Tongwei Earnings: Strong Shipment Growth but Sluggish Polysilicon Price Sends Profits Lower

We maintain our earnings estimates following Tongwei’s in-line third-quarter results. Revenue and net income declined by 11% and 68% year on year in the quarter, respectively, due to a large year-on-year decline in the polysilicon price. With significant overcapacity, we expect polysilicon prices to remain subdued for a prolonged period. This drives our forecast for net income to decline by 28% to CNY 18.6 billion in 2023 and a further 31% to CNY 12.8 billion in 2024. The shares closed 23% lower than our CNY 35.90 fair value estimate on Oct. 30, but we think sluggish polysilicon prices should continue to weigh on share prices.