Date
25 September 2017
Sinovel is losing support from clients and suppliers. Photo: Bloomberg
Sinovel is losing support from clients and suppliers. Photo: Bloomberg

Delisting warning adds to Sinovel troubles

Once the industry leader, Sinovel Wind Group (601558.CN) saw its loss widen to 3.44 billion yuan (US$552 million) last year from 580 million yuan in 2012.

Having recorded losses for two consecutive years, Sinovel got a delisting warning from the Shanghai Stock Exchange this week. One more year of loss and Sinovel will have to be removed from the bourse.

Sinovel is already losing support from clients and suppliers, and the warning from the stock exchange may further undermine their confidence in the troubled solar product maker.

The group has focused on the overseas market and offshore wind farms to shore up its fortunes, but unfortunately, that strategy didn’t pay off. 

It has overexpanded its overseas business, while growth in offshore wind farms has been sluggish, China Credit Rating said in a report.

Its installation capacity was only 90 megawatts last year, marking a third year of contraction. That’s just one-fourth of the capacity of its archrival Xinjiang Goldwind Science & Technology (02208.HK).

China Credit Rating also noted that Sinovel has large-scale inventories and massive accounts receivable, both of which are exerting a huge financial pressure on the group.

Accounts receivable surged as customers reportedly held back payments after encountering serious problems with Sinovel’s products. Unsold turbines are piling up with more clients having doubts about the quality of its products and its maintenance service standards.

At least two years would be needed for Sinovel to digest its stock, and that is an optimistic assessment.

Some suppliers fear Sinovel may not be able to pay so they avoid doing business with the group, National Business Daily said.

The industry showed signs of recovery last year, but Sinovel’s market share deteriorated sharply to 5.6 percent during the period from 9.3 percent in 2012, the worst among the top 10 players.

President Liu Zhengqi {劉征奇} has pledged the group will return to profit this year. But given the challenges Sinovel is facing, investors are wondering how Liu can pull off a seemingly impossible mission.

Sinovel’s offering price was 22.50 yuan per share (stock split adjusted) when it went public in 2011, but was trading around 3 yuan as of Thursday, with a market capitalization of around 12.3 billion yuan, marking an 86 percent decline from its peak.

– Contact the writer at [email protected]

CG

EJ Insight writer

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