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Recently, several power equipment companies, including Xiangtian Electric, Rongbai Technology, and Shenghong Co., disclosed their preliminary performance reports for the year 2024. This follows earlier announcements regarding their expected performance, painting a more detailed picture of the sector's overall prospectsAccording to data from Tonghuashun, as of the time this article was being prepared, over 220 companies in the power equipment sector listed on the A-shares market have issued earnings forecasts or performance bulletins for the 2024 fiscal year, categorized by the Shenwan Industry Classification.
Notably, companies engaged in transmission, transformation, and distribution equipment, along with lithium battery manufacturers, have shown relatively strong profitabilityHowever, major players in the photovoltaic component supply chain are under significant pressure, highlighting pronounced discrepancies in the industry's overall performanceGiven the positive outlook from market analysts regarding the industry's health and expansions into overseas markets, there is widespread optimism about the recovery of profitability in this sector.
Many of these companies are anticipating a drastic increase in net profitsPreliminary statistics from Tonghuashun reveal that over 30 firms in the power equipment domain forecast a year-on-year net profit increase exceeding 100%, some of which are emerging from loss to profitAmong them, Yangdian Technology, Xizi Clean Energy, Daoshi Technology, Zhongke Electric, Zhenyu Technology, and Huijintong expect their net profit to skyrocket by over 500% in 2024.
Yangdian Technology has projected a net profit attributable to shareholders ranging from approximately 61 million to 86 million yuan, a staggering increase of 801.57% to 1171.06% compared to the previous yearThe surge in profits is attributed to a significant rise in revenues, largely due to an expanded variety of distribution product offerings, enhancements in technological processes, and a scaling up of production capacity, along with a surge in sales orders owing to increased government contracts related to power grids
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Furthermore, the company's stronger focus on international market expansion has led to a rise in foreign export orders.
Similarly, Xizi Clean Energy anticipates a net profit of 400 million to 500 million yuan, marking an extraordinary increase of between 633% and 816% compared to last yearThe company's gross margins have improved significantly, driven by better-quality orders and a reduction in expenditures compared to the previous year.
Zhongke Electric expects a net profit of between 28.78 million and 32.53 million yuan, indicating a rise of 590% to 680% year-on-yearThis growth is largely driven by the booming demand for lithium-ion battery anode materials, which has seen a notable increase in production and sales due to the rapidly evolving market for new energy vehicles, particularly high-speed charging modelsAdditionally, the company has initiated several cost-cutting measures aimed at enhancing efficiency, further bolstering their profitability.
The strong demand in overseas markets is one of the primary reasons for the positive performance by many of these companiesShima Power has reported favorable operating conditions and forecasts a revenue of no less than 1.3 billion yuan for the full 2024 fiscal year, representing about a 40% increase from the prior yearTheir composite external insulation products for transmission and distribution lines have driven continuous growth in overseas markets, suggesting there is still substantial growth potential on that front.
Meanwhile, Dalian Electric Porcelain, which anticipates a more than 300% increase in net profit for 2024, noted that markets such as Saudi Arabia, Vietnam, and Pakistan are rapidly developingFueled by robust domestic and international orders, their Jiangxi factory has already achieved profitability, creating a foundation for significant breakthroughs in the company's future capacity and revenue.
However, it's not all rosy in the fieldMore than 60 companies, including Longi Green Energy, Yicheng New Energy, Muban High-Tech, and Yijing Optoelectronics, expect their net profits to reflect 'first losses' in 2024, predominantly in the photovoltaic sector.
TCL Zhonghuan anticipates a staggering net loss ranging from 8.2 billion to 8.9 billion yuan for 2024, while Longi Green Energy expects to incur a net loss of between 8.2 billion and 8.8 billion yuan
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This marks the first annual loss for both photovoltaic giants since 2013. Tongwei Co., Ltd. also projects its net profit to hover around -7 billion to -7.5 billion yuan, potentially culminating in its most significant overall loss to date.
Analysts attribute these profit declines to a confluence of factors, including a steep drop in product prices and challenges associated with inventory management, leading to a reported gross loss since the second quarter of the previous yearAdditionally, the competitiveness of their new energy battery component business has further undermined their financial performance during this industry cycle's downturnNotably, the difficulties experienced by their overseas subsidiary, Maxeon, which is undergoing a transformation, have also contributed to performance issues during the reporting period.
Ping An Securities has reported that several leading photovoltaic firms are likely to encounter substantial losses attributable to a significant drop in product prices, along with asset impairment write-downsThis situation reflects the fierce competition in the photovoltaic sector and the considerable homogenization problems throughout the major segments of the photovoltaic component supply chainThe institution forecasts that technological advancements may offer a solution to these homogenization issues, as the rising popularity of BC solar cell technology holds promise to become the next generation of battery technology, potentially achieving rapid industrialization.
Despite the complexities manifesting within this sector, many institutions are expressing confidence in the potential recovery of profitability in the power equipment industryThe stark differences in predicted 2024 performances among power equipment firms have not deterred analysts from upholding an optimistic growth outlook for overall profitability restoration.
In a report from Zhongjin Company, the first half of 2024 is expected to see a surge in the power equipment sector's vitality, driven by an unprecedented high in domestic grid investments
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The resurgence of demand for power equipment in lieu of overseas energy transitions, the repatriation of manufacturing jobs, and advancements in AI are progressively affirming this sector's demandThe onset of a global power cycle suggests that the trajectory towards electrification and the development of new power systems represents a long-term, sustained processThis upward trend may persist until 2030, with major publicly-listed companies maintaining solid growth in orders, revenues, and profits as they emerge from historically low valuation zones.
Specifically in the photovoltaic sphere, considering that the prices along the supply chain reached a stabilization point by December 2024 and potential asset impairments have been adequately accounted for, Citic Securities believes the worst is behind photovoltaic companiesIn light of the sector's financial performance, fundamentals, and valuation sentiment bottoming out, demand is expected to gradually recover, bolstered by administrative constraints, self-imposed production limits, and market cleansing mechanismsThe sector is poised for a recovery in its fundamentals.
Guotai Junan Securities has similarly posited that the photovoltaic sector has reached a low point, entering a stabilization phase regarding its fundamentalsPositive shifts in supply-side conditions are beginning to manifest, suggesting a potential upward trajectory in industry sentiment, price recovery, profit enhancement, and continuous improvement of supply-demand dynamics, unveiling promising opportunities within the segment.
Looking ahead to 2025, many listed companies have expressed a hopeful stance toward performance enhancementsLeading Intelligent plans to further deepen its globalization strategy, expanding its footprint in overseas marketsThis, coupled with improved operational rates among domestic downstream clients and ongoing efforts to ramp up production capabilities, suggests a gradual but steady improvement for the industry may be on the horizon
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