Yes, but no new names

Some companies in the value chain are as follows :

• Poly Silicon Manufacturing- GCL Poly, Daqo, wacker , OCI

• Ingot Manufacturing-Longi Energy, Zhonghuan

• Cell Manufacturing-Shanghai Aiko, Drinda

• Module Manufacturing- JA Solar, First Solar, hanwa,

• Inverter and which technology-Sungrow , soalredge , Enphase

• Transformers ( Inverter Duty Transformers / Power Transformers )- majorly small and big companies supply these

• EPC Players-Many

• Service & Maintenance- Many

• Any other : Inverter has been the most profitable segment in China and US. Other segments include Junction box companies and offering comprehensive solutions including cables etc

Movements of Net Profit Margins across main PV industry chains- Profits have markedly diminished across diverse segments, and certain sectors are encountering challenges stemming from prevalent industry-wide losses.

Question

Do we have an idea on the Cost Structure and Profit Margins on the various processes on Solar Manufacturing and installation and whether there are any listed peer companies for across the world to compare the valuation with for each of the processes

For e.g some of the lifecycle stages

Poly Silicon Manufacturing
Ingot Manufacturing
Cell Manufacturing
Module Manufacturing
Inverter and which technology
Transformers ( Inverter Duty Transformers / Power Transformers )
EPC Players
Service & Maintenance
Any other?

A falling cost curve permits faster adoption and hence imparts Scale. Whether they manufacture internally or buy from others, falling prices enable them to take a larger market share of the energy pie. More so when the cost of alternative technologies like thermal etc is increasing.

Solar manufacturing is just like any industrial manufacturing activity driven by

• falling cost curves
• demand supply imbalances
• Tariff and non-tarriff barriers

What distinguishes the industry is the falling Levelised cost of energy promoting the transition leading to an accelerated adoption curve and hence scalability to players who can execute at scale. It gets valued like any other manufacturing company with caveat of faster equipment write offs and necessary capex needed to constantly upgrade technology

Given the importance of energy in economic activity, there is a high degree of trade barriers and policies that dictate outcomes and profitability. This policy risk becomes key monitorable from investors’ perspective

Regards to Indian solar players, key risk are

• Access to RM and Equipment
• term of trade and advances from ROCE perspective is key risk
• Competitive intensity, and Execution are key like any other business

Deep dive requires constant monitoring and reassessment of key data points and hypotheses. As they say, business is not a still picture but an evolving movie.