In the morning of March 29, GCL-Poly Energy (03800.HK) released its 2018 annual results report.

According to the financial report, for the year ended December 31, 2018, GCL-Poly Energy achieved a revenue of RMB 20.565 billion from continuing operations, down 13.6% year-on-year; gross profit was 5.033 billion yuan, down 38.6% year-on-year; net profit attributable to shareholders 693 million yuan, while the profit for the same period last year was about 1.93 billion yuan; the basic loss per share was 3.81 points, no dividends.

It is worth noting that, in reviewing the financial data of recent years, the loss of 693 million yuan is the first loss of GCL-Poly Energy in the past five years. In 2014-2017, the net profit of the company’s deduction was 1.322 billion yuan. 1.147 billion yuan, 1.855 billion yuan, 1.93 billion yuan.

At this point, affected by the decline in both performance and net profit, the share price of GCL-Poly Energy fell 3.51% to HK$0.55 as of today, with the latest total market capitalization of HK$10.82 billion.

(Source: Futu Securities)

According to public information, GCL-Poly Energy, established in 2006, was listed on the Hong Kong Stock Exchange in November 2007 and is currently one of the world's largest solar PV companies. In addition, the company is principally engaged in the manufacturing and sales of polysilicon and wafers in the solar industry, and is engaged in the development, construction, operation and management of photovoltaic power plants.

Both revenue and net profit fell

According to the financial report, for the year ended December 31, 2018, GCL-Poly Energy achieved a revenue from continuing operations of 20.565 billion yuan, down 13.6% year-on-year; gross profit was 5.033 billion yuan, down 38.6% year-on-year; net profit attributable to shareholders 693 million yuan, while the profit for the same period last year was about 1.93 billion yuan; the basic loss per share was 3.81 points, no dividends.

(Source: Poly GCL Energy Report)

It should be noted that during the reporting period, GCL-Poly Energy's annual profit was a loss of 458 million yuan, including: the sale of a subsidiary's revenue of 445 million, the net financial assets of the impairment of 247 million, the fixed assets of 526 million, Goodwill impairment was 1.77, R&D cost was 521 million, and exchange loss was 480 million.

With regard to the loss of revenue and the loss of net profit, GCL-Poly Energy said in the announcement that the decrease in revenue during the year was mainly due to the decrease in the average sales price of wafer products, which led to a decrease in the revenue of the photovoltaic materials business. The loss during the year was mainly due to the recording of the photovoltaic materials business during the year. It has a loss of 1.011 billion yuan.

Specifically, in 2018, GCL-Poly sold a total of 20,000 metric tons of polysilicon and 24.76 GW of silicon wafers, an increase of 173.9% and 5.7% respectively. In the same period, the average non-tax price of polysilicon and wafers was about 78.8 yuan per kilogram and 0.57 yuan per kilowatt, down 24.8% and 37% respectively.

However, it is worth noting that the profitability of other business segments did not make up for the loss of the company's main business. According to the financial report data, in 2018, the revenue of GCL-Poly photovoltaic power station business was 497 million yuan, and the profit was 116 million yuan; the revenue from new energy business was 5.632 billion yuan and the profit was 708 million yuan.

In addition, the debt situation of GCL-Poly Energy has also attracted the attention of the public. According to the financial report, the company's 2018 photovoltaic materials business liabilities 32.286 billion yuan, photovoltaic power plant business liabilities 1.994 billion yuan, new energy business liabilities 51.339 billion yuan, comprehensive liabilities of about 85.6 billion yuan, an increase of 7.1%.

(Source: Poly GCL Energy Report)

At this point, when both revenue and net profit fell, and liabilities increased year-on-year, Chairman of the Board of Directors of GCL-Poly Energy, Zhu Gongshan, said in the financial report:

“In 2018, the photovoltaic industry took a roller coaster ride and the industry entered a transitional winter. Although the Chinese PV market has undergone deep adjustments and demand has declined, the global demand has benefited from the decline in the cost of photovoltaic products and the strong demand in overseas markets. Emerging markets are developing rapidly. We are pleased to see that in many overseas regions, the continuous decline in the cost of electricity has made photovoltaic power generation still have great potential in the world and will become the largest alternative energy source in the future."

Photovoltaic market challenges and opportunities coexist

In fact, as one of the world's largest solar PV companies, the development of GCL-Poly Energy is deeply influenced by the PV market.

On the one hand, the introduction of the "531 New Deal" has made the majority of photovoltaic power generation enterprises painful, and GCL-Poly Energy has not been spared.

According to public information, “531 New Deal” refers to the “Notice on Matters Related to Photovoltaic Power Generation in 2018” promulgated in May 2018. Specifically, it is to reduce the on-grid price of photovoltaic power generation and reduce the intensity of subsidies. Interestingly, this policy was considered to be the "most severe" PV new deal in history, and the photovoltaic power generation companies were caught off guard.

According to industry analysts, the impact of the decline in the price of photovoltaic products after the “531 New Deal” has been particularly acute for upstream manufacturing companies. According to the statistics of PVinfolink and the Silicon Industry Branch, the price of polysilicon and silicon wafers decreased by 47% at the end of 2018, which is close to the waist.

In addition, when the Securities Daily reporter asked the PV industry to verify the evidence, it also said that before the "531" policy, the market price of single crystal PERC components was roughly 2.8 yuan / w -3 yuan / w, 2018 after "531" In the third quarter of the year, the price of single crystal PERC components fell to 2.05 yuan / w -2.15 yuan / w, the current level rose back to 2.2 yuan / w-2.3 yuan / w.

Take Poly GCL Energy, which launched a series of asset sales in 2018, trying to save the downturn.

In February 2018, GCL-Poly, a subsidiary of GCL-Poly, sold a 50% stake in a 12 MW power plant project to a third party. In May, GCL New Energy subsidiary sold 22 million yuan to Xinjing Photovoltaic in Inner Mongolia. 100% of Power Generation Co., Ltd.; In October, GCL New Energy subsidiary sold its equity interests in two companies to CGN Solar Energy Development Co., Ltd. for a total consideration of 283 million yuan.

At the end of December 2018, GCL-Poly Energy sold 850 million yuan in some wafer business. It is expected to generate a profit of 446 million yuan after the sale, which is intended to be used as working capital. The reason for the sale was “the ability to maintain capacity with fewer wafer manufacturing facilities”.

On the other hand, overseas markets may become a corner point for PV companies, and GCL-Poly Energy may bring opportunities.

According to relevant data, the global PV installation volume is about 103.3 GW in 2018, China continues to lead with 44.26 GW, the US is 11.36 GW, the top five are India (9.3 GW), and Japan (6.2 JI). W), Australia (3.8 GW). In addition, the replacement space for double-glass components is huge. By 2020, the market share of double-glass components is expected to increase from 10% in 2018 to 30%, and it is expected to reach 60% by 2025.

Therefore, it is not difficult to see from these data that the strong demand in overseas markets will become a corner point for PV companies, and the factors of cost reduction will also stimulate high growth in overseas markets.

However, from another point of view, domestic PV parity is just around the corner, the industry driving force will be transformed from “policy + subsidy” to “cost + market”. Even if there is a short-term decline in PV installed capacity in the short term, with the arrival of parity, the future space is also expected. Resume growth. According to public information, the domestic installed capacity of photovoltaics is 44GW in 2018, and the global installed capacity is expected to be around 102GW. In 2019, the overall domestic market is expected to remain stable, with a center of 40 to 45 GW, and the demonstration project of parity may become a source of unexpectedness.

For the current status of the photovoltaic industry, Chairman of the Board of Directors of GCL-Poly Energy, Zhu Gongshan also said that the global PV industry experienced an industry reshuffle in 2018. Before the “531 New Deal”, GCL-Poly continued to reduce costs and gain efficiency. The goal is to consolidate the business foundation and actively prepare for the changes in the industry.

In addition, he added that after the “531 New Deal”, the domestic PV market demand declined, but the international market demand rose rapidly. After the staged adjustment in the global market, the PV parity online process accelerated. It is expected that the global market will resume its stability in 2019. growth trend.

In this regard, some analysts predict that in the future, polycrystalline black silicon, ingot single crystal, and straight pull single crystal will be three points. GCL-Poly said that in the first quarter of 2020, the capacity of ingot single crystal and Czochralski single crystal will reach 15 GW, 8 GW, respectively, and the polycrystalline black silicon products will constitute a "three-legged" layout. In terms of silicon materials, the first phase of Xinjiang polysilicon base reached 50,000 tons in the first quarter of this year, and the semiconductor-level polysilicon production process was introduced to meet the demand for continuous straight-drawn single crystal materials. The import substitution will be completed in the future. The “double base” pattern of Xinjiang and Xuzhou will further consolidate the dominant position of GCL-Polysilicon polysilicon products.

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