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