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Tongwei Co Ltd Class A 600438

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CNY 21.88 −1.01 (4.41%)
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Company Report

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Tongwei: Initiating Coverage With No Moat and CNY 35.90 Fair Value Estimate

Cheng Wang

Tongwei positions itself as the global leader in polysilicon production, making about 27% of global supplies in 2022. 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 plans to more than triple its polysilicon capacity by 2024 from the 2022 level 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.

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Price vs Fair Value

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600438 is trading at a 36% discount.
Price
CNY 22.89
Fair Value
CNY 26.40
Uncertainty
High
1-Star Price
CNY 42.92
5-Star Price
CNY 55.11
Economic Moat
Ldpt
Capital Allocation
Ltbgcmr

Bulls Say, Bears Say

Bulls

The plunge in polysilicon prices will force high-cost players to exit the market, and Tongwei will benefit as a low-cost player.

Bears

Polysilicon prices will remain subdued for years due to massive overcapacity.

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Trading Information

Previous Close Price
CNY 22.89
Day Range
CNY 21.55–22.89
52-Week Range
CNY 21.55–40.99
Bid/Ask
CNY 21.88 / CNY 21.89
Market Cap
CNY 98.50 Bil
Volume/Avg
54.2 Mil / 34.4 Mil

Key Statistics

Price/Earnings (Normalized)
4.76
Price/Sales
0.69
Dividend Yield (Trailing)
13.06%
Dividend Yield (Forward)
13.06%
Total Yield
13.06%

Company Profile

Tongwei is the largest polysilicon producer in the world. It produced 266.9 thousand metric tons of polysilicon in 2022, accounting for 32% of total production in China. Polysilicon contributed 43% of revenue and 85% of gross profit in 2022. Tongwei is also the largest solar cell producer in the world.
Sector
Consumer Defensive
Industry
Farm Products
Stock Style Box
Large Value
Total Number of Employees
41,214
Website
http://www.tongwei.com.cn

Competitors

Valuation

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Metric
600438
002129
601012
Price/Earnings (Normalized)
 4.765.938.81
Price/Book Value
 1.530.921.99
Price/Sales
 0.690.611.05
Price/Cash Flow
 2.919.1110.79
Price/Earnings
600438
002129
601012

Financial Strength

Metric
600438
002129
601012
Quick Ratio
 1.371.100.96
Current Ratio
 1.641.881.38
Interest Coverage
 33.437.1536.16
Quick Ratio
600438
002129
601012

Profitability

Metric
600438
002129
601012
Return on Assets (Normalized)
 13.22%5.87%10.17%
Return on Equity (Normalized)
 32.35%17.08%23.39%
Return on Invested Capital (Normalized)
 19.09%8.64%19.81%
Return on Assets
600438
002129
601012
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