GCL Technology, Polysilicon, Granular silicon, Soler energy.

The latest: GCL Technology Holdings Ltd. (3800.HK) announced Thursday that it signed an agreement to sell 125,000 tons, 150,000 tons and 150,000 tons of polysilicon to solar panel maker Longi Green Energy Technology (601012.SH) in 2024, 2025 and 2026, respectively.

Looking up: The supply deal will help to stabilize GCL’s sales by guaranteeing a major long-term buyer in a polysilicon market where prices are slumping due to major overcapacity.

Take Note: The agreement allows Longi to determine a variation of up to 10% from the stated purchase volumes, meaning final sales could be less than the agreed amounts.

Digging Deeper: GCL’s financial performance has been volatile in the last three years due to big swings in demand for and prices of polysilicon that is its main product and the main ingredient used to make solar panels. The company’s revenue surged in 2021 and 2022 on soaring polysilicon prices, allowing it to record net profits of 5.08 billion yuan ($702 million) and 16 billion yuan, respectively, in those two years. But prices fell sharply due to oversupply last year, causing its revenue to fall 6.2% to 33.7 billion yuan in 2023. Its profit last year plummeted 85% to 2.51 billion yuan, as it fell into the red with a 3 billion yuan net loss in the second half.

Market Reaction: GCL shares fell on Friday morning and closed down 0.8% at HK$1.22 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by A. Au

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