Ordos. Zhong Baoshen once revealed that LONGi's shipment targets for battery modules this year also include PERC, TOPCon, and HPBC first-generation products.

In terms of innovation in the field of silicon wafers, on March 28, LONGi released a new silicon wafer product "Tererick". LONGi told "City Boundary" that Terry's silicon wafers adopt the new TRCz crystal pulling process, which has the advantages of resistivity uniformity, good impurity absorption effect, and full platform support, which will open a new path for the whole industry to reduce costs and increase efficiency.

At the 2024 Shanghai SNEC exhibition, which opened in June, LONGi Green Energy announced that the photoelectric conversion efficiency of its crystalline silicon-perovskite tandem solar cell reached 34.6%, once again breaking the company's previous world record.

At that time, LONGi Green Energy relied on the "monocrystalline silicon revolution" to become a market value leader of 100 billion yuan. Now, can it successfully turn around again and create a story of "persistence" and "counterattack" for the market?

In the live broadcast in May, Zhong Baoshen said, "I believe that we will go more and more smoothly on the BC technical route in the future, and the most difficult time has passed." ”

Author | Yang Jie

Edit | Sun Chunfang

Operations | Liu Shan

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