LONGi Green Energy Technology Co. (601012) Report Interpretation

Overview

This earnings-review and non-deal-roadshow takeaway assesses LONGi's response to weak solar-industry conditions. Goldman Sachs remains positive on the company's margin-first strategy and BC module mix, but reduces forecasts because lower shipment expectations and a more competitive ESS market temper the path to profit recovery.

Core views

LONGi reported a 2Q26 net loss of Rmb1.8bn, broadly in line with Goldman Sachs' Rmb1.7bn loss forecast. Better gross profit, helped by a higher overseas mix, was offset by higher SG&A. Revenue was Rmb15.854bn, down 17% year-on-year but up 42% quarter-on-quarter; gross profit was Rmb496mn and gross margin improved to 3% from -1% in 1Q26. The net loss narrowed from Rmb1.920bn in 1Q26, while net margin improved from -17% to -11%. The central takeaway from the September 1 NDR is that LONGi is strengthening a margin-first strategy rather than prioritizing shipment volume. Management is pursuing greater exposure to higher-margin overseas markets, more diversified module application scenarios, and strategic linkage between solar and energy storage. Goldman Sachs is encouraged by the approach but expects the focus on profitability to reduce module shipments. It therefore lowers its 2026E-2030E module shipment forecast by 5%, while raising module segment gross-margin assumptions by an average 2 percentage points over the same period. Overseas execution provides evidence for the strategy. LONGi's overseas module shipments increased 26% year-on-year in 1H26, led by the Americas at 36%, Europe at 34%, and Asia at 20%. This contrasted with a 6% year-on-year decline in total Chinese module exports, including declines of 24% in the Americas, 1% in Europe and 15% in APAC. Goldman Sachs interprets the divergence as meaningful overseas market-share expansion. Product mix is also advancing: BC 2.0 shipments increased 34% quarter-on-quarter to 11.2GW in 2Q26, bringing 1H26 BC shipments to 20GW, or 65% of total module volume. The firm believes rising revenue contribution from BC modules can support better-than-peer mid-cycle module returns because BC modules carry roughly 10 percentage points higher gross margin than mainstream Topcon products. ESS remains an important longer-term element of the investment thesis, but it is now a material source of estimate pressure. Goldman Sachs believes the increasingly intense ESS competitive landscape could slow development and weaken margins. It cuts ESS revenue forecasts by an average 26% for 2026E-2030E and reduces assumed ESS profitability by 8 percentage points. In the revised model, 2026E ESS revenue is Rmb1.120bn versus the prior Rmb4.816bn, and 2030E ESS revenue is Rmb62.667bn versus Rmb63.778bn; 2030E ESS gross margin is reduced to 12% from 20%. Combining lower module shipment expectations with weaker ESS assumptions, Goldman Sachs lowers total revenue forecasts by an average 6% for 2026E-2030E and cuts net profit margin by 2 percentage points on average. Revised revenue forecasts are Rmb61.531bn for 2026E, Rmb68.854bn for 2027E, Rmb96.717bn for 2028E, Rmb115.857bn for 2029E and Rmb157.449bn for 2030E. Revised net profit forecasts are losses of Rmb9.316bn in 2026E and Rmb2.567bn in 2027E, followed by profit of Rmb314mn in 2028E, Rmb3.331bn in 2029E and Rmb6.730bn in 2030E. Goldman Sachs stresses that, although anti-involution initiatives may help stabilize value-chain pricing, a profitability inflection remains difficult if demand stays weak. Goldman Sachs retains Buy and lowers its 12-month target price to Rmb13.6 from Rmb14.2. The target is based on 2.3x 2026E P/B, derived from the report's historical regression relationship between P/B and ROE. At the Rmb12.07 closing price on September 1, 2026, the report indicates 12.7% upside. Its positive view rests on what it considers underappreciated ESS potential and stronger mid-cycle module ROE from the expanding BC module mix, while recognizing that the timing of margin recovery depends on demand and execution.

Analysis framework

Goldman Sachs compares 2Q26 reported results with its prior estimates, then uses NDR takeaways to reassess shipment volume, product mix, segment margins and ESS development. It translates those operating assumptions into revised 2026E-2030E revenue, profitability and net-income forecasts, and values the shares using a 2026E P/B multiple linked to the historical relationship between P/B and ROE.

Methodology notes

• Valuation methodsPB valuation

  2026E P/B valuation based on the historical regression correlation between P/B and ROE

  Goldman Sachs derives its 12-month Rmb13.6 target price by applying 2.3x 2026E book value, with the multiple informed by the company's historical P/B-to-ROE relationship.

• Industry AnalysisVolume-price decomposition

  Margin-first strategy balancing module shipment volume, overseas mix and segment profitability

  The report weighs lower expected module volumes against higher expected gross margins from overseas exposure and BC product mix to assess LONGi's earnings path.

• Industry AnalysisSupply-demand framework

  Demand recovery and value-chain pricing stabilization as conditions for profitability recovery

  The report treats persistent demand weakness as the main obstacle to a margin and profitability inflection, even if industry initiatives help stabilize pricing.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LONGi Green Energy Technology Co. (601012.SH)

  Primary covered company; expected to benefit from a margin-first strategy, overseas module market-share gains and increasing BC module mix.

  Strengths

  Global integrated wafer-to-module player with industry-leading R&D; overseas shipment growth and BC modules with approximately 10 percentage points higher gross margin than mainstream Topcon.

  Weaknesses

  Current losses, lower expected module shipments and reduced ESS profitability assumptions.

  Comparison

  LONGi's overseas module shipment growth outperformed overall Chinese module export trends in 1H26.

  Risks

  Demand weakness may delay profitability recovery; ESS competition could slow development and pressure margins.

Key data

• 2Q26 net lossRmb1.8bnBroadly in line with Goldman Sachs' Rmb1.7bn loss estimate.
• 2Q26 revenueRmb15.854bnDown 17% year-on-year and up 42% quarter-on-quarter.
• 2Q26 gross margin3%Up 4 percentage points quarter-on-quarter from -1% in 1Q26.
• 1H26 overseas module shipment growth26% year-on-yearAmericas +36%, Europe +34% and Asia +20%; overall Chinese module exports declined 6%.
• BC 2.0 shipments11.2GWUp 34% quarter-on-quarter in 2Q26; 1H26 BC shipment reached 20GW, or 65% of total module volume.
• Revenue forecast revisionAverage reduction of 6% in 2026E-2030ERevisions reflect lower module shipment assumptions and weaker ESS forecasts.
• ESS revenue forecast revisionAverage reduction of 26% in 2026E-2030EGoldman Sachs also lowers ESS segment profitability by 8 percentage points.
• 12-month target priceRmb13.6Reduced from Rmb14.2 and based on 2.3x 2026E P/B.

Impact & implications

The report argues that LONGi's overseas expansion and BC module penetration can improve mix and mid-cycle margins even if the company accepts lower shipment volume. However, weaker solar demand and a tougher ESS competitive environment delay the expected profit recovery, leading Goldman Sachs to reduce long-term revenue and margin assumptions while retaining its Buy view.

Risks

• A stronger-than-expected rebound in polysilicon and glass prices if demand exceeds expectations alongside strong supply-side policy implementation.
• Slower-than-expected progress in adopting cost-reduction technologies.
• Slower-than-expected BC development, reducing the potential for a mid-cycle margin inflection.
• Slower-than-expected ESS development.

What to watch

• Evidence of demand recovery and whether industry anti-involution initiatives stabilize value-chain pricing.
• Overseas module shipment growth and market-share trends, especially in the Americas, Europe and Asia.
• BC 2.0 shipment penetration and the resulting impact on module gross margins.
• ESS development progress, competitive intensity and segment margin performance.