Financial findings for 1H22 of solar vertically integrated companies

As PV manufacturers published their 1H22 financial results, InfoLink found that top five largest vertically integrated companies’ net profit and revenue witnessed significant growth, which can be ascribed to increased shipment volume. InfoLink’s calculation shows that the top-five shipped a total of 78.644 GW of modules in the first half of the year, up 48% from 52.968 GW in the same period last year. 

Despite marked improvement in sales volume and revenue, costs remained high due to high materials prices in the upstream and complicated international trade and policies. As a result, gross margin differs among companies, with most of which seeing no significant growth, reflecting that manufacturer had to deal with challenges from cost structure and profitability in the first half.

Note: Exchange rate: 6.437 in Q1 2022; 6.6 in Q2 2022. Calculation of operating expense includes sales, management, and R&D expenses only.
 

LONGi Group

Source: LONGi Group’s financial results for the first half of 2022

Longi shipped 18.02 GW of modules in the first half, with 17.7 GW of which were sold. The figure increased by 6% from 17.01 GW in the same period last year. Of 39.62 GW of mono-Si wafer shipment, 20.15 GW were sold, up 3% YoY. According to its Q1 2022 financial results, the company expects to ship 90 to 100 GW of mono-Si wafers and 50 GW to 60 GW of modules this year.

Benefiting from increases in wafer and module prices, Longi’s revenue stood at RMB 50.4 billion, up 43.6% compared with RMB 35.1 billion in the same period last year. Its gross margin was 17.6%, which decreased by 4.9% YoY, as raw materials shortage and increased prices resulted in higher increase in costs than in revenue. Yet, Longi’s gross margin was higher than other manufacturers, for its product offerings include wafers that can generate higher gross margin.

In terms of capacity expansion, Longi paused its plan to build facility in Yunnan due to electricity rates reason. It then shifted focus to pushing forward its mono ingot and slicing project with annual capacity of 46 GW in Ordos, Mongolia, and Longi Leye‘s 15-GW high efficiency mono-Si cell project as well as 4-GW mono-Si cell project in Xixian New Area in Shaanxi.
 

Trina

Source: Trina’s financial results for the first half of 2022

Trina shipped 18.05 GW of modules in the first half, up 72% YoY from last year’s 10.5 GW. The company’s revenue reached RMB 35.73 billion, a YoY increase of 77%. Its gross margin increased marginally from 13.4% in 2021 to 13.6%.

Trina is actively promoting modules featuring 210mm cells. It expects to bring cell capacity to 50 GW by the end of this year. Of which, lines dedicated to 210/210R accounted for more than 90%. It is to secure its leading position in large format high-efficiency cell and module. Its module capacity is expected to reach 65 GW by the end of the year.

On the capacity expansion side, Trina is investing in several projects in Xining Economy & Technology Development Zone this year, including a silicon metal project with annual capacity of 300,000 MT, a high purity polysilicon project with annual capacity of 150,000 MT, mono ingot project with 35 GW annual capacity, a slicing project with 10 GW annual capacity, a cell and module project each with 10 GW annual capacity, and a 15-GW module BOM line. First phase of the project will finish construction by the end of 2023. Phase-3 high-efficiency cell project with 8 GW annual capacity in Suqian is currently under construction.
 

Jinko

Source: Jinko’s financial results for the first half of 2022

Jinko shipped 18.214 GW (Q1: 8.031 GW; Q2: 10.183 GW) in the first half, up 113% from last year’s 8.538 GW. Wafer and cell shipment declined 65%, from 2.019 GW to 0.708 GW (Q1: 359 MW; Q2: 349 MW). Jinko expects to ship 9 GW to 10 GW in the third quarter, and 35 GW to 40 GW this year.

Jinko posted RMB 33.6 billion of revenue in the first half, up 112% YoY compared with RMB 15.9 billion in 2021. Cost of goods sold (COGS) increased along with sales volume, from RMB 13.15 billion to RMB 28.6 billion. The range of increase was slightly higher than in revenue due to increased materials costs, resulting in a drop in gross margin, from 17.1% to 14.9%.

During the reporting period, Jinko embodied 43 GW of wafer capacity, 42 GW of cell capacity, and 50 GW of module capacity; it planned to bring capacity to 60 GW, 55 GW, and 65 GW, respectively. In addition, more n-type capacity is expected to bring online.
 

JA Solar

Source: JA Solar’s financial results for the first half of 2022

JA Solar shipped 15.67 GW of cells and modules in the first half, posting 55% of YoY increase from last year’s 10.12 GW. Of the total shipment, 108 MW was for self-consumption. Overseas markets accounted for 67% of its total module shipment.

As shipment volume grew and product prices increased, JA Solar’s revenue came in at RMB 28.47 billion, increasing by 76% from last year’s RMB 16.2 billion. However, its COGS also increased 75%, from last year’s RMB 14 billion to RMB 24.7 billion, due to surging polysilicon prices and delivery fees. Its gross margin saw little change, rising from 13% to 13.2%. 

In 2021, JA Solar’s module capacity neared 40 GW, with wafer and cell lines accounted for 80% of module capacity. It plans to bring module capacity to 50 GW by the end of this year, and retain the share of wafer and cell capacity at 80%. Planned capacities and those under construction will gradually commission and start production next year. Module capacity is projected to exceed 75 GW by the end of next year, with wafer and cell capacity increase alongside. 
 

Canadian Solar

Exchange rate: Q1 2021: 6.483; Q2 2021: 6.456; Q1 2022: 6.437; Q2 2022: 6.61

Source: Canadian Solar reports second quarter results

Canadian Solar shipped 8.69 GW (3.63 GW in Q1; 5.06 GW in Q2) of modules in the first half, increased 28% YoY from last year’s 6.8 GW. The company’s module shipment is expected to come in at 20 GW to 22 GW this year.

The company’s revenue in the first half stood at RMB 23.2 billion (US$ 3.56 billion), up 43.3% YoY. Its gross margin sat at 15.5%, slightly increased on last year’s 15.1%. CSI Solar, whose business focuses on solar, energy storage, and electricity in China, posted 15.4% of gross margin. Global Energy, which focuses on solar-plus-storage and power plant operation, saw 15.1% of gross margin.

As of June, Canadian Solar held 5.4 GW of ingot capacity, 11.5 GW of wafer capacity, 13.9 GW of cell capacity, 27.9 GW of module capacity; its capacity is expected to reach 20.4 GW, 20 GW, 19.8 GW, and 32 GW, respectively, by the end of the year.
 

1H22 supply chain overview

The first half of 2022 saw an increase in global demand for PV, as spurred by national policies promoting energy transition. In Europe, prices surged for electricity and fossil fuel amid Russian-Ukraine conflicts, beefing up the bloc’s demand for renewables. As a result, shipments of all vertically integrated companies to Europe markedly increased from a year before.

Yet, disproportionate supply-demand relationship became more pronounced in the first half of the year. All sectors saw significant price hikes. Raw material prices rise ceaselessly, constraining profitability of downstream manufacturers, whose cost structure is disrupted by the complicated market environment and intricate international trade policies.

Upstream manufacturers enjoyed far greater profits than those in the downstream, as prices advanced faster for polysilicon and wafer than cells and modules in the first half of the year. 

Polysilicon production volume was up 53% YoY but still fell short of strong downstream demand. As a result, polysilicon prices kept rising, with major manufacturers, such as Daqo and TBEA, posting more than 50% of gross margin. In the wafer sector, Zhonghuan, Wuxi Shangi Automation, and JYT, yielded 18% to 20% of gross margin, lower than last year’s levels. Cell and module makers saw lower gross margin in the supply chain, but vertical integrated companies managed to keep at least 13% of gross margin.

Overall, the disproportionate supply-demand relationship has yet to be fixed. As prices rise faster in the upstream, downstream sectors can hardly generate high gross margin, despite robust demand driving up shipment volume and total revenue. Given that, manufacturers adjust strategies, hoping to better control production costs through long-term orders or vertical integration.
 

Industrial trends

As countries across the globe raised renewable installation target, demand in the first half beat expectation. In anticipation of stronger demand next year, major manufacturers announced new capacity expansion plans one after another and work on improving profitability in the downstream; they expect rapidly growing demand will drive sales volume. Meanwhile, with new polysilicon capacity coming online continuously, prices-induced cost structure issue is likely to ease. Coupled with strong global demand, most manufacturers are optimistic about market outlook. However, vertically integrated companies are still caught profitability and shipment in the short term, as prices across the supply chain peak in the third quarter.