LONGi Maintains Underweight Rating, Target Price 11.70 CNY
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LONGi Maintains Underweight Rating, Target Price 11.70 CNY
Solar industry suffers from severe overcapacity; LONGi actively develops BC technology and storage business, but valuation is high and losses continue
- Maintain Underweight rating, target price 11.70 CNY
- Solar industry faces severe overcapacity
- BC technology gross margin advantage approximately 10%
- Storage business 2026 shipment target 6GWh
- Continuous losses in FY25 and 1Q26
Report interpretation
Overview
This J.P. Morgan research report is based on LONGi Green Energy's FY25/1Q26 earnings presentation, analyzing the company's strategic adjustments under the background of solar industry overcapacity. The report maintains an Underweight rating for LONGi with a target price of 11.70 CNY, mainly based on concerns regarding high valuation and continuous losses. LONGi is actively promoting the development of BC technology and energy storage businesses, but overall industry challenges remain severe.
Core views
The solar industry continues to face severe overcapacity. Management expects the government to have more concrete intervention measures in 2026. Although preliminary policies restricting excessive competition have been implemented, due to the large existing capacity base, the effect is limited. LONGi maintains its leadership position in the BC technology field, positioning it as a key driver of future growth and profitability. BC products feature higher efficiency and reliability, expected to maintain approximately 10% gross margin advantage compared to mainstream TOPCon products. The company is actively expanding BC capacity, with self-owned HPBC battery capacity reaching 46GW in 2025, and new 20GW silver-free advanced metallization production lines scheduled to come online in mid-2026. 2025 BC module shipments reached 22.87GW, with plans to launch new generation 670-680W modules. LONGi is rapidly expanding the energy storage business as a strategic pillar beyond core solar operations. The company targets key markets including China, Australia, Europe, and the US, gaining customer recognition through benchmark projects. Management has formulated a clear roadmap to establish service centers and sales teams locally, leveraging LONGi's brand reputation for reliability and long-term service. LONGi aims for the energy storage business to reach a scale equal to the solar business within five years, with a 2026 ESS shipment target of 6GWh.
Analysis framework
The research report extracts key information from management statements by participating in LONGi's earnings presentation. Analysis focuses on three dimensions: industry supply and demand conditions, technical route competitive advantages, and new business development prospects. Regarding valuation, Sum-of-the-Parts (SOTP) valuation method is adopted, assigning target price-to-book multiples to each of LONGi's business segments. The comprehensive target multiple is 1.7 standard deviations below historical average levels, reflecting expectations of deteriorating supply and demand prospects.
Methodology notes
Sum-of-the-Parts Valuation
The research report uses the SOTP method to assign target price-to-book multiples to each of LONGi's business segments for valuation. This method applies to diversified companies and can more accurately reflect the value of individual business parts.
Supply-Demand Balance Analysis
The research report focuses on analyzing the supply and demand conditions of the solar industry, especially the impact of overcapacity on prices and profitability. This is the core framework for cyclical industry analysis.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Sungrow Power Supply (300274.SZ)Benefited by ESS market growth
- Strengths
- Leading ESS manufacturer
- Comparison
- Research report gives Overweight rating
- Daqo New Energy (DQ)Has tech/cost advantages and attractive valuation
- Strengths
- Tech cost leadership
- Comparison
- Research report gives Overweight rating
- GCL Technology (3800.HK)Has tech/cost advantages and attractive valuation
- Strengths
- Tech cost leadership
- Comparison
- Research report gives Overweight rating
Key data
- Current Share Price16.55 CNYClosing price on April 29, 2026
- Target Price11.70 CNYBased on SOTP valuation, implies 29.3% downside
- BC Module Shipments22.87GWFull year 2025 BC module shipments
- HPBC Cell Capacity46GWSelf-owned capacity reached in 2025
- ESS Shipment Target6GWhESS business shipment target for 2026
- FY26E P/B2.2xCurrent trading valuation multiple
Impact & implications
The report believes that management's statements on the energy storage business further indicate that the ESS market may maintain robust growth in the coming years, potentially benefiting leading ESS manufacturers such as Sungrow Power Supply. However, Chinese solar manufacturers still face operational difficulties caused by severe overcapacity. Therefore, the report takes a selective stance on Chinese solar companies, preferring those with technology/cost advantages and attractive valuations, such as Daqo New Energy and GCL Technology.
Risks
- Better-than-expected silicon wafer and module manufacturing cost reductions
- Better gross margins on silicon wafer and module sales due to strong pricing power and technology leadership
- Higher-than-expected solar demand and share growth leading to stronger-than-expected module shipments
What to watch
- Effectiveness of 2026 government policy interventions
- BC technology capacity expansion and market share
- ESS business development progress and market share acquisition
- Industry supply-demand balance improvement status