After a seven-month wait, a cell company waited for a notice of the meeting.
Huaxia Energy Network learned that on December 15, the 89th meeting of the Listing Review Committee of the Shenzhen Stock Exchange in 2023 deliberated and approved the initial offering application of Jiangsu Zhongrun Solar Technology Co., Ltd. *** hereinafter referred to as "Zhongrun Solar").
Zhongrun Solar is "on the list" in the domestic photovoltaic cell shipment ranking. By the first half of 2023, its cell shipments have upgraded to the third largest in the world.
Founded in 2011, Zhongrun Solar is a high-efficiency solar cell manufacturer integrating R&D, production and sales. According to PV Infolink, the company's cell shipments in the first half of 2023 ranked third in the world.
As of the end of June 2023, the cell production capacity of Zhongrun Solar reached 4504gw。In terms of operating performance, the revenue in the first half of 2023 was 1076.9 billion yuan, net profit of 93.4 billion yuan. In May this year, the prospectus was officially submitted to the Shenzhen Stock Exchange.
Seeking capital market financing is obviously hoping to accelerate product transformation and enhance market competitiveness with the help of capital power. But on the other hand, looking at its prospectus, Zhongrun Solar is in an embarrassing situation: high asset-liability ratio and single product structure.
First, the first major customer is a competitor and other four major challenges, so that investors on the company's ability to resist risks put a big question mark.
Challenge 1: Weak ability to resist market volatility
According to the prospectus, although Zhongrun Solar has also deployed a small amount of module production capacity in the past two years, by June 2023, the cell business still accounts for 94% of Zhongrun Solar's total revenue.
Because cells are in the middle of the industrial chain, they are susceptible to upstream and downstream fluctuations, but the degree of transmission of growth to downstream is limited. As a result, its profitability is squeezed by both wafers and modules. The over-reliance on the cell business has led to the lack of anti-risk ability of Zhongrun Solar to cope with the fluctuations of the upstream and downstream of the industrial chain.
According to the data, in 2021, the gross profit margin of the company's main business will increase from 12 to 1256% down to 528%, down 728 percentage points, making the company's 2021 annual loss of 19.2 billion yuan.
The company is well aware of this potential risk, and the prospectus clearly states: "If the future macroeconomic and industry policy fluctuations make the terminal installed demand less than expected, or the upstream and downstream development of the industrial chain is unbalanced, resulting in the short supply and cost of raw materials such as silicon wafers, or the new products developed by the company based on new technologies have poor marketing results and cannot accurately adapt to the changes in module customer demand, the company will have unfavorable situations such as a decrease in product sales and a decline in gross profit margin, and there is a risk of significant fluctuations in operating performance." ”
Challenge 2: It has lagged behind in the technological iteration of the industry
In terms of the analysis of the capacity structure of Zhongrun Solar Energy, it is not dominant. Under the current development trend of 210mm large-size and n-type, the product structure of Zhongrun Solar in the first half of 2023 will still be dominated by large-size monocrystalline PERC cells of 182mm and above.
According to the public information of Zhongrun Solar, as of the end of June 2023, the production capacity of large-size PERC cells reached 3651GW, accounting for 81% of cell production capacity in the same periodThe production capacity of TOPCon cells is 683GW, accounting for only 15% of the cell production capacity in the same period16%。
From January to June this year, PERC cell products accounted for 80% of the revenue, while TOPCON products accounted for less than 10%. The market share of n-type cells in the industry will rise to 22% this yearAt about 5%, the capacity structure of Zhongrun Solar has obviously lagged behind the industry.
As N-type cells become the mainstream of the market, Zhongrun Solar is still increasing its PERC production capacity and putting it into production, which may bring higher inventory. According to the prospectus, it has built a 5GW monocrystalline PERC cell production capacity overseas (Laos). According to public information inquiries by Huaxia Energy Network, the 5GW project will be put into operation in September 2023.
Challenge 3: Large customers are competitors
In the audit inquiry letter issued by the Shenzhen Stock Exchange on June 4 this year, it explained the reasonableness of the requirement that "the largest customer is a competitor".
According to the prospectus, in the market sales in 2020, 2021, 2022 and the first half of 2023, JinkoSolar (SH:688223) has been its largest customer, with sales amounts of 55.6 billion yuan, 74.6 billion yuan, 264.4 billion yuan, 234.3 billion yuan, accounting for 14%-22% of the current revenue.
As an integrated giant, JinkoSolar's cell is also a key area of Jinko's layout. By the end of 2022, Jinko's cell production capacity was 55GW. There is a competitive relationship between the two companies in the cell sector.
In addition to Jinko, several other major customers such as JA Solar, Trina Solar, and LONGi Green Energy are also competing in the cell business. The Shenzhen Stock Exchange also mentioned this issue in its inquiry letter, asking for clarification on whether major customers such as Jinko, JA Solar, LONGi, and TRW have significant dependence.
In its reply on August 11, Zhongrun Solar said that during the reporting period, the total sales amount of the issuer to Jinko, JA Solar, LONGi and Tianhe was 121.8 billion yuan, 147.1 billion yuan, 455.8 billion yuan, 425.9 billion yuan, accounting for the proportion of current operating income respectively. 32%，39.55%。"The relatively high proportion is mainly due to the high concentration of the PV module industry and the issuer's implementation of the key customer strategy, which is in line with industry practice. ”
Challenge 4: Acquire loss-making companies with high debt
At present, the disadvantages of Zhongrun Solar in the market competition have begun to appear. In 2021, the book value of the company's inventory is still 25.3 billion yuan, which has soared to 14. by the end of June 20234.7 billion yuan. The debt-to-asset ratio dropped from 92% and 96% in 2020 and 2021 to 79% in June 2022 and 2023. However, compared with the average of 64%-71% of several peer companies, the asset-liability ratio of Zhongrun Solar is still a cut higher.
Strangely, companies with high debt are still making frequent acquisitions. From May 2021 to December 2022, Zhongrun Solar acquired 100% equity of Jieyuan Photovoltaic, Zhongyu Photovoltaic, Xinqi Materials and Zhonghui Photovoltaic 88. from the actual controller Long Daqiang33% equity. Long Daqiang thus obtained the equity transfer money 4$8.4 billion.
The acquired Zhongyu Photovoltaic and Zhonghui Photovoltaic will lose 10.96 million yuan and 57.9 million yuan respectively in 2021, and their earning ability is worrying. On the eve of Zhongrun Solar's listing, why do you frequently acquire the unprofitable assets of Long Daqiang?Zhongrun Solar's reply is that the issuer has carried out asset restructuring under the same control in order to avoid peer competition, and has included Jieyuan Solar, Zhongyu Solar, Xinqi Materials and Zhonghui Photovoltaic into the issuer's system.
The founders of Zhongrun Solar are Long Daqiang and Meng Liye. According to the published prospectus, the two currently hold Zhongrun Solar respectively. 92% equity.
What confuses investors even more is that in 2022, just before the listing, Long Daqiang, the actual controller, transferred 2170 to investment institutions such as high-tech state-owned assets720,000 shares, from which 7600 million yuan;Coupled with the previous transfer of the assets of the actual controller, under the two sets of "combination punches", Long Daqiang has made a total arbitrage of 124.4 billion yuan.
The company has started cashing out before the actual controller is listed, and relevant investors have questioned its motives for listing.
It is worth noting that in the prospectus (declaration draft), the listing and fundraising amount of Zhongrun Solar is 4 billion yuan;However, in the prospectus (last draft), the amount of funds raised was reduced to 2.3 billion yuan.
After public information inquiry, in the description of the two purposes of the raised funds, the annual output of 8GW high-efficiency photovoltaic cell project (phase II) is planned to be invested in the amount of 2 billion yuanLiquidity has shrunk from $2 billion to $300 million. With this change, it is no wonder that investors previously questioned the company's "sky-high asking price".
In fact, on the issue of funds, Long Daqiang and Meng Liye have "criminal records". The four companies acquired by Zhongrun Solar used the money of Zhongrun Solar from the early stage of start-up to the later stage of development.
In its reply to the inquiry letter of the Shenzhen Stock Exchange, Zhongrun Solar mentioned that from 2011 to December 31, 2019, the overall balance of the issuer to the actual controller and its controlled related parties was 33.1 billion yuan, one of its uses is to invest in the industry of Zhonghui Photovoltaic, Zhongyu Photovoltaic, Jieyuan Photovoltaic and other related entities.
From 2020 to 2022, the annual new "call amount" of the actual controller and its controlled related parties will be in the hundreds of millions of dollars every year (96.9 billion yuan, 36.5 billion yuan, 21.6 billion yuan), totaling 15500 million yuan. Huaxia Energy Network found in its reply letter that half of the money was used for the actual controller and its four above-mentioned affiliated enterprises to "borrow new to repay the old", purchase Xinqi materials advance payment, pay personal income tax, pay wages for employees, etc.
borrowed the money from Zhongrun Solar to invest in a peer company, and then sold it to Zhongrun Solar after the development of the enterprise, and the above-mentioned actions of the actual controller were obviously flawed. This will also have a significant impact on investor confidence.
At present, the cell sector has entered a "battle of life and death" due to the crisis of overcapacity, and with the impact of cell technology, it is difficult for the cell sector to avoid a round of knockouts, and the anti-risk ability of enterprises can become a real "moat" to survive the cold winter.
But it is obvious that Zhongrun Solar lacks a moat. If success will be a kind of luck, then how to really use the funds raised after the IPO in the future to develop the enterprise, and how to keep up with the pace of technological iteration in the industry as soon as possible, is far from relying on the word luck.
*Please indicate the source, article**: Huaxia Energy Network, **hxny3060).