Tongwei Solar expecting US$3 billion in profit for Q1 – Q3 2022 as high polysilicon prices, strong demand drive growth

Leading polysilicon manufacturer Tongwei Solar is expecting its revenue for the first nine months of 2022 to soar as a result of strong demand for silicon products and its expanded production capacity.
Tongwei released an announcement on 9 October that said the company’s net profit is expected to reach RMB21.4 billion – RMB21.8 billion (US$2.98 billion – US$3.04 billion) for the first three quarters of 2022, a year-on-year (YoY) increase of 15.455 billion – 15.855 billion (US$2.15 billion – US$2.21 billion), representing a 260% – 267% rise.
Tongwei’s net profit in Q1 was RMB5.194 billion (US$720 million), rising to RMB7 billion (US$980 million) in Q2. Based on the mid-range projection for Q3, its net profit will is expected to reach roughly RMB9.4 billion (US$1.31 billion), maintaining a double-digit growth of 34% quarter-on-quarter, which means another record high for a single quarter.
Tongwei said this growth was driven by strong market demand for high-purity silicon products, resulting in higher YoY price. At the same time, the company’s new production capacity grew rapidly to achieve a substantial increase in profit. Production and sales of PV cells are growing with an improved YoY profitability.
Public information shows that Tongwei, the leader in both silicon materials and cell production achieved an operating revenue of RMB60 billion in the first half of this year, up by 127% YoY, and a net profit of RMB12.2 billion, up by 312% YoY, surpassing LONGi Green Energy’s revenue and profit for the first time to reach the top of PV sector rankings.
Tongwei produced 107,300 tonnes of polysilicon in H1, a YoY increase of 112% and a capacity utilisation rate of 119%. By the end of H1, the company had a polysilicon capacity of 230,000 tonnes. Its Leshan Phase III 120,000-tonne project was granted approval for energy consumption and is expected to be put into production in H2 2023.
In addition, the company also plans to invest in the construction of 200,000 tonnes of polysilicon capacity in the Chinese cities of Baoshan and Baotou, which are expected to be completed and put into operation in 2024. According to the company, its nominal capacity of silicon materials will reach 750,000 tonnes in 2024, further consolidating its leading position as a polysilicon producer.
Since the beginning of 2020, the company’s silicon price rose from RMB73/kg to RMB303/kg in Q3 2022, a cumulative increase of 315%. It recently hit a 10-year high and has also been pushed by as a result of power rationing in China following a severe heatwave.
It is worth noting, however, that the price increase of silicon products seems to have run its course. Analysts said the prolonged price surge is expected to end in the first half of next year when more capacity is released. Multiple calculations show that 2023 polysilicon price will enter a downward channel.
In terms of its cell business, Tongwei’s sales volume in H1 was 21.79GW, with a YoY growth of 55%.
At present, Tongwei’s cell production capacity is about 54GW. With the completion of its 8GW Jintang Phase II and 8.5GW Meishan Phase III projects, Tongwei’s total cell production capacity is expected to exceed 70GW by the end of 2022.
In addition, Tongwei has increased its cell price twice last month. PV InfoLink previously said that there was a severe shortage of PV cells, with module manufacturers eager to stockpile products as a result. Tongwei is also planning to establish a 25GW high-efficiency PV module manufacturing base in the Yancheng Economic Development Zone.
Huang Lin of Huachuang Securities predicted in a research report on 5 September that Tongwei’s 2022 net profit will reach RMB24.266 billion, a YoY increase of 196%. While net profit in 2023 is expected to reach RMB20.737 billion, down by 14.5% YoY as the forecasted lower price of polysilicon takes effect.
On the stock market, Tongwei’s share price has fallen by 31% since hitting a record high on 8 July. However, examined from a longer period of time, the price has risen by 606% since the end of March 2019.