Rational pricing in value chain to boost installations
- Beneficiary of sustained demand growth for solar power, both in China and globally
- Top wafer and module supplier in the world with industryleading margins
- Pick-up in solar installations in 2022-23 could lift sentiment on the counter
- Initiate with BUY and TP of Rmb95
Long-term beneficiary of demand growth for solar globally. We estimate global new solar installations of c.171GW to 282GW per year in 2021-25, translating to CAGR of 13%. LONGi has set long-term targets to capture global market share of >30% in modules and >40% in silicon wafers, up from c.13% and
c.26% in 2021.
Top wafer and module supplier in the world. LONGi is the world’s largest manufacturer of solar components with 85GW and 50GW of silicon wafer and solar module production capacity respectively. The company also enjoys industry leading margins, thanks to technological innovation, careful capital management, and supply chain efficiencies.
Pick-up in solar installations in 2022-23 could act as a positive catalyst. Elevated polysilicon prices in 2021 have led to a delay in solar installations. With new polysilicon supply coming to market, downstream operators should resume their installations in 2022-23. Combined with a more favourable comparison base in 2021, faster-than-expected solar installations could act as a positive catalyst to LONGi’s share
price.
Valuation:
We have a BUY recommendation on LONGi. Based on a target PEG of 1.2x, we derive our target price (TP) of Rmb95. Our TP is near 1 SD above the 1-year historical average.
Key Risks to Our View:
Slowdown in solar installations, supply chain bottlenecks, input cost fluctuations, ASP fluctuations for wafers and modules, intensifying competition, sanctions on products by overseas governments.