Fresh Concerns of Solar Overcapacity

2015 PV cumulative installed capacity of about 43GW, ranked first in the world this year in the new scale will be 20GW to 23GW, while the A shares of solar power generation concept Listed companies 70% of companies expected net profit growth of over 50%, even up to the highest 1500%. At the same time, the differentiation phenomenon is obvious, the upstream business is still mostly a loss.

Insiders call on guard against a new round of power plant overcapacity, and discard light, subsidies, land three mountains obscure short-term, will continue to erode the power plant profits. Thirteen Five-Year period, with the decline in the cost of photovoltaic power generation and the development of the situation, the price level will be reduced, and strive to achieve the 2020 parity user side, multisectoral currently brewing "reduce costs" combined.

...According to the China Photovoltaic Industry Association Secretary-General Wang Bo Hua, new PV installed capacity in 2015 is about 15GW, an increase of more than 40% for three consecutive years first in the world, of which 84% was ground stations, and distributed power plants accounted for 16%. The total installed capacity of about 43GW, ranked first in the world.

Affected by this pull, midstream component of corporate earnings also improved significantly. China Photovoltaic Industry Association data show that in 2015 assembly production exceeded 43GW, an increase of 20.8%, 51 assembly enterprises average capacity utilization rate of 86.7 percent, up 6 percentage points over the first half of 2015. The top ten more than double-digit profit margins, after 33 standardized conditions by enterprises in 2015 operating results analysis (statistical excluded due to several heavy historical burden resulting from loss of business), only four business losses, the average profit margin of 4.8%, significantly higher than the 3% average for the electronics manufacturing industry, but also two to three percentage points higher than in the first half of 2015.

The fiery momentum from the earnings of listed companies can be further confirmed. According to WIND data, as of January 29, 23 of 37 listed solar companies released 2015 annual results notice, 18 had yoy net profit growth, including 15 with expected growth rates of more than 50%, Jiawei (300317) saw growth of 1490.16% to 1519.51% to come out on top, followed by Shanghai Aero Auto (600151), net profit is expected to grow 382% to 415%, and Risen Energy (300118) and ZJ Sunflower (300111) are expected to grow 363% and 393%, respectively, from 140.22% to 166.91%.

But it is worth noting that differentiation phenomenon is obvious. Scale, brand, technology components and full corporate orders, orders difficulties of SMEs, mostly for OEM products or to provide for their own power plants. Upstream polysilicon enterprises in worse trouble in the global PV market, seasonal changes, polysilicon is also under pressure than other sectors as the most important, the price all the way down, most companies are still losing money.

"At present, the polysilicon business situation remains severe and complicated, foreign polysilicon companies are still looking for loopholes in the Chinese market, duties for Korea 'dual' tax rate is too low, some companies tax rate of only 2.4%, resulting in a substantial increase in imports from South Korea polysilicon a serious impact on China's polysilicon industry, while the European Union to take the price guarantee mechanism intended effect is not obvious, a significant increase in re-exports by Taiwan polysilicon. "Vice president of China nonferrous Metals industry Association Zhao Jiasheng said.

...Brownouts problem is equally bleak. Data show that in 2015 the national grid scheduling abandoned cumulative photovoltaic capacity range of 46.5 billion kwh, abandoned solar rate 12.62%, all concentrated in Gansu, Qinghai, Ningxia and Xinjiang in Northwest China's four provinces. Wherein the Gansu abandoned solar rate of 30.7%, 22% in Xinjiang.

...According to her estimates, the cost of land in the initial investment is not higher than 0.5 yuan / kwh, to run for no more than one yuan / square meter, reflected in the cost of electricity is 0.04-0.05 / kWh. The favorable financial environment can be expected, if the financing costs lower and lower interest rates by one percentage point, electricity demand is reduced by about 0.03 yuan / kwh. In addition, tax policy also need to win, Jizhengjitui 50% VAT tax, electricity demand is reduced by about 0.04 yuan / kwh.
Lower interest rates far enough and anything can become profitable. For a time.


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