Key points of investment
Incidents:The stock prices of leading overseas photovoltaics surged across the board during the National Day holiday. Follett Glass (06865), which had the highest increase, rose 48% during the period, while Artes (CSIQ.US), which had the smallest increase, rose 20%, with an average increase of 36%.
We believe that the main reason for the sharp rise in leading overseas PV targets during the National Day holiday is that countries have recently raised carbon emissions and renewable energy to an important strategic level. The proposed planning goals have given PV medium- to long-term growth and opened up a golden development cycle for the next ten years. In addition, recent favorable PV news at home and abroad and continuous glass price increases confirm the high momentum of the industry, further enhancing the certainty of demand side and leading performance.
The price increase of glass confirms strong demand, and there is strong certainty about the performance of leading companies under the high boom:The rise in Q3 glass is mainly due to delays in the release of leading production capacity due to public health incidents. At the same time, domestic and overseas demand exceeded expectations, leading to a short-term mismatch between supply and demand. Looking at next year, considering the uniform distribution of production capacity over the year and the need for glass production capacity to climb, effective production capacity is expected to increase by less than 20%, while global demand is expected to grow at a 30-40% rate next year, far exceeding the growth rate of supply. It is expected that glass prices will remain high. Leading companies in the glass industry will continue to benefit from increased penetration rate of double glass and optimization of leading patterns in the future.
The general trend of the global energy revolution:1) From a domestic perspective: Guangdong, Hebei, Yunnan, and Sichuan recently introduced the 14th Five-Year Plan. The four provinces had a total installed capacity of 28.44 GW as of the end of June 2020, accounting for 13% of the country's installed capacity. Assuming that this ratio rises to 18% by the end of the 14th Five-Year Plan and the four provinces are expected to complete the installation plans according to their respective plans, the total installed capacity of the country will reach 586 GW, and the annualization of the new installed capacity will be about 70 GW+. 2) Looking abroad: GE announced its withdrawal from the coal power market, focusing on renewable energy investment; some overseas countries are planning and bidding for photovoltaics; several overseas listed photovoltaic companies are planning to return to A.
In the short term, Q3Demand was strong during the off-season, and the photovoltaic sector generally exceeded expectations:The silicon accident in July accelerated the contraction of silicon material supply. The price of silicon materials skyrocketed. The shortage of supply triggered a general rise in prices throughout the industry chain. At the same time, Q3 demand was strong, leading component factories had full production schedules, and the successive price increases for glass and film in auxiliary materials factories confirm this. Judging from the gross profit of all links in the industry chain, the rebound in silicon wafers was the most obvious. Profits from silicon wafers remained stable. Profits for batteries were strong in July and August, and large profits diverged. There was some pressure on the component end to sign a low price list early on, but benefiting from overseas growth and new price negotiations, gross profit still performed well. Overall, all aspects of photovoltaics generally exceeded expectations, with significant year-on-year growth in Q3.
In the long run, from a global perspective, carbon emissions are becoming stricter, which favors the development of renewable energy: Global attention and importance on carbon emissions and climate change is gradually increasing. All major countries have proposed carbon emission targets for the past 5-10 years, emphasizing the target share of renewable energy power generation within the next 30 years, driving global development in the direction of “carbon neutrality.”
Investment advice:The photovoltaic sector has outstanding long-term growth and high short-term leading performance growth and undervaluation. I highly recommend Longji Co., Ltd., Tongwei Co., Ltd., Sunshine Power, Jinlang Technology, Jingao Technology, Foster, Aixu Co., Ltd., Follett, Linyang Energy, follow Goodway, CITIC Expo, Xinyi Solar (00968), Daquan New Energy (DQ.US), Jinko Energy (JKS.US), Artes, Amaton, Jiejia Weichuang, Dongfang Risheng, Datang New Energy, Datang New Energy (01798) et al.
Risk warning:Installations fall short of expectations, increased competition, etc.