After two consecutive days of stock price increases, Longi Green Energy (601012.SH) once again surpassed a market value of 100 billion yuan.

As of the close on July 11th, Longi Green Energy's stock price rose by 4.87% to 14.22 yuan per share, with intraday gains at one point exceeding 6%. Yesterday, Longi Green Energy's stock closed up by 3.04%, and its market value returned to the 100 billion yuan threshold. As of today's close, Longi Green Energy's market value has reached 107.8 billion yuan.

However, looking at the performance forecast disclosed on the evening of July 9th, Longi Green Energy leads the photovoltaic industry in expected losses, with a range of 4.8 billion to 5.5 billion yuan.

The performance loss stems from the provision for inventory devaluation.

Longi Green Energy stated that in the first half of this year, the company increased its investment in products and services for the photovoltaic terminal market, achieving year-on-year growth in photovoltaic module sales. "However, due to the overall supply and demand mismatch in the photovoltaic industry and the significant decline in market sales prices of major products at all stages, compared with the same period last year, the company's business growth did not lead to increased revenue, and the investment income from participating in silicon material companies decreased, with an expected provision for inventory devaluation of 4.5 billion to 4.8 billion yuan."

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In the first quarter of this year, Longi Green Energy also faced the issue of a large provision for inventory depreciation.

According to the disclosed information in Longi Green Energy's inquiry response announcement: "In the first quarter of 2024, the company provided for inventory depreciation of 2.649 billion yuan, including 1.453 billion yuan for monocrystalline components and 201 million yuan for monocrystalline silicon wafers. The main reason was the further irrational decline in the prices of major products in the first quarter due to the impact of industry supply and demand mismatch."

Longi Green Energy also mentioned the impact of the decline in industry chain prices in its response to the exchange's work letter this week. The company stated that since the fourth quarter of 2023, the tender and bidding prices for photovoltaic module centralized procurement have repeatedly set new lows. The prices of mainstream products have fallen rapidly, and the decline has exceeded the industry's cost reduction, with clear signs of devaluation.

Combining the half-year forecast data from various photovoltaic companies this week, there are a total of 5 photovoltaic companies with an expected loss limit of more than 1 billion yuan in the first half of this year, namely Longi Green Energy, Tongwei Shares (600438.SH), TCL Zhonghuan (002129.SZ), Aikosolar (600732.SH), and Shuangliang Energy Saving (600481.SH).Over the past year and a half, the price of photovoltaic upstream silicon material has dropped by 80%. At the beginning of last year, the price of silicon material was close to 200,000 yuan/ton, which dropped to 60,000 yuan/ton to 70,000 yuan/ton in the first quarter of this year, and further decreased to 40,000 yuan/ton to 50,000 yuan/ton in the second quarter.

"In my personal opinion, the entire industry does not have the capacity to support further price declines in the short term. As for when the price can rebound, with the current competitive situation, it might stabilize or slightly rise after about three more months," said Zhong Bao Shen of Longi Green Energy, who believes that in the coming period, prices will return to a range between cash costs and manufacturing costs. As capacity continues to be cleared, prices will return to manufacturing costs.

Zhong Bao Shen: The company is expected to enter a recovery state ahead of the industry by 2025.

Amidst the industry's winter, Longi Green Energy recently announced plans to issue no more than 10 billion yuan in bonds, mainly for meeting the company's operational needs, replenishing working capital, repaying interest-bearing debt, supporting project construction and operations, and equity investment, among other purposes.

"The company plans to complete a 100GW project investment within the next 2 years, and this 10 billion yuan will basically support the company's capacity expansion. The company aims to advance fixed asset investment in a robust state," said Zhong Bao Shen during a concentrated research survey by investment institutions, stating that the company's entire bank financing is currently in a relatively healthy state. The company plans to issue 10 billion yuan in bonds mainly because it may be more cost-effective than long-term bank financing in the long run, with more advantageous interest rates. This bond issuance can actually be understood as a long-term bank loan.

In the first half of this year, affected by the imbalance of industry supply and demand, the prices of photovoltaic main materials have plummeted, with prices at many stages breaking below cash costs. Photovoltaic companies have been continuously laying off employees, shutting down production lines, and reducing operating rates, and the industry has entered a stage of capacity reduction. So far, the four major links of the photovoltaic industry chain—silicon material, silicon wafers, cells, and modules—have basically broken below cash costs, and the entire industry chain is under pressure. During this round of photovoltaic industry shock cycle, the overall capacity has expanded by about 3 times, but the profit margin has decreased by about 70%.

In Zhong Bao Shen's view, every time the photovoltaic industry encounters a crisis and returns to the growth channel, the essence is solved and driven by innovation.

"Based on the current industry supply and demand relationship, only innovation can see prosperity. Without the interference of other unexpected factors, there is no opportunity without innovation," Zhong Bao Shen pointed out during an institutional research survey. The photovoltaic industry has both strong cyclical and growth attributes, and the industry is currently entering a deep adjustment phase, where the market will gradually eliminate backward capacity.

At the 2023 shareholders' meeting, the management of Longi Green Energy emphasized that the only part of the photovoltaic industry that may still have significant room for improvement is the cell segment. "BC cells will be the limit of monocrystalline silicon cells and will also be the mainstream technology in the market for the next few years."

"2024 will be a very difficult year for the company and also for the industry. In 2025, the company will be the first to return to the growth track and enter the recovery state ahead of the photovoltaic industry," said Zhong Bao Shen, who stated that the company's goal is very clear, and the overall plan is to reach a combined capacity of about 70GW for BC generation 1 and BC generation 2 by the end of 2025. Before the end of next year, the company's BC module costs should reach or be lower than the level of TOPCon.