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China Fund News reporter heard

On the evening of August 5, East China Heavy Machinery announced that the company decided to terminate the investment in the Bozhou 10GW annual output N-type high-efficiency solar cell production base project (hereinafter referred to as the investment project), but it still needs to be submitted to the shareholders' meeting for deliberation.

In response, Huadong Heavy Machinery said that it was affected by the downturn in the photovoltaic industry and wanted to reduce losses in this business. One year and one month ago, Huadong Heavy Machinery announced that it planned to invest a total of about 6 billion yuan in investment projects to help it further achieve industrial transformation and upgrading.

In comparison, the total market value of East China Heavy Machinery as of the closing on August 5 was 3.608 billion yuan.

Plan to terminate projects with a total investment of approximately RMB 6 billion

On August 5, the board of directors of Huadong Heavy Machinery reviewed and approved a proposal to terminate the investment project and cancel the project company Huadong Solar Technology (Bozhou) Co., Ltd. (hereinafter referred to as Huadong Solar (Bozhou)). At the same time, Huadong Heavy Machinery signed a "Contract Termination Agreement" with the Management Committee of Bozhou Wuhu Modern Industrial Park.

In contrast, Huadong Heavy Machinery's previous plan to invest in the project was to seize the industrial growth opportunities in the solar cell market, further promote its strategic transformation and upgrading, create new profit growth points, and enhance its core competitiveness and sustainable operating capabilities.

On July 5, 2023, East China Heavy Machinery and the Management Committee of Bozhou Wuhu Modern Industrial Park signed an "Investment Contract" with effective conditions, which shows that East China Heavy Machinery plans to invest a total of approximately 6 billion yuan to build investment projects in Bozhou City, Anhui Province.

To this end, East China Heavy Machinery indirectly established East China Solar Energy (Bozhou) with a registered capital of 600 million yuan. Its business scope includes: manufacturing of photovoltaic equipment and components, sales of photovoltaic equipment and components, solar power generation technical services, battery manufacturing, etc.

At that time, the expected benefits of the investment project by East China Heavy Machinery were to achieve 80% of the output in the first full fiscal year from the date when East China Solar Energy (Bozhou) was put into production; to achieve 100% of the output from the second fiscal year, and to achieve annual invoicing income of no less than 10 billion yuan, total tax payment of no less than 200 million yuan each year, and employment of no less than 1,000 people.

Huadong Heavy Machinery's latest announcement stated that the company and Huadong Light Energy (Bozhou) have invested a total of 1.1798 million yuan in investment projects. Among them, the investment project incurred expenses of 787,800 yuan in 2023, and the cumulative expenses incurred in 2024 were 392,000 yuan.

Financial data disclosed by East China Heavy Machinery showed that East China Solar Energy (Bozhou) did not generate operating income in 2023 and the first half of 2024, and achieved net profits of -787,800 yuan and -392,000 yuan, respectively.

Transformation affected by industry downturn

Regarding the proposed termination of the investment project, East China Heavy Machinery said that it was a strategic adjustment made to cope with the risks of the photovoltaic industry and the market, and it was in line with its long-term development plan.

Huadong Heavy Machinery announced: "During the performance of the contract, due to the overall decline in prices in the photovoltaic industry chain and the continued decline in battery prices, the two parties will not be able to achieve the commercial purpose of the contract if they continue to invest."

Recently, Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, said that the operation of China's photovoltaic industry chain in 2023 was mixed, and the first half of 2024 was a world of ice and fire.

In Wang Bohua's view, the current "hot" development of China's photovoltaic industry chain is reflected in the continued expansion of the scale of the manufacturing and application ends, while the market conditions in terms of industry chain prices, manufacturing output value, etc. have fallen to a "freezing" point.

According to data from the China Photovoltaic Industry Association, in the first half of 2024, the domestic photovoltaic installed capacity was 102.48GW, a year-on-year increase of 30.7%; the output value of the domestic photovoltaic manufacturing end (excluding inverters) was approximately 538.6 billion yuan, a year-on-year decrease of 36.5%.

In order to reduce losses in its photovoltaic manufacturing business, Huadong Heavy Machinery decided to terminate the investment project.

Compared with 2022, photovoltaic manufacturing business is a new business of Huadong Heavy Machinery in 2023. Its photovoltaic manufacturing business in 2023 achieved operating income of 77.2025 million yuan, accounting for 11.50% of the overall operating income.

However, the results of Huadong Heavy Machinery's entry into the photovoltaic industry in 2023 were not ideal, with the gross profit margin of the photovoltaic manufacturing business being -63.74%.

At the same time, Huadong Heavy Machinery's Peixian high-efficiency solar cell project achieved a cumulative profit of -97.8201 million yuan by the end of 2023.

East China Heavy Machinery announced that the Peixian high-efficiency solar cell project failed to meet the planned progress and expected returns, mainly because the battery cell market fell back in the second half of 2023, and the project was mainly in the stage of capacity ramp-up, and the various efficiencies of equipment output still need to be further improved.

Editor: Joey

Audit: Wooden Fish

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