Trina, Jinko, Canadian Solar, JA Solar, behind the resurgence of photovoltaic companies

In the early years, the promising photovoltaic Chinese concept stocks abandoned U.S. stocks and sought to be listed in A-shares. The low valuation of U.S. stocks and the loss of financing ability were the main reasons. After returning to A-shares, various companies rushed to raise funds to expand production, and the domestic photovoltaic industry was competing with each other. The shuffling may intensify.



The two photovoltaic manufacturing giants announced that they will return to domestic A shares from US stocks. So far, the four major domestic photovoltaic manufacturing leaders will all return to A-share listing and financing. The collective resurgence of A tide may intensify the competition and reshuffle of the domestic photovoltaic industry.

On June 28, the Shanghai Stock Exchange accepted the sci-tech innovation boards of JinkoSolar Co., Ltd. (JKS, hereinafter referred to as JinkoSolar) and Canadian Solar Power Group Co., Ltd. (CSIQ, hereinafter referred to as Canadian Solar). For IPO applications, the two will return to A in the form of spin-off and listing. JinkoSolar and Canadian Solar plan to raise 6 billion yuan and 4 billion yuan respectively.

Earlier, two other photovoltaic giants have completed the return of US stocks to A shares. In June 2020, Trina Solar returned to A shares from US stocks and landed on the Sci-tech Innovation Board; in December 2019, JA Solar returned to A shares from US stocks through a backdoor.

According to PV info link, a photovoltaic consulting agency, the top five companies in global photovoltaic module shipments in 2020 are LONGi, JinkoSolar, Trina Solar, JA Solar, and Canadian Solar.

From 2004 to 2009, Chinese photovoltaic manufacturing companies sought to go public on US stocks for financing, which set off an upsurge in China's photovoltaic Chinese concept stocks, including JinkoSolar, Trina Solar, JA Solar, Canadian Solar, Renesas, and Daquan. Energy also includes the delisted Yingli Green Energy, CLP Photovoltaic, Hanwha Q CELLS, as well as the bankrupted former photovoltaic giants Wuxi Suntech and Jiangxi Saiwei.

It is worth mentioning that the polysilicon producer Daqin Energy also plans to spin off its subsidiary Xinjiang Daquan to be listed on the SSE STAR Market. It has been approved by the China Securities Regulatory Commission on June 22 this year and will soon be listed on the STAR Market.

A senior analyst in the power industry told Caixin reporters that the overall change in the global photovoltaic industry is behind the resurgence of China's concept stocks. In 2014, China surpassed Europe to become the largest market in the photovoltaic industry. From 2015 to 2018, the domestic photovoltaic industry developed rapidly. With the changes in the photovoltaic industry pattern, the photovoltaic industry chain has gradually shifted from Europe and the United States to China. China has become the world`s largest photovoltaic production and application market, but European and American investors know little about Chinese companies. , U.S. stocks have generally lower valuations of Chinese photovoltaic companies than A-shares.

"Improving financing capacity and continuing expansion is the main reason for the collective return of photovoltaic Chinese concept stocks to A." The senior analyst in the power industry said that this collective resurgence of A will also intensify the competition and reshuffle of the domestic photovoltaic industry.

U.S. stocks are undervalued

JinkoSolar stated in the prospectus that the current limited financing channels and shortage of funds have become one of the main bottlenecks restricting business expansion and further improvement of profitability.

Earlier, Yingli Green Energy was delisted from the New York Stock Exchange in 2018 because its market value was less than US$50 million for 30 consecutive trading days. CLP Solar was also delisted from the New York Stock Exchange in 2016 because its market value was less than US$15 million for 180 consecutive trading days. Starck delisted.

The total market value of JA Solar in July 2018 before the delisting of U.S. stocks was approximately US$350 million (approximately RMB 2.3 billion). Before the delisting of the US stock market, the total market value of Trina Solar was approximately US$1.07 billion (approximately RMB 2.3 billion). 7 billion yuan). However, as of the close on July 9 this year, JA Solar`s A-share stock price was 47.74 yuan per share, with a total market value of 76.3 billion yuan; Trina Solar`s A-share price was 31.67 yuan per share, with a total market value of 65.5 billion yuan, and the valuation was significantly increased.

Based on this prediction, JinkoSolar and Canadian Solar will also increase their valuations after they return to A shares. As of the close on July 9, JinkoSolar's US stock price was US$56.76 per share, with a total market value of US$2.8 billion (approximately RMB 18.2 billion); Canadian Solar's US stock price was US$40.81 per share, with a total market value of US$2.48 billion. (Approximately RMB 16.1 billion).

Financing expansion

The IPO funds raised by JinkoSolar and Canadian Solar are mainly used for production expansion. JinkoSolar intends to raise 6 billion yuan, of which 4 billion yuan will be used for the construction of 7.5GW high-efficiency batteries and 5GW high-efficiency battery modules, 500 million yuan will be invested in the construction of Zhejiang Haining R&D center, and another 1.5 billion yuan will be used to supplement the flow funds.

Canadian Solar`s 4 billion yuan fundraising will also include three parts, including the 10GW pull rod project with an annual output of 10GW, the 10GW silicon wafer project in Funing, Jiangsu Yancheng, the 4GW high-efficiency solar photovoltaic cell project, and the 10GW high-efficiency photovoltaic cell module project. A total of 2.65 billion yuan was invested; 150 million yuan was invested in the construction project of the Research Institute of Jiaxing Canadian Solar Technology Co., Ltd.; another 1.2 billion yuan was used to supplement working capital.

Trina Solar will raise 3 billion yuan when it returns to A, of which 525 million yuan will be used for the 250MW photovoltaic leader project, 650 million will be used for the technological transformation and expansion of crystalline silicon, cells and modules, 440 million will be used to upgrade the R&D information center, and 1.39 billion Used to supplement working capital. Half a year after returning to A, Trina Solar will raise another 5.265 billion yuan at the end of December 2020 for the new 34GW battery and 10GW module project.

After backdoor listing, JA Tech has also frequently expanded its production capacity. In April 2020, JA Solar Technology raised 5.2 billion yuan for the annual production of 5GW high-efficiency batteries and 10GW high-efficiency modules and supporting projects. In September 2020, JA Solar announced once again that it will invest 10.4 billion yuan to expand 26GW silicon wafer production capacity, 9.5GW battery production capacity, and 3.5GW module production capacity.

However, in the prospectus, JinkoSolar warned of the risk of overcapacity in the photovoltaic industry. JinkoSolar said that leading companies in the industry have accelerated their production capacity expansion in order to increase market share and maintain a competitive position. If the growth rate of the downstream application market is lower than the expected expansion or even decline in the future, competitive expansion may lead to an unreasonable decline in product prices and a decline in corporate profits.

As far as the timing of returning to A is concerned, the aforementioned analysts said that JA Solar and Trina Solar have enjoyed the price increase of the entire power equipment and new energy sector starting in the second half of 2020 because they returned to A earlier. "But now the market in A is still good, and the domestic new energy market during the "14th Five-Year Plan" period still has a lot of room for growth." He said.

Optimize capital structure

The prospectus shows that JinkoSolar and Canadian Solar modules accounted for 96% and 81% of revenue, respectively. LONGi, Trina Solar and JA Solar will account for their component revenues in 2020. They are 66%, 75%, and 92% respectively. Peng Peng said that the reason why Longi shares the highest profit among various component manufacturers in 2020 is mainly due to the profit from the upstream silicon wafer link.

JinkoSolar said that due to the increasingly fierce competition in the photovoltaic industry, the company will further integrate vertically integrated production capacity, better control costs, and seize market initiative. Canadian Solar also stated that it will gradually increase the vertical integration of the company's photovoltaic manufacturing.

Both JinkoSolar and Canadian Solar stated in the prospectus that the company's debt-to-asset ratio is higher than that of comparable companies in the same industry. After the company's IPO, the debt-to-asset ratio will gradually decrease, which is conducive to optimizing the capital structure and enhancing the ability to resist risks. At the end of 2018, 2019, and 2020, JinkoSolar`s asset-liability ratios were 77.3%, 79.9%, and 75.2%, and Canadian Solar`s asset-liability ratios were 79.8%, 74.1%, and 67.3%, respectively, and the industry averages were in turn 59.6%, 59.1%, 62.4%.