Public company info - Solargiga Energy Holdings Ltd. , 00757.HK
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Solargiga Energy Holdings Ltd., 00757.HK - Company Profile
Chairman TAN Wenhua
Share Issued (share) 3,324,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Environmental Energy Material
Corporate Profile Business Summary: The principal activities of the Group are the trading of, manufacturing of and provision of processing services for polysilicon and monocrystalline silicon solar ingots/wafers, and the producing of and trading of photovoltaic cells and modules, the installation of photovoltaic systems and the operating of photovoltaic power plants. Performance for the year: The Group recorded revenue of RMB4,425.552 million for the year ended 31 December 2019, a 10% increase from RMB4,022.452 million in 2018. The Group recorded a gross profit of RMB341.368 million and a gross profit margin of 7.7% in 2019, as compared to a gross profit of RMB397.55 million and a gross profit margin of 9.9% in 2018. In 2019, the Group recorded a loss attributable to the equity shareholders of RMB355.492 million, as compared to a loss attributable to the equity shareholders of RMB222.402 million in 2018. Business Review The Group focuses on the vertical integration for photovoltaic monocrystalline products, providing one-stop solutions for the photovoltaic industry ranging from the manufacturing and sales of silicon ingots and wafers, photovoltaic cells and photovoltaic modules, the installation of photovoltaic system and the development, design, construction, operation and maintenance of photovoltaic generation plants. Apart from not self-manufacturing polysilicon, the scope of its business covers the whole industry chain of the photovoltaic industry. Although the Group possesses the capacities to manufacture the aforementioned mono-crystalline silicon ingots, mono-crystalline silicon wafers, solar cells and modules, the production capacity of each is not exactly the same. After the continuous adjustment of new capacity during the year and the technical transformation of existing capacity, from 2020, the Group has increased its annual production capacity of monocrystalline silicon ingots and mono-crystalline wafers to 3.6GW. The annual production capacity of photovoltaic modules has also been increased to 3.5GW through an equity cooperation in 2020. Under the consideration of limited resources that need to be coordinated and allocated, the annual production capacity of mono-crystalline silicon solar cells remains unchanged at 400MW. However, through the strategies of focusing on upstream mono-crystalline silicon ingots and wafers and increasing downstream module production capacity, the Group forms strategic partnership between the Group and large manufacturers focusing on the production of mid-stream solar cells. These external solar cell manufacturers purchase mono-crystalline silicon wafers from the Group and in turn sell the solar cells they manufactured to the Group for the Group’s manufactures the downstream modules for external customers. This will drive the demand for upstream niche self-produced mono-crystalline silicon ingots and wafers. Secondly, the Group’s vertical integration of upstream and downstream capacities, by adopting a dual-track strategy of continuous development of upstream mono-crystalline silicon ingots, silicon wafer niche products and downstream module products, while not proactively expanding the capacity for the mid-stream solar cell, effectively focuses the Group’s resources and withstands the fluctuations in upstream mono-crystalline silicon wafer market or mitigate any instability in the supply of mid-stream solar cells. For example, strategic partnership formed between the Group and external manufacturers focusing on the production of mid-stream solar cells, where in the event of a poor sales market for monocrystalline silicon wafers, the Group can outsource these monocrystalline silicon wafers to these strategic partners and work them into solar cells, which is then returned to the Group for continued production into modules, and then sold to downstream third-party large module customers. On the other hand, if the sales market for mono-crystalline silicon wafers is good, the Group can directly sell the mono-crystalline silicon wafers to these strategic partners, and then purchase solar cells from these strategic partners in order to meet the production needs of the downstream modules of the Group. Therefore, in the market situation where the industry is changing drastically, the Group can properly arrange the use of selfproduced mono-crystalline silicon wafers, and the solar cells required for the Group’s module production can also be fully guaranteed. In summary, the Group can not only give full demonstrate to the existing manufacturing advantages of upstream mono-crystalline silicon ingots and silicon wafers niche products, but also establish a stable sales channel for the terminal module market, so that the advantages of vertical integration of mono-crystalline products can be fully realised. Regarding the production of upstream mono-crystalline silicon ingot and wafer products, the Group’s low-cost high-efficiency production capacity located in Yunnan Qujing has completed its adjustment phase in 2019. Its results are now showing gradually. With the lower local electricity cost in Yunnan Qujing, its gross profit margins are recorded at 15% and is expected to reach improved levels. After the Group’s transformation and upgrading work performed on the original production bases in Jinzhou, Liaoning and Xining, Qinghai during the year, they are expected to demonstrate their advantages in production capacity increase and cost reduction from 2020 onwards, which can further improve the Group’s overall gross profit margin. Since our photovoltaic module customers are mostly domestic stateowned enterprises or large multinational corporations, the market position and strength possessed by these module customers are the most powerful in the overall photovoltaic industry chain. Therefore, the Group has established a direct supply relationship with large module customers through significant module production capacity, which not only maintains a more stable terminal product estuary, but also drives the utilisation rate of each production segment of the Group from the bottom up. As such, in order to meet the needs of module customers, in addition to the 2.3GW module capacity owned by its wholly-owned subsidiaries, the Group has participated in a newly-established module manufacturing base of 1.2GW in Yancheng, Jiangsu. It only invested a small amount of cash for a direct equity investment of 15%, however, through strategic alliances among strategic investors and employees of the Group, the 1.2GW module capacity will co-ordinate with the manufacturing needs of the Group and it has already begun production in 2020. The Group’s effective module production capacity has been increased to 3.5GW in 2020, which can greatly increase the economic scale advantage of module products. In terms of operating results, reaping the benefits of the results from strengthening the customer relationship of downstream module products over the years, the Group’s high-end photovoltaic products continued to be welcomed by domestic state-owned enterprises and multinational corporations. Total shipment increased from 2,797MW in 2018 to 4,134MW in 2019, a growth reaching 48%. However, unit selling prices has dropped rapidly during 2019 and China’s photovoltaic power subsidy policy was introduced later than expected, industry players generally hold a wait-and-see attitude, resulting in a year-on-year decrease in Chinese domestic photovoltaic installation. Further, since the production capacity of the Group’s new low-cost high-efficiency mono-crystalline silicon ingots and wafers was in adjustment phase most time during the year, production capacity has not been fully utilised, the advantages of its economy of scale has not yet been displayed. This forced the Group to continue to rely heavily on the monocrystalline ingot and wafer products from its production base in Liaoning Jinzhou. While the local electricity cost in Liaoning Jinzhou is more than double that of Yunnan Qujing, it has directly and indirectly contributed to higher production cost of monocrystalline silicon ingots and wafers. As such, the Group’s overall gross profit was greatly compressed. Further, although external shipments of the main products of monocrystalline silicon wafers and photovoltaic modules of the year increased by 137% and 27% respectively compared to last year, the Group was committed to the technical transformation and upgrading of the existing production equipment for mono-crystalline silicon ingots and mono-crystalline silicon wafers and also modules in Jinzhou, Liaoning. It affected the utilisation rate of production capacity during the year and hence led to the benefits of economy of scale not being fully demonstrated. In summary, the gross profit margin was therefore reduced from 9.9% in 2018 to 7.7% in 2019, which resulted in an operating loss of RMB184.107 million in 2019, compared to an operating loss of RMB95.271 million in 2018. As a clean energy source, photovoltaic power generation replacing traditional petrochemical energy sources has become a global trend. Even though the current coronavirus epidemic has delayed demands temporarily, the trend of rapid growth in the demand for photovoltaic products is unwavering. During the year, due to the comprehensive upgrade of existing production capacity and the efficient adjustment of new equipment in 2019, benefits of production efficiencies could not be fully displayed, resulting in an increased operating losses. In 2020, relying on (1) the new production base having low external electricity costs, which directly and indirectly reduces the production costs; (2) the commencement of mass production by the new equipment and the completion of upgrades to the old equipment; (3) technological integration advantages of its various product lines; and (4) strong client base in China and overseas, the Group expects its gross profits to return to a normal level. While maintaining its own leading technological advantage in monocrystalline products, and adhering to the vertical integration strategy, through external customer demand for the Group’s downstream modules driving the internal demand of its upstream monocrystalline wafers, also through further strengthening its strategic partnerships with third party mid-stream solar cell manufacturers, the Group and its partners will be able to leverage their respective strengths and experiences in laying a solid foundation for broader co-operation in the future. Silicon ingot and wafer business Apart from not producing its own polysilicon, a chemical product, in the scope of its business, the Group covers an all-rounded photovoltaic industry production chain under its vertically integrated business model. Among this model, mono-crystalline silicon ingot products are mostly used for the internal production of monocrystalline silicon wafers within the Group, and are less engaged in external sales. In addition, due to insufficient production capacity of the Group’s midstream solar cell production, mono-crystalline silicon wafer products of the Group are mostly sold to third-party professional solar cell manufacturers. During the year, with the advantages in application of mono-crystalline products over multicrystalline products in photovoltaic power generation, the market share of mono-crystalline products has continued to increase rapidly. As such, demand for what the Group has been focusing on all along, mono-crystalline products, has continued to increase. Its market share is fast growing. Further, in addition to the traditional mono-crystalline P-type products, shipment volume of monocrystalline N-type products with higher conversion efficiencies are also increasing. With the continued realisation of advantages in better improvement in conversion efficiency, more stable decay rate in its photovoltaic systems, continued reduction in unit costs, etc. of mono-crystalline products, it is expected that the advantages of mono-crystalline products will become more obvious in the field of photovoltaic power generation. Guided by this advantageous environment in the industry, through its long-term strategic partnerships with well-known solar cell-focused manufacturers, not only enjoys priority distribution channels for the sales of its monocrystalline wafers, but also ensures the long-term stable utilisation of the Group’s capacity and shipment volume. The benefits of the Group’s upstream and downstream vertical integration are fully realised. The Group have consolidated its leading position in the monocrystalline silicon solar ingot and wafer manufacture industry in terms of technology and product quality. The quality stability of its mono-crystalline silicon products is amongst those of the industry leaders. During the year, since most of the ingot products have been reserved for internal use, the external shipment volume of monocrystalline silicon ingots has dropped to 204.2MW (413.8MW in 2018). Conversely, external shipment volume of mono-crystalline silicon wafers has rose significantly to 2,014.6MW (850.3MW in 2018). Major customers of external sales included Aikosolar Group (愛旭太陽能集團), TW Solar Group (通威太陽能集團), Sumin New Energy Group (蘇民新能源集團) and huge state-owned enterprises in China, such as State Power Investment Corporation (中國國家電 力投資集團公司) (“SPIC”). In addition, the Group has completed the testing and adjustments of its newly invested low-cost high-efficiency mono-crystalline silicon solar ingot and wafer project, located in Qujing City, Yunnan Province, China. It has not only enabled manufacturing in scale from 2020 onwards. With the lower local electricity costs, being lower than that at previous major production base in Jinzhou, Liaoning, by more than 50%, it will lift the Group’s overall gross profit and gross profit margin. Therefore, The Group is currently actively planning the expansion of the mono-crystalline silicon solar ingot and wafer capacities in Yunnan, Qujing, in order to take advantage of the local external production environment, and enable the Group to fully demonstrate its current technological advantages in production. Solar cell and module businesses The Group’s production lines of solar cells are located at the Group’s manufacturing base in Jinzhou, Liaoning. During the year, the annual production capacity of solar cells was maintained at 400MW (2018: 400MW). Apart from providing internally to the downstream module manufacturing subsidiaries of the Group, the solar cells are also sold to our selected customers in China and Japan. In order to keep abreast of the latest trends in the photovoltaic industry, the Group has also been collaborating with university teams of the highest levels in the field of global perovskite (鈣鈦礦) research in projects to jointly develop perovskite solar cells, paving the way for the development of upstream and downstream products in the next decade. Regarding photovoltaic module business, during the year, the Group recorded external shipments of photovoltaic modules of 1,855.7MW, which grew by 27% when compared to external shipments of 1,466.2MW in 2018. Although the market prices has continued to drop from that of previous years, the Group’s module sales of the year still increased from RMB3,070.65 million last year to RMB3,199.10 million in 2019. Even with this significant increase in shipments of photovoltaic modules, the production has been in fact been hindered by the technical transformation and equipment upgrades on the existing module manufacturing capacity during the year, the advantages of economy of scale have hence not been fully realised. However, after the completion of the comprehensive technical upgrade, with the excellent product quality and price competitiveness, the Group is expected to continue to record rapid growth in external shipments and total sales, and to make full use of the expected economies of scale. External sales was mainly made to huge Chinese state-owned enterprises and Japanese multinational enterprises, such as SPIC, China Huadian Corporation (中國華電集團 公司) (“Huadian”), Beijing Enterprises Holdings Limited (北京控股集 團有限公司) (“BEGCL”), SHARP Corporation (“SHARP”) and SANSHIN ELECTRONICS CO., LTD., etc. On the other hand, following the increasing awareness of the benefits of higher conversion efficiency and more competitive costs offered by the Group’s focused monocrystalline photovoltaic modules, and responding to the opportunity offered by grid parity, market share of monocrystalline module products continues to grow quickly. Demand for N-type mono-crystalline and P-type PERC photovoltaic modules have surged. In addition to flexibly supporting the manufacturing of mono- and multi-crystalline photovoltaic modules, the Group will continue to expand and strengthen the development and sales of monocrystalline silicon high-efficiency module products such as N-type double-sized glass photovoltaic modules, half-cell photovoltaic modules, P-type monocrystalline solar cell Passivate Emitter and Rear Cell (PERC), smart photovoltaic modules, and related high-end products. Among them, installation of the new production lines of our BS modules of N-type monocrystalline IBC solar cell, which produces higher current output, open circuit voltage, fill factor and other electrical performance advantages, have been completed. Product quality and conversion has been stable. External sales has been recorded since the first half of 2019. BS modules utilises, first in the country, this internationally-leading FPC manufacturing technique, with SHARP, the Group’s key strategic partner, being its major sales customer. As a company focusing on monocrystalline silicon photovoltaic products, equipped with high-quality, self-produced upstream monocrystalline silicon ingots and mono-crystalline silicon wafers, customers’ demand for the Group’s mono-crystalline modules has always remained high. Currently, proportion of sales of the Group’s mono-to-multi-crystalline silicon photovoltaic modules has remained at 85:15 and the market share of mono-crystalline silicon photovoltaic products is expected to rise continuously. In summary, through customer demand for the Group’s downstream modules, it has not only driven the demand for the Group’s upstream mono-crystalline ingots and mono-crystalline wafers, but also helps to realise the benefits arising from the Group’s vertical integration strategy, and to better mitigate the market risks arising from fluctuant sales of upstream silicon wafers or unstable supply of mid-stream solar cells. Construction and operation of photovoltaic system business To consolidate its advantages of the business model of vertical integration, the Group actively expanded the business of end-user market apart from its efforts in stabilising its upstream and midstream business development, thereby driving demand for products from downstream to upstream. As such, in respect of the business opportunity derived from the construction of distributed power plants, apart from establishing internal photovoltaic power plant system companies of the Group, the Group also plans to establish joint venture companies with companies from other industries in order to share the profits and also provide extra distribution channels for the Group’s module sales. Prospects: As a clean energy source, photovoltaic power generation replacing traditional petrochemical energy sources has become a global trend. The market is now undergoing a structural transformation. In addition to the technological advantages of mono-crystalline silicon products, which has been the Group’s focus, being proven to be superior to multi-crystalline products, through the continued reduction of government subsidies, or even without subsidies, it is also advancing technological progress and reducing power generation costs, to promote the acceleration of the industry in the achievement of comprehensive grid parity. After years of rapid development, the Chinese photovoltaic industry is leading its peers in the world. Its annual output in China has exceeded RMB400 billion, and it has provided millions of jobs. It has made a significant contribution to China’s economic growth. It is expected that the Chinese government will continues its long-term support to the photovoltaic industry. Year 2019 is the first year of implementing a new mechanism for photovoltaic subsidy bidding, and it is also the first year of parallel development of grid parity and bidding projects. Compounded with the effect of the later-thanexpected introduction of China’s photovoltaic power subsidy policy during the year, industry players generally hold a wait-and-see attitude, resulting in a year-on-year decrease in domestic photovoltaic installation of 30.1GW in China compared with last year. This is expected to be a short term response. Demands in 2019 is expected to be deferred to 2020. However, due to epidemic of the new coronavirus, this deferred demand may not be immediately apparent in early 2020, but it is estimated that the global new photovoltaic installation in 2020 may still reach 140 to 150GW. Among them, China is expected to account for around 40GW. It is judged that the impact of the short-term deferral caused by the new coronavirus should be limited. As for the technology of photovoltaic products, due to the advantages of high conversion ratios, stable decay rate in its photovoltaic systems, continued reduction in unit cost, etc. of monocrystalline products are highlighted, market share of monocrystalline products will continue to rise. Therefore, monocrystalline products has become the popular choice in solar project. Hence, the proportion of solar plants installing mono-crystalline photovoltaic systems and the mono-crystalline products used by distributed power plants have been increasing as a result. The Group focuses on mono-crystalline silicon products in photovoltaic products and has industry-leading production technology of mono-crystalline products. In the upstream and downstream of the vertical integration of the photovoltaic industry, while not producing chemical raw material polysilicon, its business form covers the entire photovoltaic industry. The chain can fully leverage the synergies between the Group’s businesses. The focus is on the production of upstream mono-crystalline silicon ingots and silicon wafers, and planning the downstream module production capacity, in order to focus on the production of upstream niche products, mono-crystalline silicon ingots and wafers, retaining only a small scale solar cell manufacturing capacity, and through significant module production capacity, the Group not only maintains direct contact with downstream module customers with huge market power, establishes stable supply and demand relations but also keeps a finger on the pulse of the end-user market, and can also bring out the upstream high-end mono-crystalline silicon ingot and wafer products. Through the potential of continuous improvement in production costs of the upstream high-end mono-crystalline ingot and wafer products, the Group’s innate advantage will be demonstrated. As such, in order to meet the needs of module customers, in addition to the 2.3GW module capacity owned by its wholly-owned subsidiaries, the Group has participated in a newlyestablished module manufacturing base of 1.2GW in Yancheng, Jiangsu. It only invested a small amount of cash for a direct equity investment of 15%, however, through strategic alliances among strategic investors and employees of the Group, the 1.2GW module capacity will co-ordinate with the manufacturing needs of the Group and it has already begun production in 2020. The Group’s effective module production capacity has been increased to 3.5GW in 2020, which can greatly increase the economic scale advantage of module products, and also provide a more stable outlet of the Group’s 3.6GW upstream mono-crystalline silicon ingots and wafers production capacity. Although the average unit selling price of the product in the future is still expected to gradually decline with the advent of grid parity, the Group can rely on (1) the new production base having low external electricity costs, which directly and indirectly reduces the production costs; (2) the commencement of mass production by the new equipment and the completion of upgrades to the old equipment; (3) technological integration advantages of its various product lines; and (4) strong client base in China and overseas. It is expected to lead to continuous growth in the Group’s future external shipment volume and revenue, it is also expected that the magnitude of decrease in cost of the Group’s products will be greater than that of the decrease in unit selling price, hence driving the Group’s gross profit ratios to return to a normal level. The road to grid parity may be a painful change, but the expected explosive growth in the market after reaching grid parity will provide an opportunity for the industry. The Group is fully prepared and will do its utmost, to embrace the growth and development in the photovoltaic industry in the good times after reaching grid parity.

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