On January 17, 2024, the stock price of Sai Wu Technology (603212.SH) plummeted by 4.32% to 10.64 yuan per share during trading, closing at 10.69 yuan, marking a significant decline of 3.87%. This drop brought the company perilously close to its lowest price since going public, which was recorded at 9.01 yuan on January 13, 2025. Investors are gripped with concern as the firm’s financial woes become increasingly evident.

The catalyst for this downturn was the annual performance forecast released by Sai Wu Technology on the evening of January 16. The company anticipates a net loss between 200 million to 250 million yuan for 2024. To provide a clearer picture, this stark contrast to the previous year's profit of approximately 104 million yuan reveals a troubling trend for the business, which has shifted from profitability to a forecasted loss.

A retrospective glance at the first three quarters of 2024 unveils a landscape marred by intensified competition in the photovoltaic (PV) industry, specifically in segments such as films and backsheets

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This heightened competition has severely diminished the company's profit margins, culminating in a net loss of 96 million yuan for the yearNotably, in the third quarter alone, the firm faced a staggering loss of 80 million yuan.

Detailed calculations indicate that during the fourth quarter of 2024, Sai Wu Technology is projected to incur a net loss ranging from 104 million to 154 million yuan, exacerbating the financial strain observed in the third quarter.

Established in 2008 and successfully launching its stock on April 30, 2020, Sai Wu Technology relies heavily on photovoltaic materials, which constitute over 80% of its revenueThe company primarily produces two core products: photovoltaic films and backsheetsUntil now, the firm has enjoyed a decade of consistent profitability prior to the anticipated losses for 2024.

In addressing the expected 2024 losses, Sai Wu Technology cites three primary factors

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Firstly, changes in supply and demand dynamics within the PV industry, alongside intensified price pressures transmitted throughout the supply chain, have significantly influenced demand for backsheetsThis has resulted in a decline in sales at reduced unit prices, with a stagnation in photovoltaic film sales despite a modest drop in selling prices.

According to the company’s earlier operational data, the average selling price of photovoltaic films in the third quarter of 2024 was 6.23 yuan per square meter, a substantial decrease from 9.04 yuan per square meter in the previous year—a significant 31.08% declineSimilarly, the average selling price for backsheets dipped to 8.05 yuan per square meter, down 14.99% compared to 9.47 yuan in the same quarter last year.

Industry analysts underscore that the robust demand for PV installations in preceding years had driven an upsurge in the demand for films

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While the market's demand remains on an upward trajectory in 2024, an alarming supply-demand imbalance has ignited fierce price wars and chaotic competition throughout the entire industry chainThis situation has inevitably created a chilling effect, adversely impacting profitability in ancillary materialsAdditionally, the market's pivot toward double-glass modules has contributed to a slowdown in the growth rate of backsheets, further complicating the company's sales prospects.

Another factor contributing to the anticipated losses stems from fluctuations in raw material prices and preparations for inventory depreciationSai Wu Technology has acknowledged the volatility in the pricing of raw material particles used for films and the downward adjustments in market pricing for photovoltaic productsAs a precautionary measure, the company has prudently increased its inventory write-down provisions in alignment with corporate accounting standards.

Furthermore, the anticipated credit risk associated with some customers poses an additional hurdle

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The company noted that increasing credit risk among certain clients has led it to establish corresponding provisions for bad debts on receivables based on a conservative approach dictated by accounting standards, further denting overall performance.

Signs of potential bad debt had already emerged in Sai Wu Technology's interim financial report for 2024. The data indicated that there are eight entities that accumulated provisions for bad debts exceeding 50 million yuan.

Journalistic sources also highlighted that Sai Wu Technology previously launched UV light conversion films targeted at heterojunction technology (a form of N-type battery technology), thereby enabling cost reductions for heterojunction manufacturingThe company's clientele includes major players in the heterojunction marketHowever, on August 12, 2024, ST Aikon (formerly known as Aikon Technology), a representative firm within this niche, was delisted due to multiple violations, including a continuous 20-day stock closing price below 1 yuan and consistent net losses for three consecutive years.

Despite the challenges, Sai Wu Technology conveyed in its earnings forecast that it has formulated actionable steps moving forward

The company aims to refine its product matrix while hastening its international expansion efforts, alongside committing to diversification and differentiation in its product offerings.

"By improving management precision and efficiency, we strive to lower costs while enhancing operational efficiency," stated Sai Wu Technology in its report.

As evidenced by its mid-2024 earnings report, Sai Wu Technology has made significant strides in collaborating with prominent overseas component manufacturers, such as Adani, TATA, Waaree, Elin, and Philadelphia, effectively establishing itself as a key supplier of backsheets.

In October 2024, the company indicated through its investor interaction platform that its first-phase production capacity for films at its Vietnamese manufacturing base, amounting to 5GW, was operational as of the second quarter of 2024, while the second phase, which will include 5GW of backsheets, is expected to commence in the third quarter of 2024.