First-tier manufacturers start overseas expansion!

On the evening of December 19, first-tier photovoltaic manufacturer JA Solar (002459. SZ) disclosed that the company plans to invest in the construction of an annual output of 6GW of high-efficiency solar cells and 3GW of high-power solar modules in Oman, with an estimated total investment of 3.957 billion yuan, accounting for 11.27% of the latest audited net assets.

PV manufacturers are expanding overseas production in a big way, which is not common in the PV industry this year.

"Globalization as one of the company's important development strategies, has built a global sales and service network system, overseas business accounted for more than 50 percent, with the continuous growth of overseas market demand, and at the same time affected by international trade protection policies, the company's overseas production capacity layout needs are increasingly urgent. The investment and construction of this overseas production capacity project is in line with the needs of the company's global development strategy, which can improve the overseas production capacity of high-efficiency products, better serve the international market, and enhance the company's core competitiveness. JA Solar said in the announcement.

It should be noted that the overseas expansion investment of nearly 4 billion yuan is not borne by JA Solar alone.

According to the announcement, JA Solar plans to introduce external shareholders to participate in the construction of the project in the form of a joint venture. On issues such as joint ventures, on December 20, a reporter from Times Weekly contacted JA Solar, and the relevant person in charge said that "the details are inconvenient to disclose".

3.957 billion yuan to expand overseas production capacity

As a first-tier manufacturer in the photovoltaic industry, it is difficult for JA Solar to expand production overseas without attracting the attention of investors.

According to the third quarter report of 2024, JA Solar's monetary funds were 24.197 billion yuan, but due to the decline in product prices, the net cash flow from operating activities from January to September 2024 was 233 million yuan.

Even so, JA Solar's third quarterly report is already one of the most outstanding performance companies among the first-tier PV manufacturers.

According to the financial report data, in the third quarter of 2024, JA Solar achieved 16.991 billion yuan, a year-on-year decrease of 11.22%; the net profit attributable to the parent company was 390 million yuan, a year-on-year decrease of 80.02%; The net profit after deducting non-attributable to the parent company was 225 million yuan, a year-on-year decrease of 87.97%.

JA Solar insiders once told the Times reporter that JA Solar's cost has dropped significantly, the impact of TOPCon production capacity ramp-up has been eliminated, and the gross profit margin of sales in the third quarter increased by 5.6 percentage points quarter-on-quarter to 8.67%. JA Solar also made it clear in its third-quarter earnings statement that it was looking at capacity investment opportunities in countries other than the United States and the four Southeast Asian countries.

The relevant person in charge of JA Solar told the Times reporter, "Oman's production capacity layout is to meet the needs of overseas market demand, better serve the international market, and meet the needs of the company's global development strategy." ”

According to the Times reporter, the proportion of JA Solar's overseas shipments remained at a high level in the third quarter, of which overseas module shipments accounted for about 52.40%. According to the estimation of a brokerage firm, JA Solar shipped about 19GW in the third quarter.

Combined with the latest overseas expansion announcement, it is clear that JA Solar has also followed the trend and embarked on the road called the PV Overseas 2.0 model by the industry - "international business localization".

In addition to the newly announced Omani production capacity, JA Solar may have the opportunity to build two more factories in the Middle East.

On 21 November, Egypt signed a memorandum of understanding with UAE's Global South Utilities and JA Solar to build two 2GW solar factories, one for solar cells and the other for modules. Under the agreement, the investment in the cell plant is expected to be US$138 million, while the module plant will be US$75 million, mainly to serve the local market.

Photovoltaic going overseas focuses on the Middle East

The Times reporter noticed that most of the photovoltaic companies that have expanded overseas production this year have focused on the Middle East.

On July 17, JinkoSolar (688223. SH) announced plans to expand its 10GW high-efficiency cell and module project in Saudi Arabia. On the same day, TCL Zhonghuan (002129.SZ) announced the construction of a 20GW photovoltaic crystal wafer project in Saudi Arabia.

On October 31, Junda Co., Ltd. officially signed the "Land Lease Agreement" with the local government in Oman, and continued to communicate with the local government about the details of water and electricity. It is expected that the company's Oman project will start construction by the end of 2024 and be completed and put into operation in 2025. The project has an annual production capacity of 5GW of high-efficiency N-type cells.

It is worth mentioning that PV manufacturers that are going overseas to expand production choose to introduce external shareholders to reduce investment risks.

JinkoSolar Middle East, a wholly-owned subsidiary of JinkoSolar, signed a Shareholders' Agreement with RELC ("RELC"), a wholly-owned subsidiary of PIF (Saudi Arabia's Public Investment Fund), and Vision Industries Company ("VI") to establish a joint venture to build a 10GW high-efficiency cell and module project in Saudi Arabia, with a total investment of approximately SAR 3.693 billion (approximately USD 985 million).

TCL Zhonghuan, RELC and VI agreed to establish a joint venture in Saudi Arabia to build a photovoltaic crystal wafer factory with an annual output of 20GW, with a total investment of about 2.08 billion US dollars.

According to the announcement, Saudi Arabia's Public Investment Fund (PIF) was established in 1971 and is the sovereign wealth fund of the Kingdom of Saudi Arabia, and RELC is a wholly-owned subsidiary of PIF, a leading enterprise in the manufacture of local renewable green energy technologies. VI was co-founded in 2021 by two major conglomerates, Abunayyan and Al Muhaidib in Saudi Arabia, aiming to build the manufacturing capacity of the whole new energy industry chain in Saudi Arabia to meet the huge demand for new energy in the Middle East and even the world.

At present, the Middle East has become a popular destination for photovoltaic companies to go overseas.

According to the Times reporter, the business environment in the Middle East is relatively open. For example, Saudi Arabia is one of the largest economies in the Middle East, and the local government has taken a series of measures to improve the investment environment for enterprises and increase investment in infrastructure construction; Dubai has set up a number of free zones that allow 100% foreign ownership and are exempt from corporate and personal income tax.

At the same time, the Middle East also has great potential for development.

Guosheng Securities research report pointed out that the solar energy resources in the Middle East are as unique as oil, for example, the average annual light intensity in Saudi Arabia is 2200-2400 kwh/m2, while most of China is only 1400-1600 kwh/m2. The capital, Riyadh, receives 3,225 hours of sunshine per year, ranking seventh among major cities in the world.

According

to the above-mentioned research report data, from 2022 to 2023, China's PV module exports to the Middle East and North Africa will continue to exceed 10GW, especially Saudi Arabia and the United Arab Emirates, which are growing rapidly. In the first half of 2024, the Middle East and Africa will pull about 15.5GW of cargo, an increase of 163% from 5.9GW last year.

Preferential policies and a market with huge potential will naturally attract more enterprises to settle in the Middle East.

"We believe that domestic demand has bottomed out and overseas emerging markets have increased significantly. PV companies need to focus on the layout of production capacity in the Middle East, and the high-premium market is expected to remain the basic profit of PV companies at the bottom of the cycle. The above-mentioned brokerage institutions said.