The second shareholder of Longji shares dropped the holding plan five years later, and the sharp decrease of operating cash flow attracted attention

As one of the most dazzling star stocks this year, the stock price of photovoltaic leader Longji shares (601012. SH) has nearly tripled in recent half a year. However, after the stock price reached a record high on October 13, the company announced in the evening that Li Chunan, the company’s second largest shareholder, intends to reduce its shares by nearly 1%, which can not help but cause people to worry about the company’s future. This is also Li Chunan’s reduction of the company’s shares after May 2015. < / P > < p > on the other hand, in the semi annual report of Longji shares, although the net profit and operating income increased significantly, the net cash flow from operating activities (hereinafter referred to as “operating cash flow”) declined sharply. What kind of impact will this have on the company’s future operation? Whether Longji’s capacity expansion speed is too fast, the gross profit rate has risen under the industry price reduction tide, which has also triggered a heated discussion and controversy among investors. In the evening of October 13, Longji shares announced that Li Chunan plans to reduce the company’s shares by no more than 37.72 million shares from November 4, 2020 to May 3, 2021, with the planned reduction ratio of no more than 1%. Based on the latest stock price of Longji shares, the amount of the reduction plan is about 3 billion yuan. Li Chunan is the person acting in concert with Li Zhenguo and Li Xiyan, the actual controllers of Longji shares. Li Chunan holds 398 million shares of Longji shares, accounting for 10.55% of the total share capital of the company. According to the announcement, it has been five years since Li Chunan last reduced his holdings, which was just before the peak of the last round of A-share bull market. From May 14 to May 26, 2015, Li Chunan reduced 72.8 million Longji shares, accounting for 4.43%. The selling price was 16.74 yuan to 21.3 yuan. The stock price of Longji shares has been strong since this year. Since it reached a new low (21.55 yuan / share) on March 24, it has risen nearly three times. On October 13, the market value has exceeded 300 billion yuan. As the world’s largest single crystal photovoltaic product manufacturer integrating R & D, production, sales and service, Longji is mainly engaged in the R & D, production and sales of monocrystalline silicon rods, wafers, batteries and modules, the development of photovoltaic power stations and the provision of system solutions. < / P > < p > in 2020, when the photovoltaic industry is in recession, the policy subsidies are not as strong as before, and the product prices are falling one after another. However, Longji Co., Ltd. continues to expand its production capacity by a large margin. Because of the product structure, the gross profit rate has been increased, but the operating cash flow has dropped sharply. Can this “counter trend” expansion continue? < p > < p > in the first half of 2020, the operating income and profit of Longji Stock Co., Ltd. are soaring. However, the mismatching of operating cash flow and the substantial increase of inventory make people have some doubts. The novel coronavirus epidemic is spreading around the world in the past half year,

said. The company is flexible in coping with, timely adjusting its production and business plan, and maintaining its business performance rapidly. It ensures that the target of capacity building and product shipment in 2020 will be achieved. During the reporting period, the operating revenue was 20.141 billion yuan, an increase of 42.73%; the net profit attributable to the parent company was 4.116 billion yuan, with a year-on-year increase of 104.83%; the basic earnings per share was 10.09 yuan, with a year-on-year increase of 91.23%; the weighted average return on net assets after non deduction was 13.17%, with a year-on-year increase of 2.53 percentage points. Chen zikun, an analyst with GF Securities, said that Longji’s interim report performance significantly exceeded expectations, mainly due to the year-on-year growth in sales of components and silicon wafers, and the rapid increase in the proportion of sales of large-size silicon wafers and high-power components. However, in the first half of the year, the operating cash flow decreased by 86.04% to 339 million yuan, which was explained by Longji: “mainly due to the impact of the epidemic, the proportion of overseas sales has decreased, resulting in the extension of sales payment collection period. At the same time, the expansion of production scale affects the increase of cash flow of inventory occupation In the consolidated cash flow statement, “cash received from selling goods and providing services” increased from RMB 9.65 billion in the first half of 2019 to RMB 11.967 billion, which was slightly less than the operating income. It can be seen that “the extension of sales payment collection period” is not the key reason for the sharp drop of operating cash flow. What is more important is the latter. Both the increase of inventory and the expenditure of employees show that Longji shares is expanding production against the trend under the epidemic situation. < / P > < p > the consolidated cash flow statement shows that the “cash paid for purchasing goods and receiving services” increased significantly from 6.067 billion yuan in the first half of 2019 to 9.461 billion yuan, while the “cash paid to and for employees” increased from 1.281 billion yuan to 1.976 billion yuan. In the income statement, the management expenses increased by 46.76% to 586 million yuan, and the R & D expenses increased by 59.2% to 186 million yuan. Longji shares explained that “the increase of the number of employees leads to the increase of salary” and “the increase of the number of R & D employees leads to the increase of salary”. On the other hand, the inventory at the end of June 2020 increased by 54.73% to 8.56 billion yuan compared with that at the end of 2019. The reason is that “the expansion of production scale and the increase of overseas component sales affect the increase of raw material stock and in transit inventory”. However, in the first half of 2020, the gross profit margin reached 29.23%, an increase of more than three percentage points over the same period of the previous year. How did Longji achieve this goal? After the expansion of production, the industry concentration has further improved, which is perhaps the most concerned aspect of Longji. The novel coronavirus epidemic in the first half of 2020 has been blocked by the global outbreak of the new coronavirus epidemic. The phenomenon of short term terminal demand has been blocked, the supply chain of industrial chain is insufficient, the transportation time of logistics has been prolonged, and the overall capacity utilization rate of the industry has been declining,

Longji shares said in the “discussion and analysis of business”. Various links of the photovoltaic industry chain have been reduced to varying degrees, which has accelerated the reshuffle of the industry, and the relatively excessive backward capacity has been cleared up, and the concentration of various links in the industry has been further improved. On the evening of September 22, Longji announced that it planned to invest 4 billion yuan (excluding working capital) to build Qujing (phase II) 20GW single crystal silicon rod and wafer project. Just a day ago, the company announced that it planned to invest 2.5 billion yuan (including working capital) to build Lijiang (phase III) annual output of 10GW single crystal silicon rod project. The announcement said that after the project is put into operation, the company will further improve the production capacity of high-efficiency single crystal silicon rods and wafers, seize the opportunity of photovoltaic market development, and continuously improve the market scale and competitiveness. In this regard, a fund manager who discovered Longji shares earlier told the first financial reporter, “I think it has been overestimated. Of course, most emerging industry stocks are overvalued now.” There are three possibilities for Longji’s expansion. The first is to increase production capacity; the second is to increase the price due to changes in product structure; the third is to increase outsourcing service construction projects. The third point is mainly foreign orders. Foreign project orders are different from domestic industries, and large silicon production lines will reduce costs. < / P > < p > although the semi annual report does not explain the detailed reasons for the adverse growth of gross profit rate, the 2019 annual report has more detailed disclosure, and the change of product structure is the key. According to the annual report of Longji shares in 2019, the annual gross profit rate of Longji shares increased significantly from 22.25% in 2018 to 28.9%. Among them, the operating revenue of “silicon chip” reached 12.913 billion yuan, with a year-on-year increase of 111.13%, accounting for nearly 40% of the operating income, while the gross profit rate of silicon chip was 32.18%, which played an important role in boosting the gross profit rate data in 2019. Tao yuou, an analyst at Societe Generale Securities, said that in the first half of 2020, the silicon chip production capacity of Longji was 55gw, with a year-on-year increase of 31%, and the component capacity of 25gw, with a year-on-year increase of 79%, and the construction of production capacity in all links was accelerated. Silicon wafers have formed an oligopoly pattern. In 2020, components will lead the increase of industry concentration. In 2021, the market share of components will be further increased. Silicon wafers and components will rank first in the industry. < / P > < p > Disclaimer: the purpose of this article reprinted by china.com finance and economics is to convey more information and does not represent the views and positions of the website. The content of this paper is for reference only and does not constitute investment advice. Investors operate accordingly and bear their own risks. < p > < p > Chinanet is a national key news website under the leadership of the Information Office of the State Council and managed by China foreign language publishing and Distribution Bureau. Through 11 versions in 10 languages, the website releases information 24 hours a day, which is an important window for China to carry out international communication and information exchange.