JA Solar Finally Explodes After Two Years

Recently, the photovoltaic (PV) sector has seen a strong rebound; among them, JinAo Technology undoubtedly stands out as the most dazzling star.

On September 24th, JinAo Technology's stock price surged. Over the past 18 trading days, JinAo Technology's stock price has risen from 9.92 yuan to 18.25 yuan, an increase of over 80%; if calculated from August, in just two short months, JinAo Technology's stock price has doubled.

It is important to note that prior to this, JinAo Technology's stock price had plummeted from a high of 58.9 yuan, with a decline of nearly 85%. That is to say, after waiting for two years, JinAo Technology has once again given people hope of breaking even.

At this moment, all investors want to know whether this rise is a rebound or a reversal.

Let's start with one point: regardless of whether it's a rebound or a reversal, because the PV sector has been a nightmare over the past 2-3 years, the resistance to moving upwards will definitely be very strong. As soon as people break even, they will want to sell and exit quickly to avoid being trapped again. Specifically, this means that sector volatility will increase, and investors' sentiments will be repeatedly teased.

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Let's talk about the news.

Many people know that this round of news started on October 18th, which is when the Photovoltaic Industry Association issued a notice stating that 0.68 yuan/W is the minimum cost for current industry-leading enterprises to ensure product quality, and bidding for photovoltaic modules below 0.68 yuan/W is suspected of being illegal.

Perhaps many people, when they first saw this news, thought that such a call would not have a practical effect, after all, such "anti-internal-competition" appeals have been held several times this year. However, what was unexpected was that the latest announced annual tender prices for photovoltaic modules showed that, except for a few manufacturers, the majority of manufacturers' bid prices were all greater than or equal to 0.68 yuan/W, and the Photovoltaic Association's appeal had a positive impact.

Of course, the role played by the official sector cannot be ignored.

In early July, the Ministry of Industry and Information Technology took the lead in proposing to reduce projects that simply expand capacity and stipulated that the latest capital contribution ratio for new and expanded photovoltaic manufacturing projects is 30%; at the end of July, the spirit of the Politburo meeting of the Central Committee of the Communist Party of China clearly mentioned the need to prevent "internal-competition-style" vicious competition; on October 23rd, the market once again heard news that the relevant departments are expected to issue documents to limit the capacity utilization rate of the main links in the photovoltaic industry.That is to say, the current rebound in the photovoltaic (PV) sector is primarily a positive feedback to market expectations. In fact, PV companies are indeed struggling to sustain themselves. As previously mentioned, 0.68 yuan/W is the minimum cost for top-tier companies in the industry to maintain product quality; if the price falls below this figure, companies will not only incur losses but also suffer from negative cash flow. Referring to the loss situation of major downstream PV companies in the first half of the year, even leading enterprises are struggling to cope.

Taking Jinko Technology as an example, according to its mid-year report, the company suffered a net loss of 874 million yuan in the first half of the year, with a net operating cash flow of -1.859 billion yuan and a high debt-to-asset ratio of 70%. Additionally, companies such as Tongwei Co., Ltd., Longi Green Energy, and TCL Zhonghuan are also facing very challenging situations.

In a nutshell, from both the management and corporate perspectives, clearing excess capacity is an urgent priority.

Furthermore, it is necessary to mention Goldman Sachs' previous forecast. In August of this year, Goldman Sachs released a research report stating that China's PV industry is approaching the end of a downcycle, with an expected one-third of production capacity to be shut down, and the industry is expected to bottom out in 2025, with capacity utilization rates rebounding.

Regarding this point, the president of Longi Green Energy also mentioned:

"If everything develops as expected, the PV industry will essentially clear out next year; if the government introduces strong policies, the speed of industry clearing may be even faster."

Although a single opinion may not be objective enough, the accumulation of various voices is still worthy of everyone's attention.Of course, for photovoltaic (PV) companies to weather the bottom of this cycle, the key still lies in demand.

From a long-term perspective, to achieve global carbon neutrality, PV is inevitably a crucial part of the equation, hence the prosperity of the PV sector is bound to grow increasingly significant. On October 25th, during a research trip in Inner Mongolia, the leader continued to emphasize the importance of placing the development of new and clean energy in a more prominent position, and at the policy level, continued to clearly support photovoltaics.

However, compared to production capacity, in the future, more attention will be paid to the technical aspect. In fact, only technological innovation and iteration can rapidly phase out backward production capacities in the short term.

The Chief Technology Officer of Jinko Technology once stated, "The direction of the next generation of photovoltaic technology should be BC technology, followed by perovskite tandem technology." Note that the BC technology mentioned here refers to platform technology, not a specific brand, and can be combined with other photovoltaic technologies to maximize the use of sunlight, reduce current loss, and improve power generation efficiency.

Although BC cells are still in a relatively early stage and face certain challenges in terms of cost, this is precisely where the opportunities for photovoltaic investors lie.

On one hand, the high R&D threshold for BC cells can eliminate a batch of companies with weaker R&D capabilities, accelerating the clearance of backward production capacities. On the other hand, the application of new technologies and products will also lead to a reshuffling of the photovoltaic industry, with a high likelihood that the strong will remain strong, and the market share and profitability of leading companies will further increase.

We believe that the prosperity of the photovoltaic industry still exists; the present is more like the darkness before dawn, and the opportunities that lie ahead belong to the leading companies that compete by changing their paths.

Of course, the iteration of new and old technologies, combined with the clearance of production capacities, will inevitably also bring about inevitable pangs.