IPO outlook | After a huge loss in performance, Junda Co., Ltd. “made a big voyage” with N-type photovoltaic cells

After the N-type Topcon battery dividend retreated, Hainan Junda New Energy Technology Co., Ltd. (hereinafter referred to as “Junda Shares”) continued to impact the “A+H” listing position. According to the Hong Kong Stock Exchange's disclosure on October 14, Junda Co., Ltd. submitted a listing application to the main board of the Hong Kong Stock Exchange, and Huatai International, CMB International, and Deutsche Bank were its co-sponsors.

According to the prospectus, the capital raised by Junda Co., Ltd. by issuing H shares this time will mainly be used to build overseas production capacity for high-efficiency batteries, develop advanced technology, and strengthen the company's overseas sales business and distribution channels. Obviously, the main goal of Junda's listing in Hong Kong this time is to accelerate the expansion of overseas markets.

It is worth noting that thanks to seizing the opportunity of the “transition from P-type to N-type” photovoltaic cells, the performance of Junda Co., Ltd. grew rapidly for a while. However, due to factors such as the rapid expansion of production capacity in the photovoltaic industry and the growth rate or slowdown in installed capacity, the performance of Junda Co., Ltd. began to change from profit to loss, and the company's stock price also experienced an “ankle cut.” Therefore, can the Hong Kong listing of Junda Co., Ltd. reverse the decline in performance and create good returns for investors? It all became confusing.

N-type Topcon battery share shrinks, profit and loss of performance

According to the Zhitong Finance App, due to mature technology and lower manufacturing costs for large-scale mass production compared to other types of photovoltaic cells, P-type PERC batteries have been the mainstream technology in the photovoltaic industry in recent years. However, as the photovoltaic market continues to grow, and the efficiency of P-type PERC cells is close to the theoretical limit, it is difficult to meet the demand for cost reduction and efficiency of solar power generation. This provides development opportunities for n-type TopCon batteries with more prominent performance advantages. According to Frost & Sullivan's report, in 2019-2023, global N-type Topcon battery shipments grew at a CAGR of 256.6% to 142.8 GW, accounting for 27.1%.

In the process of rapidly discharging N-type Topcon batteries, Junda Co., Ltd. has maintained a competitive position in different generations of mainstream photovoltaic cells such as N-type Topcon batteries and P-type batteries through R&D innovation and key technologies. According to the Frost & Sullivan report, in terms of shipments in 2023, among professional manufacturers, the company's N-type Topcon battery global market share reached about 46.5%, ranking first, while the company's global market share for photovoltaic cells reached about 12.8%, ranking fourth.

According to reports, in 2022, when N-type TopCon batteries were mass-produced, only a few professional manufacturers and integrated manufacturers of photovoltaic cells achieved shipments. In 2022, in terms of shipment volume, Junda Co., Ltd. ranked first among professional manufacturers with 1.8 GW N-type Topcon battery shipments, with a market share of over 75%. Subsequently, the N-type Topcon battery market expanded rapidly. In 2023, global shipments of n-type Topcon batteries from professional manufacturers reached 44.3 GW, which also caused Junda's market share to shrink significantly compared to 2022.

On the other hand, the performance of Junda Co., Ltd. also fluctuated sharply. In 2021-2023, the company's revenue increased from 1,639 billion yuan (RMB, same below) to 18.611 billion yuan; during the same period, the company's gross margin decreased from 12.6% to 9.1%; and the continuing operating income belonging to the owners of the company increased from 9.505 million yuan to 816 million yuan. In the first half of 2024, the revenue of Junda Co., Ltd. was 6.355 billion yuan, a year-on-year decrease of 32.4%; gross margin was -0.4%; and continuous operating income belonging to the owners of the company was a loss of 1,663 billion yuan.

The market competition is fierce, and the price of photovoltaic cells is falling rapidly

According to the Zhitong Finance App, one of the main reasons for the decline in profitability of Junda Co., Ltd. is the rapid contraction of the company's P-type PERC battery sales revenue. In 2023, the company's P-type PERC battery sales were 4.228 billion yuan, a year-on-year decrease of more than 50%. In the first half of 2024, the company's revenue from P-type batteries was 379 million yuan, a year-on-year decrease of 87.7%; the share of P-type PERC batteries in revenue fell 26.9 percentage points to 6%.

Junda Co., Ltd. stated in its prospectus that due to the unexpected acceleration of market demand from p-type PERC batteries to N-type Topcon batteries in the fourth quarter of 2023, the company confirmed disposable property, plant and equipment impairment losses of 894 million yuan for several P-type PERC battery production lines and production facilities at the Shangrao base in 2023. The company discontinued production of P-type PERC batteries in June 2024.

In terms of N-type Topcon batteries, in the first half of 2024, Junda Co., Ltd.'s photovoltaic cell sales reached 19.2 GW, an increase of 68.4% over 11.4 GW in the same period of 2023. However, the company's N-type Topcon battery sales still fell 4.5% year on year to 5.712 billion yuan.

According to the prospectus, the global photovoltaic cell market is fiercely competitive and highly concentrated. Specialized photovoltaic cell manufacturers and integrated manufacturers are the two main market participants. According to Frost & Sullivan data, in 2022 and 2023, the top five specialized manufacturers accounted for 73.5% and 74.1% of the global PV cell specialty manufacturer's shipment volume, respectively.

Under the influence of multiple factors such as industry competition and a phased decline in market demand, the price of photovoltaic cells fell rapidly. According to data disclosed by Junda Co., Ltd., the average selling price of the company's N-type Topcon batteries dropped from 1.14 yuan/w in 2022 to 0.36 yuan/w in the first half of 2024, a drop of 68.4% during the period.

Global photovoltaic cell shipments are shifting gears and decelerating

Judging from the development trend of the industry and the development of Junda Co., Ltd. itself, the company is facing many challenges such as pressure on product prices, and is also expected to embrace new development opportunities.

In the long run, N-type batteries are unlikely to replace P-type batteries. Frost & Sullivan predicts that the penetration rate of N-type batteries will rise from 6.6% in 2022 to 99.2% in 2030. It is estimated that by 2030, global shipments of N-type batteries will reach 1514.4 GW; global shipments of TOPCON related photovoltaic cells will reach 1089.2 GW.

In 2023, the global photovoltaic cell market size reached 544.9 GW in terms of shipment volume. Global PV cell shipments are expected to reach 1526.6 GW by 2030, with a compound annual growth rate of 14.2% from 2024 to 2030, down 20 percentage points from the compound growth rate of 2019 to 2023. From 2024 to 2030, PV cell shipments in the rest of the world, excluding China, will maintain a CAGR of 25.6%.

Demand for photovoltaic cells in overseas markets is growing rapidly, which is probably an important reason why Junda Co., Ltd. regards “expanding overseas markets, promoting global market development and seizing business opportunities” as an important reason for its development strategy. According to the prospectus, from 2021 to the first half of 2024, the share of sales of Junda shares from outside China as a share of total revenue increased from 0.3% to 13.8%. The company plans to expand overseas annual production capacity to about 10 GW.

It should be noted that Junda Co., Ltd. also faces many risks in globalizing its business. Junda Co., Ltd. stated in its prospectus that maintaining, developing and expanding its business requires the company to market and sell products globally, which has inherent risks. For example, in the market where they do business, companies are subject to many laws and regulations. Some of these laws and regulations may conflict with each other, and all laws and regulations may change.

Additionally, companies face trade barriers and trade remedies, such as export regulations, tariffs, taxes and other restrictions and expenses (including anti-dumping and countervailing duty orders), which may increase the price of the company's products and reduce the company's competitiveness in some countries. These potential risks may have a significant adverse impact on the company's business, financial position and operating results.