Sungrow

Chinese companies are increasingly looking to Germany to raise capital and revive interest in their Global Depositary Receipts (GDRs) in Europe. Companies such as Sungrow Power Supply $300274 and JinkoSolar$JKS (-1.09%) are planning to issue GDRs in Frankfurt with a total value of up to 1.16 billion euros. This initiative could strengthen the links between the Chinese and German capital markets and offers an attractive opportunity for companies to position themselves globally.

However, success in Europe is by no means guaranteed. Following a surge in GDR listings in Switzerland, approvals were halted by the CSRC due to arbitrage concerns. Chinese investors bought GDRs and converted them into shares on the domestic market to take advantage of the persistent price differentials, while there was little interest from European investors.

Nevertheless, Hang Wang, partner at Baker McKenzie in Beijing, emphasized that it was never the intention of the Chinese regulators to stop the offerings of GDRs abroad. A spokesman for Deutsche Börse said it was technically ready to welcome GDRs to the Frankfurt Stock Exchange.

The CSRC set new rules in May 2023 to resume GDR approvals, introducing requirements for companies including registering with the regulator within three working days of submitting their overseas GDR listing applications and disclosing the identity of buyers. These measures could help other companies follow the example of Sungrow and JinkoSolar.

It is important to note that Sungrow and JinkoSolar are not the first Chinese companies to seek a GDR listing in Frankfurt. In late 2022, the board of Shanghai-listed Sany Heavy Industry Co approved the issuance of GDRs before Sany abandoned the plan in April due to changes in internal and external conditions.

However, a successful sale of GDRs in Frankfurt could trigger further such deals. Jean Thio from Clifford Chance emphasized that China has long been Germany's largest trading partner and companies will consider their listing targets according to their business presence.will consider.

The "underestimated opportunity" has delivered in full. 📉

I really don't understand why you would think you're smarter than the market by "hoping(?)" that it's not too bad.

A little tidbit from a contract manufacturer for some industries: Yes, the situation is indeed precarious. It may not (yet) be fatal, but how do you explain to employees who are dependent on their monthly payment that you have to go into short-time working for economic reasons?

This goes explicitly to the author of the attached post, because you were so kind to me. Here you have your kiss back attached.😘

Now then.

On to the factual part:

SMA Solar $S92 (+1.8%) has merely reflected the current picture of the inverter market today and has once again revised its forecast. There is still no improvement in sight. In particular due to the relatively uncertain political situation in Germany and the lack of transparency in the economic outlook.

With underutilization of production facilities, it is almost uneconomical to be a producer when you also consider the competitive pressure from the Far East. However, before we verbally defend Germany as a location once again, the general economic environment in Europe, particularly in the EU, must be taken into account. Ultimately, it is down to the consumer behaviour of citizens, who are currently very hesitant and are more likely to turn to cheap products from the Far East to realize their projects. This applies in particular to more expensive investments, as can be seen in the renewable energy sector or especially in the automotive sector. Although the ECB is already taking measures in this regard, uncertainty remains.

Foreign companies, particularly from the USA and China, can therefore score points here, as plant capacity utilization can be scaled up through massive subsidies so that the unit costs only correspond to fractions of the sales price. Unfortunately, under the current market conditions in Germany, this is not possible without a loss of profitability.

In particular, stock corporations such as SMA are designed by their structure to generate added value for their shareholders, which is hardly possible without losses in order to maintain the market position. The biggest competitors for this are Huawei, Sungrow $300274 and Fronius.

Conclusion:

Unfortunately, I cannot currently see any added value for a possible investment. This would require additional subsidies from the EU, which I personally would consider inappropriate in order to keep manufacturers in the economic area. You cannot stop globalization by hoping that an almost hopeless situation can only get better. That contradicts the spirit of a public limited company, which lives solely from the added value of its shareholders.

Fortunately, I can say goodbye to the industry at the end of the year and return to my old "love". Although this time has given me a lot of experience, it has also shown me the limits of challenges.