By Sam Boughedda
A GLJ research analyst said in a note to clients Friday that Tongwei started a price war last night in the solar module space.
The analyst explained that Chinese solar company Tongwei won the bidding war for DR power’s fifth round of solar module procurement, "marking Tongwei’s official entry into the solar module 'competition battle'/price war." As a result, Chinese-listed solar stocks sold off hard on the news.
"What sparked our interest was Tongwei’s bid coming in $0.05/watt lower than Tier 2 makers, and A WHOPPING $0.08/watt (or a -28% discount) lower than Longi Green Energy’s offer," wrote the analyst. "Stated more plainly, we are in the beginning innings of a nasty solar module price war, as we've been warning about for ~1yr; yet, it seems investors are more concerned with policy decisions than the current state of supply/demand in the solar module and poly-Si spaces, to their own potential peril."
The analyst said they believe the lessons of 2012, which included sharp solar price deflation for both poly-Si and cells/modules, as well as liquidity problems, will likely define the fourth quarter and 2023 for the solar “parts makers.” However, they feel "investors and the sell-side alike have seemingly ignored fundamentals."
GLJ sees solar companies, despite what many see as the best environment for solar companies in years, as losing more money and burning more cash.
"As such, we reiterate our SELL ratings on both Canadian Solar (NASDAQ:CSIQ) (SELL) and JinkoSolar (NYSE:JKS) (SELL), as well as Daqo (NYSE:DQ) (SELL); while admittedly, we have gotten burned recently on stock price moves, we are more confident than ever in our fundamental thesis of structural oversupply defining 2022E and worsening in 2023E (assuming fundamentals begin to matter more than “stories” again, All of these stocks will provide great shorts to varying degrees)," added the analyst.