Text | Qiantanhao Technology As we all know, in the first half of this year, Longi Green Energy ranked first among all listed companies in the photovoltaic new energy sector with a loss of 5.243 billion. But most people may not know that even among the more than 5,300 listed comp

As we all know, in the first half of this year, Longi Green Energy ranked first among all listed companies in the photovoltaic new energy sector with a loss of 5.243 billion.

But most people may not know that even among the more than 5,300 listed companies in Shanghai, Shenzhen and Beijing, LONGi Green Energy ranked second in terms of losses in the first half of this year!

Among the top five money-losing companies, except for Tianqi Lithium , which has been dragged down by the fall in lithium prices, the other three are real estate companies, and Longi Green Energy is the only photovoltaic company.

from Dongcai choice

Photovoltaic down cycle, all companies are under pressure. Sometimes in order to maintain market share and leading position, leading companies often need to find a balance between sales and losses, although selling more products may mean more losses.

However, LONGi’s role as the dual leader in silicon wafers and components is no longer a thing of the past. Now it is inferior to tcl Zhonghuan in terms of silicon wafer operating rate and shipment volume, and inferior to Jinko, JA Solar, and Trina in terms of component shipments. Moreover, in the first half of this year, the company also outsourced the processing of a large number of battery cells based on its comparative cost advantage.

So, why did LONGi, which ranked fourth in component shipments in the first half of this year, lose so much money all of a sudden? To be honest, if there is no certain scale, it may not be easy for some companies to lose so much in just six months! Is the huge loss of

real? Is

an industry problem or a problem of LONGi itself? Is there a mistake in the product or market, or is there a misjudgment in the technical route? Did the company make mistakes in business management, strategy and tactics, or did there appear to be some risks in corporate governance or even culture?

01 A performance briefing without performance explanation

, 2nd, Monday. LONGi Green Energy held a performance briefing for the first half of 2024 as usual. LONGi’s performance briefings have always been open to all investors, something many companies cannot do. We were also lucky enough to listen and learn the whole process.

Frankly speaking, for more than an hour during the entire meeting, I was confused. In this performance briefing meeting, the LONGi Green Energy management team led by Chairman Zhong Baoshen did not provide any necessary "explanation" around "performance" and did not explain why there was a huge loss in the first half of the year. On behalf of the majority of investors,

asked questions to the management of Longi Green Energy, all from analysts in the e-commerce industry of well-known securities companies. From the perspective of market expectations, they all focused on what will happen to the company and industry in the future. As for the 5.2 billion losses that have occurred, no one asked any questions.

In the impression of Qiantanhao, Longi was not like this before.

Take last year as an example. In the third quarter of 2023, LONGi Green Energy’s revenue and net profit both declined year-on-year. At that investor exchange meeting, the company’s president Li Zhenguo admitted frankly that LONGi made two strategic mistakes in 2023: First, when the price of silicon material dropped at the beginning of the year, LONGi’s silicon wafer price anchored the silicon material and was lowered simultaneously. It did not make the profit it should have. With the money earned, in the second quarter, when other companies competed for the market with low-price orders, LONGi was slow to follow up, which affected module sales and delivery in the fourth quarter.

In addition, Li Zhenguo also bluntly stated that LONGi had an impairment of 3 billion yuan in the first three quarters of 2023, a large part of which was caused by the return of American products.

Last year, even if LONGi made less money, it had to review with investors why it made less money. In the first half of this year, the company suffered an unprecedented huge loss, but it didn't even bother to explain it.

As a result, the entire performance briefing became a product strategy briefing for Chairman Zhong Baoshen focusing on BC strategy and how LONGi can return to the growth track. Qiantanhao suggested that it might be better if such a communication activity was renamed "Longi BC Product and Business Strategy Briefing Session".

Winning or losing is a common thing in military affairs. It is normal to make profits and losses in business. If LONGi Green Energy had been respected in the past, in addition to leading the monocrystalline technology revolution to drive the progress of the entire industry, bravely venturing into no man's land in research and development, and setting world records for solar cell conversion efficiency time and time again, it also had a more valuable quality. That's sincerity.Regarding strategic mistakes, LONGi Green Energy, including Li Zhenguo, has never been shy in the past and faced the problems head-on.

There are actually some photovoltaic companies in the A-share market that are good at being honest with investors, such as Daquan Energy , JA Technology , etc. They disclose information in detail, for fear that investors will not understand clearly. Although such a company may suffer sometimes because it is not good at bragging, in the long run, it will be rewarded by time.

02 5.2 billion, where did the loss go?

Longi Green Energy lost 5.2 billion in the first half of this year. Was the loss on silicon wafers or components? First, we need to figure out Longi’s business structure in the first half of this year. Unfortunately, LONGi Green Energy did not disclose the revenue of each category of goods as it did in the past. Instead, it packaged the three businesses of silicon wafers, components, and batteries into "photovoltaic products."

Longi Green Energy disclosed: "In the first half of 2024, silicon wafer shipments will be 44.44gw (external sales 21.96gw); external battery sales will be 2.66gw; module shipments will be 31.34gw."

At this time last year, LONGi Green Energy disclosed: “In the first half of 2023, the company achieved monocrystalline silicon wafer shipments of 52.05gw, including 22.98gw for external sales and 29.07gw for self-use; monocrystalline cell shipments of 31.50gw, including 3.28gw for external sales and 28.22gw for self-use; Crystal module shipments were 26.64gw, including 26.49gw for external sales and 0.15gw for self-use. "

In other words, if we know the shipment volume and operating income of each type of LONGi's products, we can roughly calculate the unit sales price. If we compare it horizontally with its peers. By comparison, you can roughly calculate how much the company has made or lost.

In addition, in the first half of this year, LONGi Green Energy's "photovoltaic products" still had an operating gross profit of 2.371 billion yuan between operating income and operating costs. It is also worth mentioning that LONGi’s overseas market contributed an operating gross profit of 2.673 billion. Logically speaking, from this table alone, we cannot see that such a large loss would occur.

We might as well use the ruler of tcl Central to measure LONGi's operating conditions. Tcl Zhonghuan disclosed: "As of the end of the reporting period, the company's crystal production capacity reached 190gw, silicon wafer shipments increased by 18.3% year-on-year to 62gw, and the silicon wafer comprehensive market share was 23.5%, ranking first in the industry, but the total loss increased."

tcl Zhonghuan's Silicon wafers, how much money did you lose in the first half of this year? According to the calculation in the table below, the operating gross profit is -965 million yuan. In other words, the average operating profit per watt is -0.016 yuan, and the gross loss per watt is 1 cent 6.

from tcl Zhonghuan’s 2024 mid-term report

If Longi Green Energy’s management and operation capabilities are equivalent to tcl Zhonghuan’s, then the operating gross profit of 44.44gw silicon wafers will only lose 692 million yuan at most. Considering that LONGi Green Energy had an operating gross profit of 2.371 billion yuan in the first half of this year, the operating gross profit of its component business and battery business will be at least 3 billion yuan.

So, how did LONGi Green Energy’s losses in the first half of the year occur?

LONGi Green Energy’s mid-term report introduced in the “Management Discussion and Analysis” section: “ Affected by the continued sharp decline in industry chain prices and inventory impairment provisions, , in the first half of 2024, the company achieved operating income of 38.529 billion yuan. The net profit attributable to shareholders of listed companies was -5.243 billion yuan, and the net profit attributable to shareholders of listed companies after excluding non-recurring gains and losses was -5.277 billion yuan.”

In addition, LONGi Green Energy’s interim report is repeated throughout the article. There is no introduction to why the company suffered huge losses in the first half of this year. LONGi focuses its letter on how to praise itself. Here, Qiantanhao only lists the subtitles of the "Discussion and Analysis of Operating Situations":

• (1) The value of bc's full-scenario products is highlighted, and hpbc 2.0's excellent performance leads the efficient technology;
• (2) All-round construction of a technological moat, R&D achievements have continuously set new world records;
• (3) Lighthouse Factory leads the upgrade of lean manufacturing and leads the industry in the layout of advantageous production capacity;
• (4) Focuses on long-term stable operations and actively responds to industry competition with remarkable results.

The first of the two reasons for the loss summarized by Longi is "the continued sharp decline in prices in the industry chain." This is a common problem in the industry.Obviously, whether it is TCL Zhonghuan, Jinko, Tianhe, etc., profits have declined due to industry reasons, but they have not suffered huge losses as a result.

Then, the second item - "The impact of inventory impairment provision on " is the real reason. Could it be that LONGi Green Energy's silicon wafers, cells or modules could not be sold in the first half of this year, leading to high inventory and subsequent sharp depreciation? How much inventory impairment has LONGi Green Energy incurred and how much has it accrued? The answer to is 4.87 billion !

03 LONGi’s loss in inventory depreciation exceeds the sum of the five photovoltaic giants

From LONGi Green Energy’s 2024 interim report

In the first half of this year alone, LONGi Green Energy’s “losses in inventory depreciation and contract performance cost impairment losses” were as high as 4.87 billion. . In the first half of last year, it was 1.753 billion. Just compared with LONGi Green Energy itself, we don’t think there is any problem with this. After all, the prices of silicon wafers and modules have plummeted in the first half of this year. However, if compared with peers, the problem is obvious. Among

comparable companies, in the first half of this year, Tcl Zhonghuan's inventory depreciation losses and contract performance cost impairment losses were 1.109 billion, JinkoSolar was 546 million, Trina Solar was 502 million, and JA Solar Technology was 434. 100 million. Tongwei Co., Ltd., the dual leader in silicon materials and batteries, is only 2.252 billion!

comes from five companies’ 2024 mid-term reports

The key is that the silicon and battery leader Tongwei, the silicon wafer leader Zhonghuan, and the three integrated companies with the largest shipments of photovoltaic modules in the first half of this year have suffered losses from inventory price declines. In total, it is only 4.843 billion, which is not even as much as LONGi Green Energy. So, what kind of inventory does LONGi Green Energy have? The price has fallen even more sharply than that of silicon materials, causing a huge inventory price loss of 4.87 billion? Could it be that LONGi didn't sell its silicon wafers after they were cut out and the modules rolled off the assembly line, but waited until the price dropped to a low point before cutting the price and clearing out the products?

comes from Longi Green Energy’s 2024 interim report; unit: 10,000 yuan Currency: RMB; Note: The main holding subsidiaries include their total assets, net assets, operating income, operating profits, and net profits, accounting for any one of the listed companies’ combined share The statements correspond to subsidiaries whose financial indicators exceed 10%.

The 5.2 billion loss seems to have been allocated to the above-mentioned major holding and participating subsidiaries of Longi, but this is not the case. Because the sum of the net profits of these major subsidiaries was -2.479 billion yuan. In addition, there is a loss gap of 2.764 billion, and it is unknown to which entities it occurs.

From LONGi Green Energy’s 2024 Interim Report

Are these inventory depreciation losses real, or are they a means to adjust profits?

Otherwise, it would be difficult for ordinary people to understand that Zhong Baoshen conveyed the impression to investors at the performance presentation meeting that he didn't care about such a huge loss. It was a matter of course and there was no psychological burden. It was as if the loss was not theirs at all. money.

04 .11 million shareholders left the market

At the end of February this year, Qiantanhao published an article titled "". Today, half a year later, LONGi Green Energy's share price has dropped from 20.51 yuan to 13.51 yuan, a full 7 yuan, or a drop of 34.13%. During the same period, the market fell only 5.85%. Half a year later, the number of shareholders of LONGi Green Energy has dropped from nearly one million at that time, from 998,600 households to the current 883,600 households. 110,000 shareholders were cut off from the market in the process. During this process, two seemingly unrelated things happened. The first thing is "time .

. On April 20, LONGi announced that after Hillhouse Capital received the notification of filing the case from the China Securities Regulatory Commission on November 8 last year, it planned to proactively repurchase all the reduced shares involved in the case. April 19 On the same day, Hillhouse's shareholding ratio increased to 5.00%. This disgraceful incident of Hillhouse's illegal shareholding reduction ended in this form of three drinks as a penalty - compared with the past, this case is more difficult for small and medium-sized investors. The protection of rights and interests is already a huge progress.

The second thing is LONGi Green Energy’s bizarre dive. On the evening of June 6 this year, LONGi announced that it planned to issue tens of billions of corporate bonds.However, before this announcement was released, it was suspected that hot money or institutions collectively sold the market at 11:15 on June 6. The targets were led by Longi Green Energy, and also included JA Solar, Junda, Tongwei, etc. Longi fell 6.02% that day.

Some time after this incident passed, a private equity friend revealed to Qiantanhao that during the stock market crash, the head of a private equity fund in the south was forced to liquidate his position. Unable to bear the pressure, he finally hanged himself at home!

According to him, this investor had also actively participated in stocks such as Shijin Technology, Liancheng CNC , and made a lot of money. This time it is believed that we got the exact news, so we spent 500 million to pursue Longi Green Energy. The most fatal thing is that he promised the LPs to protect their capital and profits. Qiantanhao has always been dubious about such stock market stories, even though they have names and origins. The author asked the private equity circle for confirmation on this, and someone reported that they had indeed heard about it.

The stories of people who failed in stock trading and went to the rooftops often remain in plots or jokes. Now, it is so thrillingly related to photovoltaics. This desperate investor is just one of the 110,000 shareholders who left Longi Green Energy.

Qiantanhao met another private equity investor. Like the one above, he invested in Longi Green Energy for a long time and made a lot of money in his early years. However, in the round when Hillhouse took over, they lost miserably. Because everyone thinks that the entry of Hillhouse will definitely drive up LONGi's stock price, but in fact it is just the opposite. At that time, people didn’t even know what reintegration was. This "friend of time" is back again this year, and has been for more than four months. This time, will anyone believe it?

When I first joined the industry, my impression of LONGi Green Energy was that it was always a respected company, especially the founder Li Zhenguo. He lived a simple life and treated people sincerely. According to LONGi employees, he treated any grassroots employee very well. Generous and kind. This kind of intellectual simplicity and lack of defense has led to some people even admonishing that kindness does not lead to war, and one should still be ruthless in dealing with others. But now, let’s put aside LONGi’s contribution to R&D and technological innovation. If we look at the top 5 listed photovoltaic companies from the perspective of the capital market, besides LONGi, have any founders been punished by the China Securities Regulatory Commission for participating in insider trading? ? Has any well-known investment institution ever been investigated by the China Securities Regulatory Commission for illegally reducing its holdings? Has there ever been a chairman who announced that he would personally increase his holdings of his own stocks, but in actual practice accidentally became a "stock god" in the primary and secondary markets? Have you ever lost more than 5 billion in one go? We've finally seen it.

post note

The recent debate between bc and topcon has been chaotic. But when it comes down to it, operating performance is the best litmus test.

topcon is very complicated and highly homogeneous, but why is it that after the 2024 mid-term report, the only photovoltaic main material companies that can still make money are all topcon companies? Among the top 10 components in terms of component shipments, there are Jinko, Trina, Canadian Solar, Chint, GCL Integrated, Hengdian DMC, etc. However, LONGi, the leader of BC, has become the second money-losing enterprise among more than 5,000 listed companies.

bc is very good, but it cannot be said that this world only belongs to bc. What's more, where is the ultimate technical route in the world? Today, with the explosion of science and technology, the only thing we can do, as we are ignorant, is to always be in awe and trek toward the distance.

The last debate in the photovoltaic industry was also a discussion on the "ultimate" topic. In 2019, Longi said that 166 is the best choice for the entire photovoltaic industry chain. In 2021, Longi said that 182 is the ultimate size of silicon wafers.

The business ecology of photovoltaics was not like this in the early years. In 2011, 14 photovoltaic companies including Yingli, Suntech, and Trina issued a joint statement in Beijing and held a press conference to deal with "double reverses." Looking back on China's photovoltaic industry at that time, although it was weak, how united was it? ! Qiantanhao believes that changes in the photovoltaic business ecology actually began with the wave of integration. Photovoltaic big brother LONGi Green Energy took the lead in integration, and photovoltaic companies were forced to give up professional division of labor. For the sake of supply chain security, and for the sake of ensuring that every link can be squeezed out, they have established a separate system.In fact, the large-scale expansion of production and repeated investment by leading companies have also exacerbated this round of overcapacity and involution. Let’s just imagine, if all the integrated companies did not have their own silicon wafer production capacity, and there were no Hongyuan Green Energy, Gaojing, or Gaozhai, how easy would it be for TCL Zhonghuan and Longi Green Energy?

photovoltaic is a world. Thinking back to the last size war that involved the entire industry, it was also divided into two camps: 182 and 210. Everyone already knows the outcome. We don’t want to comment too much, but during the debate, there are still some details worth pondering. Qiantanhao received news from fans. When I saw the ppt below, I couldn't believe my eyes - this is the ecology of our industry. I don’t know whether the above-mentioned documents are true or false, but the working ideas are generally very clear, written very realistically and straightforwardly. The excerpt is as follows:

• "Seize the risk points and uncertainties of the 210 component, strengthen publicity, and shake customer confidence"
• "United Crystal Co., Ltd. and Canadian Solar promoted the m10 specification to attack 210, which had the effect of "
• ". Company leaders came forward to influence the inverter factory's standard products, the glass factory's new production capacity planning width and other constraints (already carried out in August. Communicate with Huawei)”

The Internet has memory. In August 2023, a "popular science article" about how topcon cracked appeared in major media at the same time. There is one detail. Many media have marked the word "contribution". Qiantanhao found that the format was exactly the same as two years ago. Therefore, just listen to the so-called painful drama of the six sects besieging Guangmingding. The glory of the past, the glory of the past, has finally become a heavy crown and a stumbling block on the way forward. There are very few companies that can get rid of the winner's path dependence and rise from the trough with an empty cup mentality.

Longi still needs to work hard.