The Zhitong Finance App learned that Guojin Securities released a research report saying that after the recent rapid decline in silicon prices, it is expected that the release of terminal wait-and-see demand and the weakening of the price game in the industrial chain will jointly drive an increase in component-side production schedules in May and beyond. At the same time, the clearance of excess production capacity, which is a strong signal from silicon production capacity maintenance/shutdown, will also accelerate. Along with the release of the quarterly performance risk, the sector is expected to usher in a round of beta repair. Looking ahead, in addition to the fact that the annual component production is still expected to rise further to 700GW or more, it is expected that the Q2 profitability of most parts of the industrial chain will begin to show a month-on-month improvement trend (typical example: expected price increase in Q2 +cost loop down+sales volume increase).

Furthermore, Guojin Securities anticipates that the frequency of subsequent “backward production capacity shutdowns” will increase significantly, thereby deepening the market's awareness of the “clearance” process and gradually attracting some left-side capital to enter the market; many positive statements and intensive supporting policies at the macro level since this year will also effectively support sector sentiment and valuation centers.

The main views of Guojin Securities are as follows:

Industrial chain: Silicon prices are catching up at an accelerated pace, which is expected to promote downstream production scheduling until terminal demand is released

1) Price: In April, the price of silicon fell rapidly, and the price difference between N/P and granular silicon narrowed; the silicon wafer sector continued to lose money, and some companies considered adopting a strategy of further reducing production or stopping production; batteries continued to fall while upstream prices continued to fall; the average price of module transactions declined due to the new unit price. Prices were relatively strong, and operating rates were differentiated. In terms of auxiliary materials, downstream module production schedules remained high, and the price of new orders for photovoltaic glass rose; in April, adhesive film production maintained a normal pace. Considering the rise in resin costs in March, the price of adhesive film increased slightly.

2) Profit: The price of silicon material fell below the company's production costs, continued losses in the silicon wafer sector, and downstream profits recovered. 3) Production schedule: Terminal production schedule remained high in April. InfoLink predicts silicon/silicon/cell/module output of 80, 67 (N type about 51), 69 (N type about 47), 58 GW, +4% month-on-month, +4%. As silicon prices bottom out, low and stable raw material prices are expected to promote downstream production scheduling and the continued release of terminal demand.

Demand: Domestic installed capacity fluctuates slightly, and overseas demand remains high

1) Domestic installed capacity: 45.74GW of PV installed capacity was added in 24Q1, of which 9.02GW was added in March, compared to -32%. We expect short-term domestic installation fluctuations to be normal, mainly due to component factories' adjustment of shipping strategies, with silicon prices not being significantly adjusted in March and domestic profits being pressured. Short-term domestic installation fluctuations are normal; against the backdrop of drastic price reductions for components and energy storage, the yield of optical storage projects remains extremely attractive globally, and demand is expected to maintain a 30% (or even higher) growth rate in 2024 Corresponding component requirements are close 700GW or more).

2) Exports: Total exports of Q1 battery modules were 76GW, +39.7% year over year, and +22.3% year over year after excluding India. Overseas inventory digestion and demand growth were further confirmed. The total export of battery modules in March was 27 GW, with a year-on-year average of +10.1%; of these, module/battery exports were 22.9/4.1GW, +16.9%/+35.6%, the January-February average was +24.0%/-32.1%, India and the Middle East exports were booming, and European demand gradually recovered. In March, the 10 European countries exported 9.1GW, accounting for 40%, and the January-February average +59%;

Collection data tracking: the N-type standard price center is basically flat

According to incomplete statistics, as of April 22, the 2024 large-scale component collection bidding/opening/scaling volume of central state-owned enterprises was 63/105/53GW, respectively, -30%/+54%/-15% compared to the same period last year. The bidding/opening/bid volume in April 2024 was 19/21/19GW, respectively, -27%/-6%/-21% compared with the same period last year. Looking at the tender structure, the N type accounted for 84% of the clearly defined component tenders from March to April 2024, and the N type accelerated penetration. In terms of price, the average price of P-type bids for the March-April 2024 mining project was 0.82-0.86 yuan/W, the average price of N-type bids was 0.87-0.91 yuan/W, and the N/P price difference remained 0.04-0.05 yuan/W. In the projects announced in April, the P-type fixed price was 0.84 yuan/W, the N-type fixed price was 0.86-0.92 yuan/W, and the bid price center was basically the same.

Investment advice:

Guojin Securities said that from the perspective of stock selection strategies, although it is more difficult for the industry to see a sharp rise in profit trends in 2024, as long as beta stabilizes, the stock price of α companies can perform. Using “certainty of positive performance growth in 2024, long-term pattern, and stability of leading position” as the two major criteria, the PV sector with outstanding α is maintained. Currently, the sector maintains the lead: Sunshine Power (300274.SZ), Artus (688472.SH), Otway (688516.SH), Follett (601865.SH), Forster () (603806.SH) etc.

Risk warning: The price of traditional energy has fluctuated greatly (downward), the industry's production capacity has expanded irrationally, the international trade environment has deteriorated, and the cost reduction of energy storage and pan-flexible resources falls short of expectations.