2021 is China’s “big year” of distribution and the last year for household photovoltaic to enjoy state subsidies. So why are we optimistic about China’s distributed photovoltaic track in the era of no subsidy? What are the investment opportunities in the distributed industrial chain?
\u3000\u30001. In the era of no subsidy, distributed has the conditions to achieve high growth by relying on market power – high profitability + large growth space + strong growth momentum
From the perspective of profitability, 1) distributed economy is stronger than centralized economy. According to our calculation, the IRR of household, industrial and commercial projects in 21 years is 5.3% and 1.9% higher than that of centralized projects. If the mode of “spontaneous self use and balance online” is adopted, the IRR can be further improved. 2) The profitability of the main links of the industrial chain (components, inverters and installers) is also higher than that of centralized. The gross profit margin of distributed components and inverters is 1-4% and 4% higher than that of centralized, and the net profit margin of installers is 6.1% higher than that of centralized.
From the perspective of growth space, 1) in the past 21 years, the distributed demand has increased greatly, accounting for 53% of the first super centralized photovoltaic, of which household use accounts for 70% +, and the distributed development in the central and eastern coastal provinces is better. In the past 21 years, the newly added distributed installed capacity in Shandong, Hebei and Henan ranked among the top three in China. 2) Future: there is great growth potential in household, industrial and commercial markets. According to our calculation, the penetration rate of household, industrial and commercial roof photovoltaic in 21 years is only 1.4% and 4.6% (cumulative installed capacity / total installed capacity). At the same time, we predict that in 2025, the penetration rate of household, industrial and commercial PV will steadily increase to 5.3% and 8.3%, corresponding to about 30 / 45gw of new installed capacity of household in 22 / 25 years and 14 / 27GW of new installed capacity of industrial and commercial respectively.
From the perspective of growth momentum:
1) economy is the core driving force. The distributed economy of all regions continues to improve. If the component price drops in 22 years, the initial investment cost of household is 3.07 yuan / W. it is expected that the IRR of household projects in the top ten distributed provinces will exceed 7%, and Guangdong, Jiangsu, Zhejiang, Anhui and Fujian have great growth potential.
2) policy implementation is an accelerator. The whole county promotes distributed packaged development to attract central state-owned enterprises, and the agent development of private enterprises can also mobilize the enthusiasm of both parties for investment and construction. At the end of 21, the national pilot counties have recorded but not connected to the grid, and the project has reached 28.45gw, accelerating the penetration of household use; Dual control of energy consumption (limited use of coal and electricity) and market-oriented reform of electricity price (the maximum increase of transaction electricity price is 20% of the benchmark price, and the electricity price may increase significantly during the peak period of electricity consumption) stimulate the demand for industrial and commercial installation.
3) new business models expand distributed audiences. Under the financial leasing mode, there is zero initial investment cost, the threshold of self investment is reduced, and a large number of potential customers are attracted (representative enterprise: Skyworth); The roof rental mode (cooperative development mode) meets people’s risk-free investment psychology and attracts a large number of rural roof owners to cooperate (representative enterprises: Chint, Trina Solar and Zhonglai).
\u3000\u30002. What are the investment opportunities in the distributed industrial chain – how is the investability of each link? How will the market change in the future? What competitive elements do distributed enterprises need?
Link selection: first consider the market space & profit level (affecting the profit space), and then consider the input-output ratio (affecting the return speed of funds). The investment value of each link of the distributed industrial chain is roughly sorted as follows: installer inverter component.
1) first, compare the three links according to the market space & profit level. In terms of market space, installers components inverters. It is estimated that the distributed market space of components, inverters and installers in China in 22 years will be 78.8 billion yuan, 10.5 billion yuan and 176.9 billion yuan respectively, and the CAGR in 20-25 years will be 30%, 35% and 27%. In terms of profitability, inverter installer components. In the past 20 years, the net interest rates deducted from components, inverters and installers were 6.7%, 14.3% and 10.9% respectively. If the profit space of each link is roughly calculated, the profit space of the three links in the past 22 years will be 4.07 billion yuan, 1.15 billion yuan and 18.76 billion yuan respectively. Overall, the installer has the largest market space, relatively high profit level, the largest profit space and high investment value.
2) Secondly, compare the components and inverter links according to the input-output comparison. In terms of input-output ratio, inverter = installer component. In 20 years, the ROIC and fixed asset turnover rate of inverter link are 11% and 5% higher than that of component link respectively, and the initial investment in fixed assets is less (the fixed asset investment of inverter is about 30 million yuan / GW, and the component is about 200 million yuan / GW). If the installer obtains income through system integration, EPC, power station development and operation and maintenance, the initial investment in fixed assets is also less. On the whole, although the profit space of inverter in China’s distributed market is smaller than that of components, the market space has the fastest growth and the strongest growth, and the capital return speed is significantly higher than that of components, so the investment value is also good.
Installer link – the competition pattern is not stable, and the short-term market concentration is expected to increase significantly.
1) at present, the concentration of China’s distributed market is low, and the Cr4 in the first half of 2021 is about 37% (Chint, Trina Solar, Skyworth and Zhonglai). Due to the promotion of large-scale development in the whole county (the development scale of a single county can reach 140MW), the large number of counties signed by central state-owned enterprises and strong willingness to develop on behalf of others, it is expected that large installers with GW level full life cycle management capability (development, design, construction, operation and maintenance) will be more favored by central enterprises in the short term, and the market share is expected to increase significantly.
2) by analyzing the competitive factors of large installers, we believe that the company mainly focuses on the channel ability and financing ability in the early stage of development, the system design and integration ability in the medium term, and the intelligent operation and maintenance ability in the later stage (the projects are scattered and the operation and maintenance is difficult).
3) with the support of various competitive factors, in addition to self-supporting / selling power stations to farmers, head installers have cooperated with central state-owned enterprises to form a more diversified profit model, mainly including: obtaining one-time development and construction income in the early stage (3.5-4.01 yuan / W), providing after-sales operation and maintenance in the later stage and obtaining long-term operation and maintenance income (0.04 yuan / w / year).
Inverter and component links – the strong will always be strong, and the market will accelerate to concentrate on the leading enterprises.
1) inverter and components are fully competitive industries with high market concentration. In 2021, China’s distributed component Cr5 was about 60% (Longji, Trina Solar, Jingao, Atlas and Jingke). Sunshine, jinlang, Jiangsu Goodwe Power Supply Technology Co.Ltd(688390) and other advantageous enterprises of series inverter also had a high market share in China’s distributed market, with jinlang alone accounting for 31%.
2) distributed customers are short-term, decentralized and non-standard. Brand channels and customization ability (module version includes 60 / 66 / 72, and the number of inverter models of each brand is 8) are the common competitive elements of inverter and module head enterprises. At the same time, C-end customers do not know photovoltaic professionally and attach importance to brand endorsement. Head enterprises with strong comprehensive strength will be more popular in the future. 3) In the long run, China’s attention to the component level shutdown function of distributed inverter will benefit the micro inverse scheme (the component level shutdown function is the best).
Investment suggestions:
Focus on the installers with the largest market space and high profitability: it is recommended to pay attention to household installers [ Zhejiang Chint Electrics Co.Ltd(601877) ] (channel and operation and maintenance advantages deepen the brand moat), [ Jolywood (Suzhou) Sunwatt Co.Ltd(300393) ] (household and n-type TOPCON two wheel drive, and the whole cycle asset management ability is favored by central state-owned enterprises). It is recommended to pay attention to industrial and commercial installers [ Suwen Electric Energy Technology Co.Ltd(300982) ], [ Zhejiang Sunoren Solar Technology Co.Ltd(603105) ]. Focus on the inverter links with high input-output ratio and fast growth of market space: recommend [ Sungrow Power Supply Co.Ltd(300274) ] (high national popularity and 21-year development of China’s household market), [ Ginlong Technologies Co.Ltd(300763) ] (fast growth, rapid product iteration and distributed full scene coverage) [ Jiangsu Goodwe Power Supply Technology Co.Ltd(688390) ] (rapid response + financing guarantee expand the Chinese market, and the application prospect of energy storage inverter in China is good). It is suggested to pay attention to micro reverse enterprise [Hemai shares].
Risk warning: the installed capacity of the industry is less than expected; Risk of price rise of raw materials; Market competition intensifies risks; The calculation is subjective and for reference only
