Gross profit declines, accounts receivable increase, and diamond line suppliers face multiple risks

In 2017, solar polycrystalline manufacturers rushed to switch technology, detonating the market of Diamond Wire, and the diamond wire was fully applied in the field of polysilicon cutting. With the expansion of the application field of King Kong line products and the expansion of market demand, this year, China's King Kong line enterprises officially emerged, and many diamond line companies such as Muller New Materials, Sanchao New Materials and Tony Electronics successively landed in the capital market. The mainstream suppliers of the domestic diamond line earned a lot of money.

On the other hand, because the traditional mortar cutting process was quickly replaced by the diamond wire cutting process, such companies suffered a serious decline in profits due to the silicon cutting blade and related business drag, and the former mortar faucet was squeezed.
The huge profits have triggered a number of diamond line suppliers to compete for expansion (as shown below). At the same time, the hot market has attracted a number of new market participants to enter the diamond wire saw manufacturing industry. The competition in this segment of the industry chain is gradually Upgrade, there is a tendency to "come out of the crowd".

However, the fiery market began to experience cold after the PV 531 New Deal, and the price war and the contest for customers competed. Recently, Tony Electronics has begun to squeeze the market share of Sanchao New Materials and Muller New Materials. At the same time, the price fell relatively large. In the second quarter, Dongni Electronics did not increase its revenue. It is expected that the second quarter profit will also drop.
The latest semi-annual report of Sanchao New Materials shows that its performance in the first half of 2018 increased year-on-year, and its profitability exceeded expectations. Even so, the three super-new materials have also made a risk warning, saying that since the second quarter, the price of the diamond line products has dropped significantly. Especially after the introduction of the new PV policy, some downstream customers have stopped working and reduced production, and the market demand has dropped or even shrunk sharply. Lead to a reduction in some of the company's product orders. Affected by the above factors, the company's second-quarter performance decreased.
According to informed sources in the industry, the domestic diamond line has been transformed from "one line is hard to find" to "supply oversupply" last year, and the price has been tumbling. According to relevant media statistics, the price of the first-line brand 65 diamond line in the market is 125 yuan/km, the price of the second-line brand 65 diamond line is 120 yuan/km; the price of the first-line brand 60 diamond line is 145 yuan/km, second quarter. The price of the 65 diamond line fell by about 30%.
In addition, the cooperation between wafer manufacturers and diamond line manufacturers has a greater advantage in purchasing prices. The price of 65 lines has reached 100 yuan/km, and the price of 65 lines in the third quarter will fall below 100 yuan/km, which is almost the cost price. The previous 50% of the high gross profit is gone.
Increasingly increased receivables and a highly concentrated customer base In the first quarter of Tony Electronics's earnings report, we observed a large change in its cash flow, net cash flow generated by Tony Electronics' operating activities from January to March 2018. It was negative at 25.97 million, a decline of 210.07% compared with the same period in 2017.
Tony Electronics said in the financial report that on the one hand, the sales of diamond cutting line products are mainly expanded, and the collections are all settled by the bank acceptance bills, and the bills receivable increase; on the other hand, the raw materials of diamond cutting lines are large due to market demand. The use of prepayment settlement resulted in a large change in the net cash flow from operating activities.
Three super new materials also face the risk of receivables collection. As the company's business scale continues to expand, the amount of accounts receivable continues to increase, and its proportion of total assets and income is high. As of December 31, 2017, The balance of accounts receivable was RMB 100,052,300, an increase of 42.17% from the end of the previous year.
Sancha New Materials said that the company has drawn off bad debts in full according to the provision for bad debts. Despite this, once the major customer defaults, the accounts receivable cannot be recovered in full or even in time, or it will adversely affect the operating performance and operating cash flow of Sanchao New Materials.
According to the balance of the arrears, the companies that interacted with Sanchao in 2017 were Tianjin Xintianhe Electronics, Changzhou Yijing Optoelectronics, Tiantong Holdings, Taicang GCL Solar, Harbin Qiuguan Optoelectronics, and five companies. The total accounts receivable amounted to approximately 44.25 million yuan, accounting for 44.02% of the total accounts receivable. At the same time, the sales revenue of the top five customers accounted for 43.71% of the total sales revenue of Sanchao New Materials.
According to the large customer information publicly disclosed by Sancha New Materials, Tony Electronics and Muller New Materials, the leading companies such as Longji, GCL Group, Zhonghuan and Jinglong Group have flashed the main customers of the above-mentioned Jinang line enterprises. The group of the group.
In addition to Tony Electronics and Sanchao New Materials, the current situation of other Diamond Line companies is similar and even faces a more tense development situation. The main production links of polysilicon, silicon wafers, batteries, modules and other photovoltaic industry chains are experiencing a new round of survival of the fittest. As a supplier of silicon wafers, the Jingang line enterprises are also facing “adult baptism”. In the second half of the year, they will not only accept capacity expansion and capital. The test of accumulation, as well as the strength of competition from the technical side.
The diamond wire production technology is complex in technology, involves many fields, strict process control, and high requirements for mass production stability. As a consumable for cutting hard and brittle materials, the diamond distribution density, uniformity and consolidation strength, diamond cutting ability, and fatigue resistance of steel wire directly determine the quality and cost of hard and brittle material slicing.
When the silicon wafer company uses the diamond wire, it has strict requirements on the cutting line speed, the wire consumption, the cutting tension, the main cutting speed, the cutting time, the filming rate and the like. As the diamond wire cutting technology continues to advance, the pair The performance specifications and quality stability requirements of the diamond wire products are also constantly increasing, which requires suppliers to continuously improve the cutting performance and quality of the products through technological advancement.
Industry professionals said that despite the huge impact of the current PV industry, the industry recovery may take 1-2 years, but the company in the leading position of the diamond line industry will be better, with more capital and technical strength until the industry recovery season.

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