The photovoltaic "lone wolf" that has achieved large profits for three consecutive years, beware of being toppled by a "gray rhinoceros"!

Ask AI · How does Hengdian East Magnet grow against the trend in the photovoltaic “deep winter”?

China Huaxia Energy Network learned that on March 28, Hengdian East Magnet (SZ: 002056) released its 2025 annual report. Full-year operating revenue was 22.586 billion yuan, up 21.7%; net profit attributable to shareholders was 1.851 billion yuan, up 1.34%.

Hengdian East Magnet said it will base the plan on 1.601 billion shares, after excluding the shares held in the share repurchase special account from the total share capital, and distribute cash dividends of 6 yuan for every 10 shares to all shareholders. Together with the dividends distributed in the first half of 2025, Hengdian East Magnet will have distributed a total of 1.569 billion yuan to shareholders for the full year, with a dividend payout ratio as high as 84.8%.

Hengdian East Magnet is a listed company under Hengdian Holding Group. Its photovoltaic business accounts for 63.36% of total revenue. In the 2025 global photovoltaic module shipment ranking released by infolink, Hengdian East Magnet is tied for eighth place with JinkoSolar.

For many years, Hengdian East Magnet has maintained steady profitability. Even after 2023, when upstream and downstream companies across the photovoltaic industry chain were generally suffering losses, the company still remained profitable. In 2023, 2024, and 2025, Hengdian East Magnet recorded net profits of more than 1.8 billion yuan every year, and it has maintained positive growth year after year—an absolute “profit king” in the photovoltaic industry.

But behind high profitability and high dividends, Hengdian East Magnet’s “turning point” is already beginning to emerge. After its profit hit a “peak” in the second quarter last year, the company’s quarterly profit started to decline quarter by quarter. Can this last remaining “lone sprout” of profitability in the photovoltaic main industrial chain continue to stand out in 2026?

Dividend payout ratio as high as 84.8%

What makes investors most happy is Hengdian East Magnet’s big-spending dividend this year.

In the middle of last year, Hengdian East Magnet already paid a large dividend: it paid a cash dividend of 2.3 yuan for every 10 shares, totaling about 609 million yuan. Now, the company is paying another 960 million yuan in cash dividends. The two rounds together bring the total cash dividends to 1.569 billion yuan.

For full-year 2025, Hengdian East Magnet’s dividend yield was 4.6%, which is already at a relatively high level in China’s A-share photovoltaic sector. Meanwhile, the payout ratio (also known as the “dividend rate” or “dividend payment ratio”) is as high as 84.8%, exceeding most companies in the A-share market. To be specific, China National Petroleum (SH: 601857) had a payout ratio of only 54.7% in 2025, and that is also the highest level for PetroChina in the past five years.

Hengdian East Magnet dividend statistics (Source: Wind)

China Huaxia Energy Network noted that even in horizontal comparison, Hengdian East Magnet’s 2025 dividends reached a new high. The data show that in 2023 and 2024, Hengdian East Magnet’s earnings were 1.816 billion yuan and 1.827 billion yuan, respectively, and its cash dividends were 629 million yuan and 724 million yuan, respectively. Although its profitability levels were close, its 2025 dividends doubled.

It is worth noting that these three years were precisely when the photovoltaic industry was in deep trouble and companies were extremely short of cash. In the same period, many photovoltaic companies fell into losses. Since 2025, multiple leading photovoltaic companies, including Trina Solar (SH: 688599) and Tongwei Co., Ltd. (SH: 600438), have said they will not pay dividends.

Why does Hengdian East Magnet dare to pay such large dividends? In fact, Hengdian East Magnet has the confidence: when the whole industry is losing money, its business is still comprehensively profitable.

Hengdian East Magnet’s main businesses include photovoltaics, magnetic materials, and lithium batteries. In 2025, all three segments maintained high growth. Hengdian East Magnet said in its annual report that during the reporting period, its magnetic materials business achieved relatively fast growth in shipment volumes across multiple application areas for AI servers and new-energy vehicles; its photovoltaic business achieved relatively fast growth in shipment volumes while maintaining profitability; and its lithium battery business maintained a good momentum in market expansion.

In terms of gross margin, the company’s overall gross margin was 17.82%. Among them, photovoltaics, magnetic materials, and lithium batteries were 15.25%, 28.14%, and 15.38%, respectively. The overseas business, accounting for 50.17%, had a gross margin of 15.59%. When gross margins for photovoltaic companies are generally negative, Hengdian East Magnet’s photovoltaic products not only keep a positive gross margin, but also at such a high level. A useful comparison is Junda Shares (SZ: 002865), a photovoltaic cell producer. Its overseas business proportion is 50.66%, similar to Hengdian East Magnet, but its photovoltaic product gross margin is -1.65%. Although its overseas business gross margin is positive, it is only 0.75%.

China Huaxia Energy Network previously pointed out that there were three reasons why Hengdian East Magnet grew against the trend in the first three quarters of last year. First, it made early preparations for overseas market positioning. Second, it continuously developed differentiated new products. Third, it improved product competitiveness through cost reduction and efficiency gains (see “Everyone Is Losing Money, Yet This TOP10 Module Company Is ‘Earning’—Why?”).

Now it appears that in 2025, Hengdian East Magnet continued these approaches. The annual report shows that the company’s full-year overseas revenue reached 11.331 billion yuan, up 40.20% year on year, and its share of total revenue increased from 43.55% last year to 50.17%. In products, the company launched a series of differentiated products adapted to specific application scenarios, including all-black modules, greenhouse systems, anti-glare, offshore modules, high-transmissivity products, anti-hail products, anti-soiling products, installation-friendly products, lightweight products, and more. In technology R&D, the company’s TOPCon cell mass production efficiency has already exceeded 27.75%, reaching an industry-leading level.

Risks are accumulating

While Hengdian East Magnet’s performance continues to improve, a “gray rhinoceros” is also slowly approaching.

For full-year 2025, although Hengdian East Magnet’s revenue grew 21.7% year on year, its net profit increased only 1.34%.

Looking at the single-quarter data for 2025, the profit decline trend is extremely obvious. In the second quarter, Hengdian East Magnet’s revenue and net profit both reached a peak, and then they fell quarter by quarter thereafter. Especially for non-recurring net profit after excluding items, the second-quarter figure was 614 million yuan; by the fourth quarter, it had dropped to 295 million yuan, less than half of the second quarter.

Hengdian East Magnet’s quarterly main financial indicators (Source: the company’s financial reports)

In response, Hengdian East Magnet explained that industry “involution” is severe, showing a trend of “volume increases while prices fall.” In the process, last year’s photovoltaic product shipment volume rose to 24.9GW, up 45% year on year, but declining selling prices eroded profit margins.

In addition, another guarantee for Hengdian East Magnet’s earnings growth—overseas markets—has also seen crises repeatedly.

Hengdian East Magnet’s photovoltaic overseas production capacity is mainly in Indonesia, and it was put into operation as early as 2024. In April 2025, the U.S. Department of Commerce announced the final anti-dumping and countervailing duties outcome and tax rates for photovoltaic products from Cambodia, Malaysia, Thailand, and Vietnam. Hengdian East Magnet avoided the worst because its base is in Indonesia. In July of the same year, Indonesia also faced an “anti-dumping and countervailing” investigation, but fortunately later the U.S. and Indonesia reached a trade agreement, under which products exported from Indonesia to the U.S. would be subject to a 19% tariff, lower than the initially proposed 32%.

However, Hengdian East Magnet’s “luck halo” did not last long. In February this year, the U.S. Department of Commerce announced its preliminary determinations in the countervailing duty (CVD) investigations for crystalline silicon photovoltaic cells (whether or not assembled into modules) from India, Indonesia, and Laos. The determination results show that the total CVD rates for the three countries were 80.67%—143.3%. Among them, Indonesia’s countervailing duty tax rate for photovoltaic products was 85.9%—143.3%.

The final ruling for this investigation is scheduled to be released in July this year. By then, Hengdian East Magnet will have to make strategic adjustments to its Indonesia business in order to protect its overseas market “cake.”

It is worth noting that at an investor relations event held in October last year, regarding the U.S.’s “anti-dumping and countervailing” investigation into Indonesia, Hengdian East Magnet said that U.S. domestic module capacity is large but silicon wafer and cell capacity is small; even if new capacity is built, it would take time, and costs are also relatively high. Therefore, it expects that there will still be a significant supply gap in 2026 and 2027. “We will focus on the cell segment and actively seek solutions to meet sustainable transactions between overseas bases and the U.S. market,” Hengdian East Magnet said.

In addition, in the European market, Hengdian East Magnet also faces major challenges. Since last year, LONGi Green Energy (SH: 601012) and Aiko Solar (SH: 600732) have continued to expand their presence in Europe. Just recently, LONGi Green Energy reached a major cooperation with Solarpro, a European solar energy storage engineering contractor: the two parties will work together to build a 450MW BC photovoltaic power station. Aiko Solar has also cooperated with Neoen, a European renewable energy producer, to provide BC modules for large-scale ground-mounted photovoltaic projects in core regions such as France, Ireland, and Italy, with a total capacity of 600MW.

It is worth noting that in early this year, Certisolis, a French authoritative certification body, announced it would cancel the eligibility of four solar module models under Hengdian East Magnet to enjoy a 5.5% preferential value-added tax rate. The reason is that errors were found in the documents provided by Hengdian East Magnet regarding the traceability of certain modules, which greatly affects the calculation results of carbon footprints.

Although Hengdian East Magnet told the media that this matter does not affect the company’s overseas market, the incident undoubtedly weakens its brand credibility in Europe—especially under the EU’s increasingly strict carbon footprint and product traceability requirements—potentially leading some compliance-focused customers to switch to other suppliers.

Author statement: personal opinion, for reference only