Company Reports

Tongwei's second-quarter revenue fell 10% year on year. The company continued to post deep losses, with net margin at negative 12%.

Tongwei is the world's largest supplier of polysilicon. Following a supply shortage in 2021 and 2022, polysilicon prices soared, leading to significant investments and subsequent oversupply. As a result, prices fell sharply, resulting in net losses for Tongwei's polysilicon business in 2024 and 2025. Due to substantial overcapacity, we think polysilicon prices will remain subdued for a prolonged period until the small players are driven out of the market.

Data from China's National Energy Administration suggests that domestic solar installations fell 13% year on year in June and 66% in the first half of 2026.

The Chinese solar producers under our coverage—Jinko Solar, LONGi, JA Solar, Trina Solar, TCL Zhonghuan, Tongwei, and Daqo—remained loss-making through 2025 and into the first quarter of 2026.

Tongwei is the world's largest supplier of polysilicon. Following a supply shortage in 2021 and 2022, polysilicon prices soared, leading to significant investments and subsequent oversupply. As a result, prices fell sharply, resulting in net losses for Tongwei's polysilicon business in 2024 and 2025. Due to substantial overcapacity, we think polysilicon prices will remain subdued for a prolonged period until the small players are driven out of the market.

China's solar photovoltaic sector rallied on Feb. 4 following media reports that delegations associated with Elon Musk recently visited several Chinese solar PV companies, spanning equipment, silicon wafers, cells, and modules.

Tongwei guided for preliminary 2025 net losses attributable to shareholders in the range of CNY 9 billion-CNY 10 billion.

Tongwei's third-quarter revenue fell by 2% year on year. While still in the red, net margin improved to negative 1.3% compared with negative 9.6% in the previous quarter and negative 3.4% in the same quarter last year.

Tongwei's first-half revenue fell by 8% year on year, and the company continued to report operating losses.

Chinese solar producers Jinko Solar, JA Solar, Trina Solar, LONGi, Tongwei, and TCL Zhonghuan all reported losses in the fourth quarter of 2024 and the first quarter of 2025. However, CSI Solar remained profitable in both quarters.

Tongwei is the world's largest supplier of polysilicon. Following a supply shortage in 2021 and 2022, polysilicon prices soared, leading to significant investments and subsequent oversupply. As a result, prices fell sharply, resulting in a net loss for Tongwei's polysilicon business in 2024. Due to substantial overcapacity, we think polysilicon prices will remain subdued for a prolonged period until the small players are driven out of the market.

Tongwei's preliminary loss guidance of CNY 7.0 billion-CNY 7.5 billion is higher than our forecast loss of CNY 5.9 billion for 2024. This range indicates a loss of CNY 3.0 billion-CNY 3.5 billion for the fourth quarter, nearly four times the third quarter's loss despite the stabilization of polysilicon prices since June. We believe that the widened loss is likely due to lower utilization rates in the fourth quarter, resulting in negative operating leverage.

We maintain our fair value estimate of CNY 21.70 for Tongwei and believe the shares are currently overvalued. Tongwei's operating losses for the third quarter narrowed sequentially, likely because of improvement in its polysilicon segment. Factoring this in, we have slightly revised our net loss estimate for 2024 to CNY 5.9 billion from CNY 6.6 billion. We leave our estimates unchanged beyond 2024 and continue to anticipate a turnaround in 2026, driven by industry consolidation and more disciplined competition.

Tongwei positions itself as the global leader in polysilicon production, accounting for about 27% of domestic supply in 2023. Following a supply shortage in 2021 and 2022, polysilicon prices soared, leading to significant investments and subsequent oversupply. Consequently, prices fell sharply, resulting in a net loss for Tongwei's polysilicon business in the first half of 2024. Despite this overcapacity, Tongwei continues with its expansion efforts to protect its market share. As a result, we think polysilicon prices will remain subdued for a prolonged period until the small players are driven out of the market.

Tongwei’s first-half CNY 3.1 billion net loss is in line with its preliminary guidance. However, we anticipate a prolonged overcapacity in the solar industry and hence reduce our assumptions for its shipment, average selling price, and gross margin for 2024-28. This leads to a wider 2024 net loss forecast of CNY 6.6 billion from our prior CNY 2.1 billion net loss forecast. We project Tongwei to turn around in 2026 but reduce our net income estimates by 21%-60% for 2026-28. As a result, we cut our fair value estimate by 15% to CNY 21.70 per share. We consider the shares fairly valued.

We see little impact on LONGi, Tongwei, and Zhonghuan from the US action to double the tariff rate on China-made solar cells (including those assembled into modules) to 50% from 25% in 2024 under Section 301. Currently, China-made solar cells and modules are already subject to US antidumping and countervailing duties, the Section 201 tariff, and the Section 301 tariff, which could add up to over 100% tariff rate. As a result, China’s direct export of solar cells and modules to the US is minimal, accounting for less than 0.1% of its total solar cells and modules export in 2023.

We cut our fair value estimate for Tongwei to CNY 25.60 from CNY 35.90 after incorporating lower polysilicon and solar cell prices. While the losses in fourth-quarter 2023 and first-quarter 2024 are disappointing, the market reaction was contained as the prices appear to be bottoming. Tongwei currently trades at a 14% discount to our fair value estimate, but we prefer TCL Zhonghuan for greater upside potential.

Tongwei positions itself as the global leader in polysilicon production, making about 27% of domestic supplies in 2023. Tongwei benefitted from the shortage in supplies in 2021 and 2022, but this has now led to excess capacity in the industry. Despite the overcapacity, Tongwei is pressing on with its capacity expansion plan to defend its market share. We think Tongwei will remain profitable given its cost advantage, but returns on investment and profit margins will be dampened.

We maintain our earnings estimates following Tongwei’s in-line third-quarter results. Revenue and net income declined by 11% and 68% year on year in the quarter, respectively, due to a large year-on-year decline in the polysilicon price. With significant overcapacity, we expect polysilicon prices to remain subdued for a prolonged period. This drives our forecast for net income to decline by 28% to CNY 18.6 billion in 2023 and a further 31% to CNY 12.8 billion in 2024. The shares closed 23% lower than our CNY 35.90 fair value estimate on Oct. 30, but we think sluggish polysilicon prices should continue to weigh on share prices.

Tongwei’s interim revenue of CNY 74.1 billion and net income of CNY 13.3 billion translate to CNY 40.8 billion revenue and CNY 4.7 billion net income in the second quarter. The 34% year-on-year and 46% sequential decline in net income in the quarter were well expected given the polysilicon price freefall. The plan to invest CNY 20 billion to add 32 GW integrated capacity covering ingot, wafer, and cell production, however, surprised us. We acknowledge that internalizing wafer supply should help reduce cost, but we are slightly concerned about dilution risk. To recap, Tongwei just announced a private share placement of CNY 16 billion in April to fund its polysilicon projects. As of June 2023, Tongwei had about CNY 40 billion cash and equivalents and CNY 34 billion long-term debt, and it plans to fund the integrated capacity with cash in hand and additional borrowings. While we do not see debt risk in the near term, we reason that an overly stretched balance sheet might necessitate a potentially dilutive fund raising in the future. Regardless, the planned move will make overcapacity worse in the solar wafer market. This is not good news for solar wafer suppliers such as LONGi and TCL Zhonghuan.