Author |Deepwater Finance & Economics **
"Long pain" is not as good as "short pain", and Runxing Technology's drag on East China Heavy Machinery has finally come to an end.
On the evening of January 30, Huadong Heavy Machinery (002685) released its 2023 annual performance forecast, which is expected to achieve operating income of 6500 million yuan 900 million yuan, attributable net profit loss 5500 million yuan 8200 million yuan.
*: Huadong Heavy Machinery's 2023 annual performance forecast.
So, in 2024, for East China Heavy Machinery, what will be the benefits of getting rid of the "burden"? What opportunities will be ushered in by the transformation of light equipment?
After carrying the heavy "burden" for many years, I finally got rid of it completely.
In April 2017, Huadong Heavy Machinery Co., Ltd. 29500 million yuan acquired Runxing Technology, which is mainly engaged in CNC machine tools, but once the performance commitment period passed, Runxing immediately turned from profit to loss, with a cumulative loss of more than 600 million yuan, dragging down the parent company Huadong Heavy Machinery for 4 consecutive years, for which the company also provided for goodwill impairment of more than 2 billion yuan.
"Long pain" is not as good as "short pain". On December 6, 2023, Huadong Heavy Machinery was transferred to Guangdong Yuanyuan, controlled by Zhou Wenyuan, for a price of 700 million yuan; On December 21 of the same year, the company's general meeting of shareholders deliberated and approved the relevant proposals, which are currently being implemented.
Judging from the 2023 performance forecast, among the three main businesses of East China Heavy Machinery, "HAECO" is still the pillar of profitability, photovoltaic is the biggest bright spot in the future, and CNC machine tools are the source of huge losses.
In 2023, the business of the CNC machine tool sector will shrink, continue to lose money, the level of production and sales and gross profit margin will decline year-on-year, and the recovery of accounts receivable will be less than expected. Huadong Heavy Machinery said in the announcement that according to relevant regulations, the company made a total provision of 400 million yuan for goodwill impairment and bad debts 66.6 billion yuan.
Specifically, in 2023, the company plans to make a provision for goodwill impairment of 200 million yuan to 36.6 billion yuan, the balance of goodwill on the company's books after provision is 0 to 16.6 billion yuan. The aging of the overall accounts receivable of the CNC machine tool business is deferred, resulting in an increase in the scale of long aging accounts receivable, according to the prudent principle, the company intends to make provision for bad debts of accounts receivable of about 200 million yuan to 300 million yuan.
Shenshui Finance and Economics observed that the provision of goodwill, bad debts and Runxing Technology's losses in the current year are almost equivalent to the total annual loss of East China Heavy Machinery in 2023.
However, the benefits of this are also obvious. From a financial point of view, the difference between the transfer price of the asset and the net asset value is the investment income. After the completion of the equity delivery of Runxing Technology in 2024, it is estimated that Huadong Heavy Machinery can produce 21.5 billion yuan 3Investment income of 1.5 billion yuan.
Specifically, Huadong Heavy Machinery sold Runxing to Guangdong Yuanyuan at a price of 700 million yuan, and as of June 30, 2023, the net assets of Runxing were 68.5 billion yuan. The performance forecast shows that Runxing intends to make a provision for bad debts of accounts receivable of about 200 million yuan and 300 million yuan, which means that Runxing's net assets will further shrink to 3$8.5 billion to 48.5 billion yuan.
Not only that, according to the draft report on major asset-related transactions disclosed by Huadong Heavy Machinery, the losses during the asset transition period will be borne by Guangdong Yuanyuan, and after the equity delivery, the losses incurred during this period will also be reversed back to the losses of listed companies.
*: East China Heavy Machinery's major assets** and related party transaction report (draft).
So, how big is Runxing Technology's loss in the second half of 2023?
According to the financial reports of previous years, from 2020 to 2022, Runxing Technology lost a total of 60.1 billion yuan, with an average loss of 100 million yuan in half a year; In the first half of 2023, it lost 6702730,000 yuan, estimated according to the average of 3 and a half years, Runxing Technology's loss in the second half of 2023 is expected to exceed 83 million yuan.
Then, investment income + reversal loss, East China Technology is expected to earn 300 million yuan this year.
400 million yuan. In addition, as of June 30, 2023, the balance of accounts payable by Runxing Technology and its subsidiaries to Huadong Heavy Machinery was 30,662830,000 yuan, of which the principal payable is 14.9 billion yuan, interest payable 07.8 billion yuan, dividend payable 0800 million yuan.
According to the transaction plan, Runxing Technology and its subsidiaries shall repay the related payables of Huadong Heavy Machinery before the actual transfer date of the underlying assets. This means that this year, East China Technology will return more than 300 million yuan in cash.
Then, including the transfer of 700 million yuan of "throwing off the burden", East China Heavy Machinery is expected to return funds and increase book income of 1.3 billion yuan and 1.4 billion yuan this year.
Withdrawal + book income of more than 1.3 billion yuan, East China heavy opportunity to invest in**?
Huadong Heavy Machinery once said in the announcement that the listed company will divest the CNC machine tools with poor profits, promote the transformation and upgrading of the business structure, focus on container handling equipment and expand the photovoltaic cell module business, and improve the company's profitability.
Is it for HAECO? Or photovoltaics?
According to the performance announcement of East China Heavy Machinery, the shipping market has been improving in the past two years, and the company has seized the opportunity to upgrade and transform port machinery equipment at home and abroad, and the bidding volume of port machinery will increase to a certain extent in 2023, and the company has sufficient orders for port machinery in hand.
"Since March 2023, the company has expanded its photovoltaic cell module business and promoted the transformation and upgrading of its business structure. The first high-efficiency n-type solar cell production base was built in Pei County, Xuzhou, and the first batch of production lines and the first photovoltaic cell were rolled off the production line in a record time. ”
"The transformation goal of East China Heavy Machinery is the same as that of Junda, to become a pure photovoltaic enterprise. In August last year, Weng Jie, the "less owner" of East China Heavy Machinery, told Shenshui Finance and Economics.
So, what is the current state of the PV market?
In 2023, although the photovoltaic market will be affected by unfavorable factors such as overcapacity and product decline, it will benefit from the doubling of photovoltaic installed capacity in 2023 year-on-year, and most of the performance of listed companies in the photovoltaic industry chain is promising.
According to the statistics of Shenshui Finance and Economics, as of the evening of January 29, 32 A-share companies in the photovoltaic industry chain have disclosed their 2023 performance forecasts, and 26 have achieved year-on-year growth in net profit last year, of which 9 are expected to increase by more than 1 times.
It is worth mentioning that JinkoSolar, which has the deepest layout in TOPCON, has not only returned to the first place in global module shipments, but also has a net profit increase of more than 1% year-on-year in 20234 times. However, due to the comprehensive impact of the photovoltaic industry chain, the performance growth of most companies, including JinkoSolar, slowed down in the fourth quarter of last year.
As a photovoltaic newcomer, the current operating income of Huadong solar cells has exceeded 100 million yuan, but Huadong Heavy Machinery also admitted in the performance forecast that in the fourth quarter of 2023, the overall decline of the photovoltaic industry chain is serious, and the cell industry has declined rapidly.
But there are pros and cons to everything. On the one hand, modules will further stimulate the downstream demand for photovoltaic power generation installations; On the other hand, it forces photovoltaic enterprises to improve their processes, reduce costs and increase efficiency.
At present, the average mass production conversion efficiency of East China Solar's TOPCon cells has reached an astonishing 261%, and this year's target is more than 265%；Through ultra-low-cost metallization technology, the company ensures that the cost of battery production is at the leading level in the industry.
It is a general trend for the photovoltaic industry to upgrade from P-type to N-type technology, and from the perspective of expansion scale, TOPCon is the absolute mainstream. According to incomplete statistics, in 2023, more than 40 manufacturers, including East China Solar, will deploy TOPCon cell technology, and the TOPCon production capacity that has been put into production will exceed 430GW. According to a third-party authority**, TOPCon is expected to account for more than 70% of the photovoltaic industry chain this year.
From the point of view, compared with P-type, the n-type products that are accelerating the replacement of ** have risen steadily. Recently, according to the information of the Silicon Branch of the China Nonferrous Metals Industry Association, the transaction price of P-type M10 monocrystalline PERC cells has stabilized at 0375 yuan W, the transaction price of N-type TOPCON battery rose to 046 yuan w, the price difference between type n and type p increased slightly to 0085 yuan w.
For future capacity planning, Huadong Heavy Machinery revealed in its third quarter report in 2023 that Huadong Solar plans to build 30GW N-type high-efficiency photovoltaic cell production capacity by 2024 and 50GW n-type high-efficiency photovoltaic cell production capacity by 2025.
East China Heavy Machinery, which has changed its cage for birds, is expected to be reborn. "Shenshui Finance and Economics believes that with the policy to accelerate the exit of inefficient P-type batteries, the rapid penetration of high-efficiency TOPCON batteries will gradually rise to a reasonable profit level. At that time, Huadong Heavy Machinery will obtain more than 1.3 billion yuan of return funds + book income, which will contribute to the transformation of photovoltaics.
(Exclusively released by Shenshui Finance and Economics, a global market capitalization research institution, **Please indicate the source for citation).