Last week, the industry ushered in two major macro policy benefits:

1) the NDRC and the Energy Bureau jointly issued the Circular on matters related to promoting the healthy Development of the Photovoltaic Industry chain, focusing on providing all aspects of support and guarantee for the production and supply of polysilicon.

2) Credit China, entrusted by the National Development and Reform Commission, the Ministry of Finance and the Energy Bureau, issued a list of the first batch of "compliance projects" confirmed by the verification of renewable energy power generation subsidies. Note that we stress once again that these two things are clearly positive and must not be misled by some media's out-of-context and malicious negative interpretations.

Specifically, the notice contains a total of eight articles, of which the key words of the first four articles are respectively: ensuring the production of polysilicon, supporting the production of polysilicon, encouraging reasonable control of the price level, and ensuring the power demand of polysilicon enterprises. When it comes to the issue of price level, it is also specially proposed to "follow the principle of fair competition."

It can be seen that the competent authorities are well aware that the sustained rise in the price of this round of industrial chain cannot be achieved by some enterprises alone, but is caused by the contradiction between the sustained higher-than-expected global terminal demand and the long production expansion cycle of short-board polysilicon in the supply chain. therefore, it is clear that the policy force is focused on "polysilicon supply".

We can reasonably expect that if some areas encounter power supply constraints again and need power cuts, polysilicon enterprises are expected to enjoy significantly higher priority to ensure the most efficient release of short board capacity in the supply chain. accelerate the satisfaction of terminal demand and drive prices back to a reasonable level.On the other hand, some media must take "curbing excessive capital speculation" in Article 7 of the "notice" as the title and theme of the article to attract attention.

Secondly, the core purpose of the subsidy verification of renewable energy power generation projects is to clarify the compliance of a large number of stock projects in order to gradually realize the historical arrears of subsidies and the subsequent distribution of power generation subsidies, and for projects that have obviously violated the regulations, it is also natural to recover the unreasonable subsidies illegally obtained in accordance with the law.

According to the original text of the Credit China announcement: "the National Development and Reform Commission, the Ministry of Finance and the National Energy Administration, together with relevant parties, will carry out nationwide self-inspection and verification of renewable energy power generation subsidies since March 2022. Compliance projects confirmed in six aspects, such as project compliance, scale, electricity, electricity price, subsidy funds and environmental protection, will be publicized in batches.

The first batch of compliance projects confirmed by verification were announced, totaling 7344. "the first batch of more than 7,000 compliance projects have been publicized, and how many have been asked to return large subsidies in the past few months? Obviously, the good thing of supporting the healthy development of the industry and helping to comply with the sustainable development of new energy operators has been misinterpreted by some media with the words "huge shock, shock" and so on. In particular, investors are reminded to distinguish right from wrong.

Let's take a look at the fundamentals of the industry: the intensity of domestic incremental demand is higher than expected, and the trend of high price volume in Q4 industry is further clear.

This week, the Energy Bureau announced that the domestic photovoltaic installed 8.13GW in September increased by 132%, and the ring increased by 21%. From January to September, the installed 52.6GW increased by 106%. In addition, Longji released the latest silicon wafer quotation on October 24, which was the same as that on September 26th. M10 / 155 μ m quoted 7.54 yuan / wafer, M6 / 160 μ m 6.33 yuan / wafer, cancel the single crystal 158.75 quotation. The price of the latest battery chip released by Tongwei on October 25 is also the same as that of the previous month, but the thickness specification corresponding to the quoted price of the mainstream 182 Universe 210 battery chip has dropped from 155 μ m to 150 μ m, with an actual increase of 1-1.5 points / W; although the silicon material association has cancelled the public quotation statistics, according to our research, the recent signing price of mainstream silicon enterprises has been stable, and the number of orders signed in November has basically exceeded half.

In September, the number of new installed rings in China increased by 21%, and the ground power station has started to pull goods, showing that the price affordability of the ground power station may be higher than expected under the background of the high price of the industrial chain. The output of silicon materials increased by about 24% month-on-month in September / October compared with September and October. The production schedule of leading component enterprises increased by about 10% in November compared with the previous month. In the context of rising industry output, the price of silicon wafers remained stable and the battery chips continued to rise, which also verified the ability of downstream demand to withstand or exceed expectations.

With the continuous increase of silicon supply, the price affordability of the main source of Q4 demand increment (domestic centralized power plant) is higher than expected, which will support the industrial chain to maintain a relatively high level, and the trend of Q4 high price volume is clear, which is expected to drive Q4 boom beyond market expectations and consistent expectations in 2023.

Investment advice: we believe that there is a high probability that the actual demand (component-side output scale) in 2023 will exceed the current market consensus expectations around 400GW and reach the 450-500GW range, and the performance of the Q4 industry chain is expected to trigger this expected upward revision.

The current recommended order is as follows:Energy storage (Sunshine, Ningde, Nandu, Shangneng, etc.), integration leader (Longji, Tianhe, Jingao, Jingke, Central), strong alpha silicon (Tongwei, Xiexin), equipment (Aotewei, Mai Wei, High Test, Jinchen, Jiejia, etc.), power plant EPC/ operators, high prosperity auxiliary materials / consumables.

In addition (1): focus on the three angles of the main line of overseas industrial chain construction:

1) head equipment manufacturer

2) enterprises with high production automation and low energy consumption technology routes to cope with the pain point of overseas expansion of labor / energy costs (TCL Central, Xiexin Technology, etc.)

3) the leading supply chain in North America (Jinjing Technology).

In addition, (2): in the links of core accessories (such as plastic film and glass) which were greatly adjusted due to concerns about the deterioration of the pattern, some leading stock prices have been adjusted back to the long-term attractive range, and it is expected to usher in a phased volume-price rise at least in Q4.Suggest to pay attention (Xinyi Solar, Follett, Foster, Haiyou, etc.).