between Hesheng Silicon Industry and Fang Hongcheng, the former general manager, has caused a lot of hubbub. Hesheng Silicon Industry has found that its net profit has declined for five consecutive quarters. PV industry 
2023, Hesheng Silicon Industry issued the Announcement of Reply to the Regulatory Letter on Media Reports. The enmity between former president Fang Hongcheng and chairman Luo Liguo ushered in key information.
The announcement acknowledged that Luo Liguo had signed a drawer agreement with Fang Hongcheng on the transfer of the company's equity, and that the company had sold dangerous "hydrolyzed oil" . It is basically the same as the real-name report of Fang Hongcheng's family a month ago.
It is noteworthy that the details of the pre-listing equity incentive arrangement announced by Hesheng Silicon Industry are not disclosed in the prospectus. Whether Luo Liguo interferes with judicial justice is still unknown, but it is believed that regulators will soon give a conclusion on the suspected violation of the letter in the IPO process of Hesheng Silicon Industry.
On December 8, Hesheng Silicon Industry issued a reply letter, which coincided with the adjustment of Shanghai 50 constituent stocks. Although the stock price rose 1.73% on that day and closed at 49.
On December 19, Hesheng Silicon Industry was awarded a buy rating by Capital Securities. According to the research report, the company is the leader in the silicone and industrial silicon industry, and the production and sales of industrial silicon and silicone rank first in the industry. It is estimated that the net profit attributable to the parent company in 2023-2025 will be 28.52/39.58/48.
The net profit will decline for five consecutive quarters. Can strength keep up with the ambition? At least from the latest three quarterly reports, the pressure on enterprises is still not small. In the first three quarters of
2023, the company's revenue and net profit were 19.886 billion yuan and 2.185 billion yuan respectively, with a year-on-year change of 8.81% and a year-on-year decrease of 18.35 PCT; Net profit margin on sales was 10.87%, representing a year-on-year decrease of 14.
Looking at the third quarter alone, the contrast between income increase and profit increase was even more obvious : revenue was 7.949 billion yuan, representing a year-on-year increase of 50.67%; Net profit was RMB402 million, representing a year-on-year decrease of 60. Gross profit margin on sales was 14.63%, representing a year-on-year decrease of 22.00 PCT and a month-on-month decrease of 7.97 PCT; The net sales interest rate was 4.96%, a decrease of 14.10 PCT compared with the same period last year, and a decrease of 7.
Longer dimension, the decline in profitability was early warned . In 2022, the revenue of Hesheng Silicon Industry was 23.657 billion yuan, an increase of 10.62% compared with the same period last year. Net profit was 5.148 billion yuan, down 37 from the same period last year. On a quarterly basis, net profit has declined year-on-year for five consecutive quarters since the third quarter of 2022. In the first three quarters of
2023, the gross profit margin fell to the lowest level in the last six years, only 21. Compared with 52
at the end of 2021, the reason is that the prices of industrial silicon and organic silicon have fallen. Wind data show that as of September 30, 2023, the average price of industrial silicon in the third quarter was 13527 yuan/ton, with a ring ratio of-4.83%; The average price of organic silicon in the third quarter was 13645 yuan/ton, with a ring ratio of -7.
As the dual leader of organic silicon and industrial silicon in China, it benefited from the explosive growth of photovoltaic industry demand. In 2021, the non-net profit deducted by Hesheng Silicon Industry was as high as 81.
The soaring performance made the enterprise see the downstream opportunities of the industrial chain, accelerate the transformation to polysilicon and seek https://www.databm.
. Since 2022, Hesheng Silicon Industry has officially announced that its total investment in the silicon industry has exceeded 85 billion yuan . In February of that year, the annual output of 200000 tons of high-purity polysilicon project (Ganquanbao) was launched, with an investment scale of 17.5 billion yuan. In April
2023, another high-purity silicon project (Shanshan) with an annual output of 200,000 tons was launched, with an investment scale of 176. The total investment scale of the two projects reached 351
. Hesheng Silicon said that the main production facilities of the high-purity silicon project with an annual output of 200,000 tons built by the company's subsidiary Central Hesheng in Urumqi Industrial Park, Xinjiang, have been commissioned recently, and the production adopts the improved Siemens process route.
It is noteworthy that the Hesheng Ganquanbao project started in March 2022 and was initially planned to be put into operation in May 2023 according to the 18-month construction cycle. At the 2022 annual general meeting of shareholders, Luo Liguo, chairman of Hesheng Silicon, said: Ganquanbao (project) will be commissioned in June, in principle in July, and the product will be produced in August at the latest.
According to the forecast of China Nonferrous Metals Silicon Branch, by the end of 2022, China's polysilicon production capacity will reach 1.203 million tons per year, an increase of 131.8% over the previous year, the global share will increase to about 89%, and the production capacity will reach 240
. Domestic polysilicon production capacity is mainly concentrated in the hands of Tongwei Stock, Xiexin Science and Technology, Daqo Energy, TBEA and Dongfang Hope. According to the data of the Silicon Branch of China Nonferrous Metals Industry Association, as of November 2023. The production capacity of Tongwei in 2023 is 350000 tons, that of Xiexin Science and Technology is 240000-260000 tons, that of TBEA is 240000-250000 tons, that of Daquan Energy is 200000-210000 tons, and that of Oriental Hope is 25.
Luo Liguo has said that Tongwei currently has 350000 tons of polysilicon, the largest in the world. If 400 thousand tons of polysilicon are put into production, Hesheng will be the largest polysilicon manufacturer in the world.
The ideal is plump enough, but how much do you know about the hidden worries? 400 thousand tons of polysilicon not only brought the "biggest" reverie to Hesheng Silicon Industry, but also brought financial pressure.
From 2020 to 2022, the company's book construction projects totaled 3.958 billion yuan, 5.125 billion yuan and 16.791 billion yuan, with corresponding growth rates of 164.59%, 29.47% and 227.During the same period, the cash outflow from investment activities was 2.033 billion yuan, 3.851 billion yuan and 13.155 billion yuan. The net cash flow generated from investment activities was -1.351 billion yuan, -3.074 billion yuan and -12.147 billion yuan, with corresponding growth rates of -11.60%, -127.51% and -295.
Net cash flows from corporate investment activities amounted to -9.756 billion yuan, compared to -3.77 billion yuan for the same period last year. Net cash flows from financing activities amounted to 15.227 billion yuan, representing an increase of 1.78 billion yuan as compared to the same period last year. In the first half of the year, the net cash flow generated by
operating activities was -1.788 billion yuan, compared with the same period last year. In the third quarter, it was gratifying to improve to 1.628 billion yuan, an increase of 1.491 billion yuan over the same period last year, but in the first three quarters, it was still -160 million yuan, compared with the same period last year
. The net profit of Hesheng Silicon Industry is 2.805 billion yuan, 1.1 billion yuan, 1.404 billion yuan, 8.222 billion yuan and 5.148 billion yuan, totaling 186.
Guo Xing, an industry analyst, believes that huge investment needs to be vigilant against debt repayment pressure. Especially at present, the voice of overcapacity in photovoltaic industry is rising and the price of products is under pressure, so it is necessary to prevent the possibility of performance change brought about by market changes. Ambition should be commensurate with strength, scale is only one aspect, Hesheng Silicon Industry's top priority is to control the reasonable debt scale, consolidate the quality core , in order to achieve counter-cyclical growth. What is the pressure of
pledge and repurchase, guarantee and debt? On May 19,
2020, Hesheng Silicon Industry issued a fixed increase plan, with a fixed increase price of 18.On
May 20, 2022, a fixed increase plan was issued again, with a fixed increase price of 66.In December 2022, the fixed increase was completed.
It is worth noting that the two targets are Luo Liguo's son Luo Yedong and daughter Luo Yi.In order to alleviate the debt pressure, in addition to financing and borrowing, the Luo family, the actual controller, also obtained funds through pledge. On December 11,
2023, the latest announcement of Fit Silicon Industry showed that Hesheng Group and its concerted actors Luo Liguo, Luo Yi and Luo Yedong directly held 78% of the company's total equity. The pledged shares accounted for 47.98% of the total shares of the company and 37% of the total share capital.
After December, Hesheng Silicon has issued three equity pledge announcements in just 11 days. Putting aside the high-level infighting, the stock price shocks are also related to this.
In order to boost the depressed stock price, on the evening of December 5, Hesheng Silicon Industry disclosed that Luo Liguo proposed to buy back the company's shares for no less than 500 million yuan and no more than 1 billion yuan. On December 6, Hesheng Silicon Industry's share price rose 2.5% to close at 49.56 yuan, and then went down in several trading days, falling to a low of 45.09 yuan on December 19. It finally closed at 45.88 yuan, compared with 82 yuan at the beginning of the year. As of December 22, the closing price was 47 yuan.
What is the market waiting for? Compared with the decline in earnings, liquidity pressure is another market concern . As of September 30, 2023, the book cash and trading financial assets of Hesheng Silicon Industry totaled 3.988 billion yuan, and the total debt in the same period totaled 43.94 billion yuan , up 141
% from 29.76 billion yuan at the end of December 31, 2022. Short-term borrowings and non-current liabilities due within one year amounted to RMB5.02 billion and RMB1.305 billion, respectively, and short-term debts amounted to
RMB10.370 billion. Hesheng Silicon still has a huge guarantee problem . According to the announcement on the guarantee situation in the third quarter of 2023 disclosed by the company, as of September 30, the company and its holding subsidiaries had an external guarantee balance of 28.62 billion yuan . It accounted for 120% of the latest audited net assets attributable to the shareholders of the parent company.
Among the guaranteed units, the asset-liability ratio of the holding subsidiaries Xinjiang East Hesheng Silicon Industry Co., Ltd. and Xinjiang Hesheng Silicon Industry New Materials Co., Ltd. exceeded 70%.
Watch out for changes in the industry, where is the difficulty of silicon material business? Overcapacity will soon be transmitted upstream. Silicon material business is a heavy asset model, and fixed assets investment is the most difficult link for photovoltaic to exit. In the future, the price of silicon materials will be in a downward trend, and most enterprises will be in a loss state .
As a new entrant in the polysilicon industry, Luo Liguo seems not worried about the changes in the industry. At the 2022 annual shareholders'meeting held in May
this year, Luo Liguo said that even if polysilicon was sold to 780000 yuan/ton, Hesheng Silicon Industry's polysilicon project could still make money after putting into operation; I have a line of 100,000 tons, while others have a line of 10,000 tons. My operating cost is 10,000 to 20,000 yuan/ton cheaper than it. I can still support it when it closes. This is the calculation.
Indeed, relying on the "coal-electricity-silicon" industrial chain synergy, Hesheng Silicon Industry has the advantages of scale effect and integrated cost control. Just don't forget that the cycle is irreversible, and individuals need to follow the trend no matter how strong they are.
Wind data show that the price of polysilicon in January 2023 is 300 thousand yuan/ton. As of December 13, the weekly report of China Nonferrous Metals Industry Association showed that the price of polysilicon had dropped to 60000 yuan/ton, with a cumulative decline of up to 80% in the year.
According to the Financial Associated Press, the excess supply of silicon materials in China is expected to be about 180GW in 2023. As a large amount of silicon production capacity will still be put into operation in 2024, the industry expects that the price of silicon materials will be close to 50,000 yuan/ton . The price of
silicon materials continues to fall, and it needs to be observed how long the scale advantage of Hesheng Silicon Industry can resist. From the above revenue increase, it is mainly due to the increase in sales volume. Take 2023Q3 as an example, the sales volume of industrial silicon of the company is 361,800 tons, with a month-on-month increase of 50.26%; the sales volume of organic silicon is 276,300 tons, with a month-on-month increase of 49. But even so, the net profit is still sliding, how easy is the operation? The semi-annual report of Tongwei shares shows that the production cost of polysilicon is 40000 yuan/ton. Xiexin Technologies said that in the second half of the year, the production cost of Leshan Xiexin Granular Silicon Project was about 3.
Yu Shengmei, an analyst, believes that the homogeneity of the silicon industry is obvious, and cost control is the basic skill . In the face of industry shuffling, it will be more difficult for new production capacity to enjoy the first dividend and subsequent profits. Silicon material is a capital-intensive industry with long cycle and slow return, and the high depreciation attribute of heavy assets leads to higher production costs, which Hesheng Silicon Industry needs to pay attention to. It's
not too demanding. Some new entrants have begun to withdraw. On December 4, TCL Central , the leading silicon wafer company, announced that it had transferred 27% of its shares in Xinjiang Goens, a polysilicon producer, and received a transfer payment. 6. The transaction announcement showed that the net assets of Xinjiang Goens were 15.7 billion yuan.
In addition, Daquan Energy also announced on October 31 that it was affected by market environment, supply-demand relationship and other factors. Decided to postpone the date of Inner Mongolia Phase II High Purity Polysilicon Project with an annual output of 100000 tons to the second quarter of next year.
The industry has entered the "surplus is king", in this context, how easy is the expansion of Hesheng Silicon Industry? Once the future is unfavorable, how will the pressure of debt repayment and performance go? In the reply to the annual report supervision letter, Hesheng Silicon said: "The application direction of photovoltaic materials in the downstream expansion of the company is N-type batteries, which are expected to become the mainstream in the future and have a larger market space.". Therefore, the company's photovoltaic materials put into production after the risk of overcapacity is small.
The consideration is that the traditional silicon giants are more convenient in the transformation of P-type capacity and N-type capacity. On December 14, China Nengjian released the transaction information of centralized procurement of 15GW photovoltaic modules in 2023, which showed that the winning unit price range of P-type modules was 0.974 to 1.0745 yuan/W, with an average of 1.069 yuan/W; The winning bid price of N-type photovoltaic modules ranges from 1.0176 to 1.125 yuan/W, with an average of 1.
Whether P-type or N-type, the winning bid price of photovoltaic modules is basically maintained at about 1 yuan/W. At the same time, the price difference between P-type components and N-type components continues to narrow , whether it will be transmitted to the upstream of silicon materials in the future, narrowing the price difference between P-type silicon materials and N-type silicon materials is also worth vigilance. From
a deeper point of view, R & D investment is the key to technology iteration and market share of leading companies.
According to Choice data, from 2020 to 2022, the R & D expenditure of Hesheng Silicon Industry was 230 million yuan, 556 million yuan and 723 million yuan respectively, accounting for 2.56%, 2.6% and 3% of the revenue. The sustained growth is worthy of affirmation.
However, under the pressure of funds, the first three quarters of 2023 were only 558 million yuan, a year-on-year decrease of -50. The third quarter was 1. The sales fee for the same period was 12.27 million yuan, an increase of 3.17 million yuan, and the management fee was 1.
. Want to become the world's first, enterprises can not tolerate many pain points and worries. Only the moat built by strong R & D is the foundation of homogenization breakthrough. Hesheng Silicon Industry is still facing a serious test between long and short profits and fast and slow choices.
In the end, how does the ideal shine into reality
? With the price of photovoltaic modules falling, a new round of shuffling triggered by overcapacity on the supply side has begun.
Fortunately, thanks to the first-mover layout, the integrated layout of Hesheng Silicon Industry has achieved initial results.
For example , the third phase of Xinjiang Coal, Electricity and Silicon Integration Project, with an annual output of 200000 tons of siloxane and downstream deep processing projects , has been put into operation in the first quarter of 2023. As of June 2023, the second phase of Hesheng Coal, Electricity and Silicon Integration Project in the East of Industrial Silicon has reached an annual output of 400000 tons of industrial silicon. In September, the annual output of 1.5 million tons of ultra-thin and highly transparent photovoltaic glass manufacturing project for new energy equipment in Hesheng Silicon Industry in central Xinjiang has been approved by the EIA.
On October 14, Hesheng Silicon Industry created the world's first "Polycrystalline Silicon-Single Crystal Slice-Battery Module-Photovoltaic Glass- Initial Securities Calculation. By virtue of the self-provided power plant and self-provided graphite electrode in Xinjiang region, the Company can bring 1269 yuan/ton and 232 yuan/ton for industrial silicon respectively.
Meanwhile, the industrial silicon business of the Company is mainly concentrated in Xinjiang, which has the advantages of coal resources and power cost, which is beneficial for the Company to give full play to the industrial chain value of coal-electricity-silicon integration.
Indeed, the change from volume to quality is the new normal of the photovoltaic industry. With the advantages of scale and integrated layout, Hesheng Silicon Industry has formed a certain comprehensive risk resistance. The next step is the watershed of success or failure, shuffling cycle crossing, that is, whether we can jump out of homogenization and break the circle with the double-material armor made by characteristic products and extreme cost.
To lengthen the dimension, the cycle is also constantly changing. If we can timely respect leverage, quality first, and grasp the "balance" between expansion and risk, the next spring transformation may surprise countless people.
He is strong, let him be strong, the breeze blows the hills!
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