In the near future, on May 7, 2024, the board of directors of TCL Zhonghuan has passed a significant financial decision, agreeing to invest up to RMB 10 billion of its own capital into financial products. This move follows the company’s repurchase plan announced last year, aiming to repurchase some of its shares in circulation with RMB 5 to 10 billion.
As of April 30, 2023, TCL Zhonghuan has cumulatively invested approximately RMB 62.558 million in repurchasing shares, involving 4,999,968 shares, accounting for 0.1237% of the company’s total share capital. Although share repurchase is often seen as a sign of confidence in the company’s value, TCL Zhonghuan’s move has raised doubts among some investors. Considering that in the A-share market, only 12 companies have financial investment scales reaching or exceeding RMB 10 billion, such operations have attracted considerable attention.
An analysis of TCL Zhonghuan’s financial report reveals that the company’s net profit in 2023 has plummeted to RMB 3.416 billion, a significant drop of 49.9% compared to the previous year, mainly due to a substantial decrease in silicon wafer prices and large asset impairment losses. By the first quarter of 2024, the net profit turned into a loss, amounting to negative RMB 0.88 billion, which is also mainly related to the decline in silicon wafer prices.
By May 8, the stock price of TCL Zhonghuan had fallen to an unprecedented low, with its market value dropping from over RMB 200 billion at its peak to just RMB 42.048 billion, evaporating RMB 150 billion in less than two years. The company’s share price likewise tumbled from the peak of RMB 40.1 per share in April 2023 to the current RMB 10.40 per share.
In the photovoltaic industry as a whole, for the first quarter of 2024, photovoltaic listed companies collectively faced challenges, with operating income and net profit attributable to the parent company dropping by 15.47% and 71.98%, respectively, compared with a growth of 35.81% and 54.98% over the same period in 2022. Analysis of individual corporate data shows that 64 companies experienced declines in revenue, among which 32 dropped more than 30%, 12 fell more than 50%, covering leading enterprises in various fields. Longi Green Energy, for instance, saw its revenue decrease by 37.59% year-on-year, leading to a net loss of RMB 2.35 billion.
The tense profit situation is also worrying, with 73 companies experiencing a decline in net profit in the first quarter, 57 of which fell more than 30%, 46 fell more than 50%, and even 26 of them had a reduction exceeding 100%. This series of figures reflects the strong impact of the photovoltaic industry cycle.
Ultimately, the photovoltaic industry possesses both growth and cyclical attributes. Its growth comes from the continuous increase in end-installation demand, which has driven the country’s photovoltaic installation capacity to grow nearly 40 times in the past decade. At present, photovoltaics has become the second-largest source of energy after thermal power.
With the end of the first quarter of 2024, the country’s cumulative additional installation capacity reached 45.74 gigawatts (GW), an increase of 35.9% compared to the same period last year. In the same period, China’s export volume of photovoltaic modules also achieved growth, reaching 59.85GW, a year-on-year increase of 27.4%. Experts predict that the global additional photovoltaic installation will reach 525GW in 2024, a 33% increase from 2023.
Analysis finds that the development cycle of the photovoltaic industry echoes past industry trends, transitioning from “policy-driven” to “market-driven,” and then to the “technology-driven” stage.
Data provided by China’s Photovoltaic Industry Association shows that in 2023, China’s production of polysilicon, silicon wafers, cells, and modules reached 1.43 million tons, 622GW, 545GW, and 499GW, respectively, with year-on-year growth rates of 66.9%, 67.5%, 64.9%, and 69.3%. However, despite the significant increase in output, the supply-demand ratio in the industry chain worsened from 1.02:1 in June 2023 to 2:1 by the end of the year, indicating that the mismatch between supply and demand in the photovoltaic industry has not been effectively improved. Persistently low prices have led some companies’ module prices to fall below the break-even point, signaling that the industry fundamentals have yet to be further repaired.
By the end of the first quarter of 2024, the production capacity of the entire photovoltaic industry chain had exceeded the 1000GW milestone, but the mismatch between the supply side and terminal installations persists. In fact, the current photovoltaic industry is deep in the bottom of the cycle, accelerating the elimination of outdated capacities while simultaneously entering a technology iteration phase driven by innovation.
Leading companies in the industry, such as Tongwei, Longi, and JinkoSolar, will not be easily eliminated during this process. These top-tier enterprises, with their integrated operations model and global layout, should successfully navigate through the cyclical fluctuations. Following the industry’s natural selection, leading manufacturers will be more proactive in upgrading technology, improving efficiency, and reducing costs. They will also utilize their advantages in technology, cost, capacity configuration, and market layout to strengthen capital capabilities and self-sufficiency, thereby continuing to consolidate their leading position in the fiercely competitive industry.
Looking at long-term development, companies should transcend the constraints of short-term interests, look to the future, respect the natural evolution of market cycles, and use the power of innovation to smooth out cyclical fluctuations.
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