Since this year, the entire A-share photovoltaic sector has been experiencing “cooling down”
When checking the latest net value of a photovoltaic ETF purchased by himself, Zhang Ling (pseudonym) took a breath.
“Look down and still ‘stand guard’.” She joked that she was “sister Gang” and was “foolishly” waiting for the account to return. Recalling the scene of choosing the new energy theme ETF in the fourth quarter of last year, Zhang Ling was somewhat helpless. “At that time, he didn’t know what to buy. He only knew that photovoltaic, lithium battery and other new energy themes were popular, so he bought this photovoltaic ETF with his friends. Unexpectedly, he took the ‘roller coaster’ next.”
To this end, Zhang Ling and his friends also set up a discussion group. Even, when the net worth continued to decline, everyone comforted each other.
“After looking at the analysis of so many institutions, I also learned about the companies with heavy positions in EFT. In fact, I feel that there is no problem with the development of the industry and the operation of the company. Maybe everyone has been too hot before, so I have to reduce the temperature.” Zhang Ling said that he would not “cut meat” for a while.
Zhang Ling’s experience is an epitome of the “baptism” of the current A-share photovoltaic sector valuation.
In fact, even well-known investment institutions may face a large floating profit pullback at present.
In December 2020, the leading photovoltaic concept stock Longi Green Energy Technology Co.Ltd(601012) (601012. SH) announced an announcement on share transfer – the major shareholder Li Chunan transferred about 226 million shares to hilling capital, accounting for 6.00% of the total share capital of the company, and the transfer price was 70 yuan / share.
This equity transaction with a total consideration of 15.841 billion yuan further helped Longi Green Energy Technology Co.Ltd(601012) share price soar. At that time, it also became the wind vane of photovoltaic concept popular in the capital market. Now, with a round of adjustment, Longi Green Energy Technology Co.Ltd(601012) share price has shrunk significantly from the high point, and the position floating profit of Hillhouse capital has also been reduced from more than 15 billion yuan in the peak period to about 6 billion yuan.
Indeed, as Zhang Ling said, since this year, the entire A-share photovoltaic sector has been experiencing “cooling down”. Visible reference is that the number of companies with a market value of 100 billion has emerged in the original industry, and there has been a “staff reduction”. As of the closing on February 18, the market value of eight photovoltaic companies exceeded 100 billion. At the most “lively” time, the number is 13.
“another 100 billion photovoltaic company was born”
On August 4, 2021, Zhejiang Chint Electrics Co.Ltd(601877) (601877. SH), which has always been labeled as “household leader”, became a new photovoltaic company with a market value of 100 billion A-Shares due to the rise of share price limit.
Igniting the engine of Zhejiang Chint Electrics Co.Ltd(601877) share price rise is the promotion of the National County wide distributed policy.
On June 20, 2021, the National Energy Administration officially issued the notice on submitting the pilot scheme of roof distributed photovoltaic development in the whole county (city, district), which opened the curtain of distributed photovoltaic development with an estimated scale of trillion. With maintaining a high market share in the user field for many years, Zhejiang Chint Electrics Co.Ltd(601877) has been pushed into the leader of the distributed concept by the A-share market. Its share price began to rise all the way, and its maximum market value even exceeded 130 billion yuan.
“At that time, as long as there was any disturbance in the photovoltaic industry, the capital market could always dig out the corresponding longyi and longer concept stocks.” Zheng Qiang (a pseudonym), who changed his career to stock investment, experienced a bull market in 2015, but the madness of the A-share photovoltaic sector since the third quarter of 2020 exceeded his imagination. “The carbon peak and carbon neutralization policies have suddenly improved the development status of the new energy industry represented by photovoltaic, and A-share hot money has surged upward.”
Zheng Qiang did not pay attention to the photovoltaic industry because of the rise of heat.
In 2017, when he was an employee of a company, he saw an article “who will become the next 100 billion photovoltaic company” and began to pay attention to the development of this industry. “There is no systematic research, that is, reading all kinds of news and research reports.” Zheng Qiang specially stressed that at that time, he also checked that there were no photovoltaic companies with a market value of 100 billion in the A-share market at that time.
Looking at the development history of China’s photovoltaic industry before 2019, in the market value of listed companies, only two companies have realized the “100 billion dream” – Wuxi Suntech, which landed in the US stock market, and hanergy thin film power generation, which was popular in Hong Kong stock market. With the end of the two former giants, there has been no myth in China’s photovoltaic industry.
Until Longi Green Energy Technology Co.Ltd(601012) appears. In mid and late November 2017, the silicon wafer giant, which won in one fell swoop in the single polycrystalline competition, approached the market value of 80 billion. At that time, the market value of Tongwei Co.Ltd(600438) (600438. SH) and Tianjin Zhonghuan Semiconductor Co.Ltd(002129) (002129. SZ) behind him was only more than 40 billion and 20 billion. Therefore, Longi Green Energy Technology Co.Ltd(601012) who ran out of the queue is expected to fill the gap in the market value of 100 billion in China’s photovoltaic industry for several years.
Indeed, on August 31, 2019, the total market value of Longi Green Energy Technology Co.Ltd(601012) reached 100.1 billion yuan, and the first 100 billion market value photovoltaic company in A-Shares was born.
From the emergence of the market value of 100 billion three years ago, it is no wonder now. In Zheng Qiang’s view, the call of “another 100 billion photovoltaic company” after another A-share last year is now a dangerous signal.
“There’s no making without breaking. Photovoltaic industry has a definite development space in the medium and long term. But the capital market suddenly fired up bullets, and it made the leading companies and all sectors stir up huge bubbles. Zheng Qiang firmly believes.
“valuation overdrawn”
“The biggest problem with photovoltaic is that the valuation is overdrawn.” On an investment exchange platform, a user expressed his views on the continuous correction of the current A-share photovoltaic sector.
This has attracted the discussion of some other users. Some people believe that “it is not that the valuation is overdrawn, but that the poor price transmission of the industrial chain leads to uneven profit distribution.” Others echoed, “in the context of killing valuation now, we must find the most certain one in the iterative platform.”
Objectively speaking, after the year to date correction, the valuation of the whole A-share photovoltaic sector has been significantly reduced.
Take the wind photovoltaic index as an example. As of the closing on February 18, the index closed at 4430.98 points, down 14.67% year to date. After adjustment, the dynamic P / E ratio corresponding to wind PV index is 44.5 times. At the peak in early August last year, the figure reached 63.37 times.
Leading companies bear the brunt of this round of adjustment.
As of the closing on February 18, Longi Green Energy Technology Co.Ltd(601012) , Tongwei Co.Ltd(600438) , Sungrow Power Supply Co.Ltd(300274) (300274. SZ), the three photovoltaic companies with the highest market value, have fallen by 20.48%, 13.12% and 27.34% respectively this year. In addition, Trina Solar Co.Ltd(688599) (688599. SH), Flat Glass Group Co.Ltd(601865) (601865. SH), Suzhou Maxwell Technologies Co.Ltd(300751) (300751. SZ), Shanghai Aiko Solar Energy Co.Ltd(600732) (600732. SH), Wuxi Shangji Automation Co.Ltd(603185) (603185. SH) have retreated by more than 20% year to date.
The three companies with the largest share price decline are Arctech Solar Holding Co.Ltd(688408) (688408. SH), Yingkou Jinchen Machinery Co.Ltd(603396) (603396. SH), Shenzhen S.C New Energy Technology Corporation(300724) (300724. SZ), which have fallen by 40.34%, 38.41% and 32.82% respectively since this year.
The visible positive signal is that after the correction, the valuation of many leading stocks has fallen sharply. For example, Longi Green Energy Technology Co.Ltd(601012) , Tongwei Co.Ltd(600438) , Zhejiang Chint Electrics Co.Ltd(601877) , Xinjiang Daqo New Energy Co.Ltd(688303) and other 100 billion market capitalization companies’ latest dynamic P / E ratios decreased to 38.05 times, 21.43 times, 15.79 times and 19.07 times respectively.
However, there are still many high value companies. According to wind data, as of February 18, the number of companies with the latest dynamic P / E ratio of more than 70 times was 17, accounting for more than 20%.
It is worth mentioning that when encountering this round of sector adjustment, some investors compared it with the two quotations in 2011 and 2018.
Throughout 2018, the wind PV index fell by 37.72%, second only to 38.55% in 2011, becoming the second largest annual retreat since the establishment of the index.
However, the industrial background of the three index retreats is not the same. In 2011 and 2018, China’s photovoltaic industry suffered from the industrial crisis caused by “European and American double anti” and the industrial cooling caused by policy adjustment. That is, from the demand side, the development of the whole industry has encountered a “freezing point”.
The lack of industrial demand does not exist at present.
start after the “baptism”
Both the net value trend of photovoltaic ETF and the performance of wind photovoltaic index convey the same conclusion. In 2020 and 2021, China’s photovoltaic industry has indeed ushered in a honeymoon period. On the one hand, the continuous release of favorable policies has laid the development prospect of China’s photovoltaic industry; On the other hand, the continuous support of a large amount of capital has further increased the development heat of the whole industry.
However, when the dual promotion of policy and capital pushed the photovoltaic concept to the star throne of a shares, the phenomenon of record high share prices emerged one after another, which also made the whole photovoltaic sector need to experience another “baptism”.
Unlike the two events in 2011 and 2018, when the capital market was pessimistic about the short-term development of the industry, resulting in the cold of the sector, this round of valuation “baptism” is just an early warning of overheating.
Such overheating warning exists not only in the capital market, but also in some links of the photovoltaic industry chain.
First of all, on the capital market side, when the share price is at a new high and the market value is greatly increased, leading companies need to have stronger performance growth to support the high valuation.
According to the statistics of the 21st Century Business Herald reporter, as of February 18, a total of 46 A-share photovoltaic companies have disclosed the performance forecast of 2021, with a cumulative net profit of nearly 40 billion yuan. Among them, the net profit of more than half of the companies increased in advance, and the net profit of 20 companies is expected to double.
Such performance almost announced that China’s photovoltaic industry as a whole achieved a “bumper harvest” last year. This also supported the expectation of the capital market to pursue the concept of photovoltaic in the past year. However, when the “boots fall to the ground”, where is the new expectation?
In addition, the overheating of the industrial chain has triggered a large influx of new and old capital, and the signal of overcapacity in some links is looming.
According to the statistics of Black Hawk photovoltaic, the industry media, the total investment in photovoltaic manufacturing exceeded 720 billion yuan in 2021, almost twice that in 2020. Among them, the investment amount of silicon material, silicon wafer and battery / module exceeds 160 billion yuan, 80 billion yuan and 220 billion yuan respectively.
However, a new round of fierce expansion cannot avoid the “prisoner’s dilemma”. It is doomed that the “cooperation between upstream and downstream industries” will not disappear for a long time in the future.
In fact, the game of industrial chain price has also become one of the possible factors leading to this round of photovoltaic adjustment.
“We believe that the main reasons are: first, the market is worried that the potential fed interest rate hike will lead to a decline in valuation; second, the sector turns to value stocks; third, there are concerns about the performance of the fourth quarter of 2021 and the first quarter of 2022 (mainly affected by rising costs), especially silicon wafer, inverter and photovoltaic glass.” Yan Yishu, an analyst of photovoltaic and renewable energy at UBS Securities, said when analyzing the reasons for the stock price correction of China’s photovoltaic industry since this year.
But in her view, after the recent stock price correction, the industry valuation will be attractive again. “Industry demand has rebounded since the first quarter of 2022, and the fundamentals will improve.”
