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Against the backdrop of overcapacity in the photovoltaic industry, no photovoltaic giant has been spared, with a substantial net loss expected in the first half of the year. How to "seek" has also become a topic of repeated discussion among companies. On the evening of August 13, Tongwei Co., Ltd. (600438) launched a large-scale merger and acquisition plan, intending to spend no more than 5 billion yuan to acquire the controlling stake in Jiangsu Runyang New Energy Technology Co., Ltd. (hereinafter referred to as "Runyang Co., Ltd."). It is worth mentioning that Runyang Co., Ltd. is also a well-known company in the photovoltaic industry. It once impacted the listing on the Growth Enterprise Market and was approved for registration in June 2023, but it was not issued and listed within the validity period of the approval document, and ultimately missed the A-share market.

Plan to hold a controlling stake in Runyang Shares

On the evening of August 13, Tongwei Co., Ltd. disclosed an announcement stating that the company plans to acquire no less than 51% of the equity of Runyang Co., Ltd. by increasing capital and acquiring equity.

Tongwei Co., Ltd. stated that the company plans to sign a "Capital Increase Intention Agreement" with Runyang Co., Ltd., Shanghai Yueda New Industrial Group New Energy Co., Ltd. and other relevant shareholders of Runyang Co., Ltd., and Jiangsu Yueda Group Co., Ltd. After the signing of the aforementioned agreement, Jiangsu Yueda Group Co., Ltd. will increase its capital in Runyang Co., Ltd. by RMB 1 billion in cash; after the company completes its due diligence, audit and evaluation of Runyang Co., Ltd., and reaches a formal capital increase plan with all parties, the company will increase its capital in Runyang Co., Ltd. in cash with its own or self-raised funds, and at the same time acquire the equity of Runyang Co., Ltd. acquired by Jiangsu Yueda Group Co., Ltd. with the aforementioned capital increase of RMB 1 billion in cash, and will acquire a total of no less than 51% of the equity of Runyang Co., Ltd.

The total amount of the above-mentioned transaction will not exceed RMB 5 billion. After the transaction is completed, Runyang Co., Ltd. will become a wholly-owned subsidiary of Tongwei Co., Ltd.

It is understood that Tongwei Co., Ltd.'s main business sectors currently include new energy and agriculture. In terms of new energy, the company focuses on the research and development, production and sales of high-purity silicon, solar cells, modules and other products. By the end of 2023, the company has formed an annual production capacity of 450,000 tons of high-purity silicon, an annual production capacity of 95GW for solar cells, and an annual production capacity of 75GW for modules.

In terms of revenue, Tongwei Co., Ltd. also mainly relies on the photovoltaic business. In 2023, Tongwei Co., Ltd.'s consolidated operating income was 139.104 billion yuan, of which the main business income of the photovoltaic business was 102.828 billion yuan and the main business income of the agricultural and animal husbandry business was 35.489 billion yuan.

Runyang shares is also a photovoltaic enterprise with leading industry technology. Regarding this acquisition, Tongwei shares said that it is to implement the relevant opinions of relevant departments on guiding the orderly and healthy development of the photovoltaic industry, promote the integration of high-quality resources in the industry, reduce the waste of social resources and inefficient competition in the industry, improve the overall efficiency of the photovoltaic industry, and further consolidate the company's leading competitive advantage in the global photovoltaic industry.

It should be pointed out that the photovoltaic industry has already seen an obvious problem of overcapacity. The prices of products in the main links of the photovoltaic industry chain, such as silicon materials, silicon wafers, and battery cells, have all fallen, and the industry is also accelerating the elimination of backward production capacity. On July 25 this year, at the "Photovoltaic Industry Development Review in the First Half of 2024 and Outlook for the Second Half of the Year Seminar and 2024 Photovoltaic Industry Supply Chain Development (Wenzhou) Forum", Wang Bohua, Honorary Chairman of the China Photovoltaic Industry Association, said that the adjustment of the photovoltaic industry should be heavy and fast. At present, the industry is facing fierce competition both inside and outside the industry. The industry needs to "go light", and the integration time should not be too long. It is necessary to promote the elimination of backward production capacity, encourage corporate mergers and reorganizations, and encourage companies to acquire new production capacity left behind by cross-border companies exiting the industry in a targeted manner.

The target A-share listing failed

Runyang Co., Ltd. should not be underestimated as it was chosen by Tongwei Co., Ltd.

According to Tongwei Co., Ltd., Runyang Co., Ltd. is a well-known solar energy company that focuses on the research and development, production and sales of high-efficiency solar products, and is also involved in industrial silicon, polysilicon, silicon wafers, modules and photovoltaic power station businesses. The controlling shareholder and actual controller is Tao Longzhong.

In terms of industry strength, from 2020 to 2022, Runyang shares ranked among the top three in the world in battery shipments for three consecutive years, and will remain in the top five in the world in battery shipments in 2023. Based on its long-term accumulation in the field of solar cells, Runyang shares has further extended to the upstream and downstream photovoltaic industry chain. At present, it has formed an industrial silicon production capacity of 55,000 tons, a polysilicon production capacity of 130,000 tons, a crystal pulling capacity of 7GW, and a slicing capacity of 10GW in the upstream of the industry chain; a high-efficiency solar cell production capacity of 57GW in the midstream of the industry chain; a component production capacity of 13GW in the downstream of the industry chain, and appropriately deployed some photovoltaic power station businesses.

After years of development, Runyang Co., Ltd. has also deployed production capacity in some overseas countries such as the United States, Thailand, and Vietnam, which can meet the traceability requirements of overseas markets.

It is worth mentioning that Runyang Co., Ltd. also wanted to be listed on the A-share market. In March 2022, the company began to impact the Growth Enterprise Market and got the "entry ticket" for listing, but it failed to be listed.

The official website of the Shenzhen Stock Exchange shows that Runyang Co., Ltd.'s GEM IPO was accepted on March 18, 2022, and was approved at the meeting on November 3 of the same year. The company submitted its registration application on June 20, 2023, and the registration took effect on June 29 of the same year.

Along the way, Runyang's IPO went smoothly. But unexpectedly, after 12 months, Runyang has not been able to issue and list shares. The company's registration approval expired in June this year. It is a rare company in the IPO market that has not been listed after obtaining approval.

Judging from the company's fundraising at that time, Runyang Co., Ltd. planned to raise 4 billion yuan, which would be invested in a 50,000-ton annual high-purity polysilicon project, an annual 5GW heterojunction battery cell production project, and a supplementary working capital project.

Regarding this merger and acquisition, Tongwei Co., Ltd. also admitted that it would be able to optimize the capital structure of Runyang Co., Ltd. and meet the production and operation needs of Runyang Co., Ltd.

The highest net profit in the first half of the year is expected to be a loss of 3.3 billion yuan

Behind the large-scale merger and acquisition, Tongwei Co., Ltd. also expects a substantial net loss in the first half of the year due to industry influence.

According to the 2024 semi-annual performance forecast disclosed by Tongwei Co., Ltd., the company expects to achieve an attributable net profit of about -3.3 billion to -3 billion yuan in the first half of the year, which will be a loss compared with the same period last year. As for the reasons for the performance change, Tongwei Co., Ltd. also stated that due to the overall and substantial decline in market prices in all links of the industrial chain and the continued downturn, the company's photovoltaic business operations incurred losses in the first half of the year.

Looking at the performance of Tongwei Co., Ltd. before 2024, it is quite impressive. Among them, from 2021 to 2023, Tongwei Co., Ltd. achieved operating income of approximately 64.83 billion yuan, 142.4 billion yuan, and 139.1 billion yuan respectively; the corresponding attributable net profits were approximately 8.109 billion yuan, 25.73 billion yuan, and 13.57 billion yuan respectively.

In the secondary market, since July 2022, the share price of Tongwei Co., Ltd. has started to fall continuously, and it hit a low of 15.79 yuan per share during the trading session on July 12 this year. As of the close of August 13, the share price of Tongwei Co., Ltd. was 18.57 yuan per share, with a total market value of 83.6 billion yuan.

Data shows that from 2020 to 2022, Runyang Co., Ltd. achieved attributable net profits of approximately 513 million yuan, 486 million yuan, and 2.039 billion yuan, respectively.

Under the influence of industry factors, Tongwei Co., Ltd. is not the only one that is expected to suffer a net loss in the first half of the year. A-share photovoltaic giants Longi Green Energy and TCL Zhonghuan will also suffer losses. Liang Zhenpeng, a senior industrial economic observer, told the Beijing Business Daily reporter that when photovoltaic companies are expected to cross the bottom of the industry cycle depends on many factors, including market demand, technological progress, and policy changes. However, if photovoltaic companies can strengthen cost control, improve efficiency, strengthen technological innovation, formulate correct market strategies, and cooperate with other companies, they may be able to stabilize the industry trough for a period of time and eventually cross the bottom of the industry cycle. However, this requires companies to have strong strategic planning and execution capabilities, as well as keen insight into the market and technology.

Liu Jimao, founder of Hongyang Solar Energy, also said that the current development environment of various industrial links in photovoltaic manufacturing has undergone fundamental changes, posing a comprehensive test to the company's product technology innovation capabilities, industrial manufacturing capabilities, operational capabilities, and globalization capabilities, forcing companies with backward product technology, backward manufacturing methods, and backward management capabilities to be eliminated at an accelerated pace. The photovoltaic industry is currently at the bottom of the cycle.

Beijing Business Daily reporter Ma Huanhuan