Jingtong Finance App learned that Sinolink Securities released a research report stating that the export rebate rate for photovoltaics has been reduced from 13% to 9%, which is both expected and unexpected. In the short term, a small number of orders may see slight profit declines, but in the medium and long term, this will have a positive impact on boosting overseas and domestic market price recovery, stimulating potential demand release, easing trade friction risks, and accelerating the elimination of outdated production capacity; Power Construction Corporation of China,Ltd's 51GW component joint procurement increased by 24%, reaching a new high, with frequent positive signals in domestic demand; The sector has solidified its Q3 performance bottom, and the turning point in prosperity has arrived. The focus is on the "valuation gap, new technology growth, and survival of the fittest" as the three main investment themes.

Sinolink Securities' core views on the power and new energy industry this week are as follows:

Photovoltaics & Energy Storage

The export rebate rate for photovoltaics has been reduced from 13% to 9%, which is both expected and unexpected. In the short term, a small number of orders may see slight profit declines, but in the medium and long term, this will have a positive impact on boosting overseas and domestic market price recovery, stimulating potential demand release, easing trade friction risks, and accelerating the elimination of outdated production capacity; Power Construction Corporation of China,Ltd's 51GW component joint procurement increased by 24%, reaching a new high, with frequent positive signals in domestic demand; The sector has solidified its Q3 performance bottom, and the turning point in prosperity has arrived. The focus is on the "valuation gap, new technology growth, and survival of the fittest" as the three main investment themes.

1. The export rebate rate for photovoltaics has been reduced from 13% to 9%, which is both expected and unexpected. It brings minor bearish signals in the short term and significantly bullish signals in the medium to long term.

On the 15th, the Ministry of Finance and the State Administration of Taxation issued the "Announcement on Adjusting Export Tax Rebate Policies", which includes reducing the export rebate rate for photovoltaic silicon wafers, battery cells, and components from 13% to 9%, effective from December 1, 2024.

In China, the photovoltaic manufacturing industry chain has long had a huge crushing international competitive advantage, but is currently mired in loss-making operations due to severe overcapacity of homogenized production at this stage, and at the same time, is being accused or punished by major export destinations around the world in the name of anti-subsidy and anti-dumping. Against this background, the industry has been anticipating a reduction or even cancellation of photovoltaic product export tax refunds for some time, so this adjustment of the tax rebate rate is to some extent within the industry's expectations. However, with the current secondary market focus mainly on expectations of more direct supply-side restrictions, this adjustment to the tax rebate policy can be said to be somewhat unexpected.

From the perspective of policy influence, there are several main points:

1) For orders of components exported after December 1st, which have already been signed at a price and do not have flexible terms for potential tax policy adjustments, there may be direct profit and cash flow losses of 2-3 cents/W, but considering the significant reduction in order cycles in most overseas markets during the process of continuous product price declines over the past few years, it is estimated that the scale of these "directly affected" orders will be very limited.

2) Since the time from policy issuance to implementation is only two weeks, considering the time needed for shipping arrangements, cabin space reservations, and potential short-term freight cost increases due to potential rush shipping, it is expected that there will not be a large-scale short-term production surge and "export rush" behavior, especially for large enterprises.

3) Except for individual regions such as the USA, the current profit margin for China's photovoltaic module exports is slim or even in a loss-making state, therefore, for export orders that have not yet been priced, the full transmission of cost increases due to a reduction in tax rebate rates to selling prices will be a high probability event, and a 2-3 cents/W price increase will have a negligible impact on overseas demand, and may even potentially stimulate demand release from those who have expectations of further reduction in tax rebate rates, coupled with the industry's recovery or to drive continuous price increases of components.

4) After all, through price increase transmission policies, leading companies with stronger bargaining power and better product performance and reputation are expected to expand their overseas market share in this process, while further accelerating the elimination of capacity or enterprises lacking competitiveness.

5) At the time of the US election results, the reduction in tax rebate rates for China, represented by exports of photovoltaics, can be understood as China taking the lead in potential international trade tariff policy changes, or to some extent alleviate the hostile sentiment of international markets towards China's export industry and potential more intense punitive tariff adjustments.

6) Finally, the rise in overseas market component prices may further guide the repair of domestic component prices.

China Power Construction Corporation, Ltd. released a 51GW module + 51GW inverter plan for 2025, and a 16GWh energy storage system framework bidding announcement for 2025-2026, once again showing a positive signal of sustained domestic demand.

Previously, when the market was fully focused on the expectations of 'supply-side policies,' it is emphasized that potential 'demand-side policies' and signals should not be ignored, along with their reparative effects on the current market's demand side pessimistic sentiment. Following the release two weeks ago by six ministries of the 'Guiding Opinions on Vigorously Implementing Renewable Energy Substitution Action' and the launch of the 71.8 billion yuan Taklimakan Desert large base project by the Three Gorges Group, this week, China Power Construction Corporation, Ltd. released the largest-ever scale photovoltaic centralized procurement bidding announcement, adding another stimulus to the demand side expectations. This 51GW component tender is divided into three parts: 12GW TOPCon components for self-owned projects, 36GW TOPCon components for engineering contracting projects, and 3GW HJT components. The total quantity has increased by approximately 24% compared to the framework procurement scale of 42GW in 2024. From the perspective of bidding product types, PERC has been completely excluded, while the application penetration rate of HJT is gradually increasing.

Focus of the sector shifts back to: signal of improved prosperity, industrial technological progress, domestic/international policy progress, and performance realization, continuing to lay out the three main themes of 'value pockets, new technology growth, and survival of the fittest.'

Looking ahead, the key focus areas of the light storage sector and potential influences on sector stock prices will mainly focus on the following aspects:

1) Signals of fundamental price improvement: under the joint action of industry associations and voluntary self-regulation of enterprises, "production reduction & price support" may become the phased common action direction of leading enterprises in various links of the industry chain. The recent stabilizing trend of prices in the industry chain is significant. Pay attention to turning points in prices (silicon materials, battery cells) or inventory (glass, recent occurrences of kiln shutdowns for cold repairs, production reduction or acceleration at the end of the year); at the end of the year, after the whole industry reduces production and clears inventory, if Q1 demand at the terminal once again shows a 'non-lean season,' the probability of components scheduling and price signals exceeding expectations will increase.

2) Technological progress remains a perennial topic for the sector. During the year-end time window, catalytic signals or increasingly concentrating choices around next year's capital expenditure plans, technological roadmap & R&D direction by enterprises, focusing on changes in marginal directions such as battery technology routes, cost reductions through metallization, continues to be a key focus. Recently, patent litigations around battery component technology in the international market have become frequent, potentially influencing decisions on expansion by enterprises to some extent.

3) Domestic/international policies: domestically, the focus is on the subsequent formal implementation of the Ministry of Industry and Information Technology's 'Normative Conditions for the Photovoltaic Manufacturing Industry (2024)' and demand-side policy progress related to market-based transactions, carbon footprint assessment, etc.; internationally, amid the ample release of pessimistic sentiments towards the U.S. market, attention is on the preliminary ruling of anti-dumping duties against four Southeast Asian countries expected to be announced at the end of November (previously, the anti-subsidy duty rate was better than expected), and the recovery of U.S. market orders after the imposition of anti-dumping duties.

4) From a performance perspective, expectations for the Q4 (shipment structure, year-end impairment) / Q1 (traditional lean season) sector performance may still be slightly under pressure with relatively full expectations; focus on potential possibilities of exceeding expectations.

Investment recommendation: Actively focus on the three main themes of "undervalued opportunities, new technology growth, and survival of the fittest".

1) High-quality leading companies that are still undervalued from a static PB or expected PE perspective.

2) Manufacturers of new technology equipment / consumables / with a stronger "growth" tag.

3) Leading companies in stable patterns and "survival of the fittest" in various sectors.

Wind power

Three Gorges Group issued a procurement notice for the tower and related accessories of the Yangjiang Qingzhou Seven EPC project, signaling positive progress in the key offshore wind projects in Guangdong; Fujian Development and Reform Commission issued a tender announcement for the 2024 offshore wind power competitive allocation, including 5 sites with a total capacity of 2.4GW; Shanghai Jinshan offshore wind project Phase I obtained onshore construction permit, officially entering the construction phase, with the recent intensification of domestic offshore wind projects, it is estimated that the installed capacity of offshore wind power in 2025 will be between 14-17GW; the upward trend in offshore wind power installation capacity is clear for 2025, with a focus on recommending the segments like submarine cables and tower sections that will benefit significantly from accelerated offshore wind construction.

Intensive acceleration of domestic offshore wind projects this week. Three Gorges Group's digital procurement platform issued a procurement notice for the tower and related accessories of the Yangjiang Qingzhou Seven offshore wind project, including 500MW and a total of 39 wind turbine towers and accessories, with equipment delivery deadline set as 'no less than 8 tower sets ready for shipment by March 20, 2025, and complete supply by May 30, 2025'. Positive signals observed in the progress of key offshore wind projects in Guangdong. The offshore wind bidding has started in Fujian Province for 2024, including 5 offshore wind sites with 2.4GW installed capacity. Shanghai Housing and Urban-Rural Development Management WeChat account released a message that the Phase I of the Jinshan offshore wind power project has obtained the onshore construction permit, officially entering the construction phase.

End-of-year acceleration in the construction promotion of offshore wind projects, based on the progress of various offshore wind projects, it is expected that the installed capacity of offshore wind power in 2025 will be between 14-17GW. Since September, the acceleration of domestic offshore wind bidding and construction has been evident, with domestic offshore wind project unit bidding scale of about 3.3GW from September to November (as of the 17th), and bid announcements indicating delivery time all show delivery in 2025/full capacity grid connection. At the micro level, based on the progress of various provincial and municipal offshore wind projects in China, assuming that projects that have completed unit/EPC bidding at the current stage will achieve full capacity grid connection in 2025 (except for those with delivery period marked for 2026), it is estimated that the domestic offshore wind grid connection scale in 2025 will be 17GW. Even assuming that some projects such as Longyuan Sheyang, Fanshi II, and Three Gorges Dafeng projects may not achieve full capacity grid connection next year due to the significant impact of project scale, the installed capacity of domestic offshore wind power in 2025 can still reach 14GW.

Next year, the clear trend of high growth in offshore wind power installation is identified, focusing on the deep benefit from the accelerated construction of offshore wind power such as submarine cables and tower sections: 1) Submarine cables: key offshore wind projects in Guangdong, including Yangjiang Qingzhou 5-7, Fanshi 1-2, Yangjiang Sanshandaowu 5-6 projects are all using 500kV high-voltage submarine cables for power transmission, with higher project value and profit capabilities than 220kV submarine cables. The bid for the export cable for Fanshi 1-2 has been completed this year. With the progress of the project construction, it is expected that the bidding for submarine cables of Qingzhou 5-7 and Sanshandaowu 5-6 projects will gradually proceed; 2) Tower sections: This year, due to the lower-than-expected starting rate of tower section related to offshore wind power, profits have been continuously under pressure. With the accelerated construction of offshore wind power, the starting rate of tower section enterprises is expected to rise, thereby driving the dilution of fixed costs and gradually restoring profits.

Key recommendations at the current point focus on three main lines:

1) Acceleration of domestic offshore wind power construction—① Logic: Short-term bullish on the acceleration of offshore wind projects in the later period of the 14th Five-Year Plan, the rapid release of performance elasticity brought by the approval of offshore use in Guangdong and Jiangsu, and long-term bullish on the increase in value of the offshore wind power industry chain under the '15th Five-Year Plan.' ② Catalyst: Bidding and construction progress of key projects in Guangdong, Jiangsu, turning points in the performance of key individual stocks, introduction of policies on offshore use, release of plans for offshore wind power in coastal provinces under the '15th Five-Year Plan.'

2) Improvement in profits of complete units and components—① Logic: The domestic land-based wind turbine unit bidding prices remain stable, with the signing of industry self-discipline agreements expected to improve price competition. With a 93% year-on-year increase in bidding scale for wind turbines in the first three quarters of the year and an increase in the proportion of large-scale wind turbines, components such as blades and castings are expected to see price increases. ② Catalyst: Progress in price negotiations between component and complete unit enterprises at the year-end, improvement in raw material prices, wind power installation data exceeding expectations.

3) Overseas order overflow—① Logic: The construction of offshore wind power in Europe has entered a new growth cycle, with significant supply-demand gaps in local single pile and submarine cable segments. Leading domestic companies are expected to benefit from overflow orders. ② Catalyst: Disclosure of key company orders, overseas interest rate cuts exceeding expectations.

Grid

Siemens Energy disclosed its Q4 FY2024 financial report, exceeding market expectations. The Q4 grid business achieved revenue of 2.7 billion euros, up 34% year-on-year, achieving a net income of 0.277 billion euros, up 75% year-on-year, with new orders reaching 5.4 billion euros, up 136% year-on-year, and cumulative orders in hand reaching 33 billion euros. In terms of capacity, Siemens Energy plans to invest 1.1 billion euros for capacity expansion, with two new factories scheduled to start production in 2026 and a transformer capacity increase of 85GVA. The company guides a year-on-year revenue increase of 23%-25% for FY25, with a profit margin of 10%-12%. It aims to maintain low double-digit revenue growth by FY28 and increase profit margin to 13%-15%, with continued high market activity overseas in the electrical equipment market.

On November 12th, Siemens Energy released its Q4 FY2024 financial report, with the grid business being the fastest-growing business area for the company. The company's grid solutions/products are ranked first/second in the global market, maintaining a leading position in the industry. Siemens Energy stated that considering the push from population growth, improved living standards, and the trend of electrification, it is expected that global electricity demand will reach 0.031 millionTWh by 2024, further increasing to 0.036-0.039 millionTWh by 2030. In addition, driven by new energy grid connections, replacement of aging infrastructure, and rapid growth in data centers, the global grid market size is expected to reach 201 billion euros by FY2030, with a compound annual growth rate of 12%.

Grid Business: 1) Revenue & Profit: Achieved revenue of 2.7 billion euros in Q4, up by 34% year-on-year, and achieved a net profit of 0.277 billion euros, up by 75% year-on-year; 2) Orders: New orders of 5.4 billion euros in Q4, up by 136% year-on-year, with a cumulative backlog reaching 33 billion euros; 3) Capacity: Invested 1.1 billion euros in capacity expansion, set to commission two new factories in 2026, increasing transformer capacity by 85GVA; 4) Performance Guidance: Achieve a year-on-year revenue growth of 23%-25% in the 2025 fiscal year, with a profit margin of 10%-12%, and aim for low double-digit revenue growth by the 2028 fiscal year, with a profit margin increase to 13%-15%.

On November 12, Zhang Zhigang, Chairman of State Grid Corporation of China, met with Huang Tianyuan, President of Singapore Energy Group at the company's headquarters. Zhang Zhigang expressed his anticipation for both sides to strengthen exchanges and cooperation in project stable operation, third-party market development, to achieve mutual benefit, enhance international influence. Huang Tianyuan stated that Singapore Energy Group is committed to promoting the growth of renewable energy and clean energy transition, increasing investment efforts, steadily expanding the scale of business development. He hopes to further cooperate closely with State Grid Corporation, deepen exchanges and cooperation, expand collaboration areas, and explore market potential.

Outlook for the fourth quarter: In terms of international business, the orders signed in 2023 for power transformers, high-voltage switches, and smart meters are expected to enter a phase of concentrated delivery. Domestically, ultra-high voltage and power transmission projects are seeing intensive bidding, with direct current projects being delivered continuously. There is also room for improvement in domestic offshore new energy + industrial sectors, reaffirming the domestic and overseas opportunities exceeding expectations. Key enterprises in power transmission and transformation generally meet/exceed expectations in the first half of the year, and with order realization in the second half of the year, the sector is expected to have further elastic space.

In 2024, it is continuously recommended to invest in four structured opportunities in the electric power equipment sector:

1) Overseas Expansion of Power Equipment — ①Logic: The outlook for the export of Chinese power equipment (smart meters, transformers, combined electrical appliances, etc.) is clearly improving, with a significant mismatch in overseas supply and demand. Some electrical equipment is in a large-scale replacement phase, and leading companies that have actively expanded overseas in the past are expected to undergo a round of valuation reshaping. ②Follow-up Catalysts: Overseas key area power grid investment planning and implementation plans, customs data surpassing expectations, individual stocks with overseas orders/shipping/performances exceeding expectations.

2) Ultra-High Voltage Lines & Main Networks — ①Logic: There is a strong demand to transmit power from large wind and solar energy bases, with multiple line gaps still existing. Meanwhile, the construction of main networks and supporting developments in new energy sources, etc., have seen an uptrend in bidding scale. ②Catalysts: New disclosure of lines, flexible transmission rate improvements, bidding amounts/new stock bidding share exceeding expectations, individual stock performance exceeding expectations or advancing realization pace.

3) Electricity Market Reform: In 2023, major electricity reform policies were intensively introduced, with expectations of continued policy reinforcement in 2024. Electricity reform has entered a period of clear guidance, becoming the main theme for at least the next two years. Policies will drive the industry to enter the second growth curve, with more detailed policy regulations expected to create new stimuli subsequently.

4) Distribution Network Transformation — ①Logic: In terms of policy, in early March and early April, the top-level authorities respectively issued the "Guiding Opinions on High-Quality Development of Distribution Networks" and the "Implementation Measures for Incremental Distributed Power Business Distribution Area Division." ②Catalysts: Top-level policies being issued, provincial tendering exceeding expectations, individual stocks breaking through in bids/raising shares.

Hydrogen Energy and Fuel Cell

Another pure hydrogen energy company went public, leading the way for a wave of pure hydrogen companies to go public again. The consistent increase in corporate listings combined with the high certainty of fuel cell vehicle volume growth has reignited industry enthusiasm and is expected to boost sector sentiment. The Ministry of Finance issued an early reward of 1.625 billion yuan, with national funds boosting enterprises beyond expectations, accelerating the volume of fuel cell vehicles by 2025.

Another pure hydrogen energy company went public, igniting sector sentiment. On November 15, National Hydrogen Energy (02582) was officially listed on the Hong Kong Stock Exchange at an offer price of 65 Hong Kong dollars per share. It offered 6 million H shares globally, with 0.7253 million shares available for sale to the public in Hong Kong, accounting for 12.09%, and 5.2747 million shares available for international sale, accounting for 87.91%. Over half of the proceeds from this IPO will be used to expand the company's production capacity, around 33.9% for boosting research and development capabilities, and the remaining 10% is intended for operating funds and general corporate purposes to support business growth. National Hydrogen Energy is a leading player in hydrogen energy storage and transport equipment, becoming the third pure hydrogen energy company to go public following Yihuatong and Sinosynergy. Additionally, the top fuel cell system enterprise has successfully completed its listing hearing on the Hong Kong Stock Exchange, rekindling industry enthusiasm with a wave of pure hydrogen companies going public once again, expected to boost sector sentiment. At the same time, the industry's fundamentals remain robust. According to the "Long-term Development Plan for the Hydrogen Energy Industry (2021-2035)", the target is no fewer than 50,000 vehicles by 2025, with a current shortfall of 25,000 vehicles. With additional subsidies distributed to demonstration city clusters, rapid development of hydrogen energy demonstrations, cost reductions in fuel cell vehicles, and the anticipation of pressure targets, subsidies, and cost parity, the fuel cell vehicle sector is set to see a peak in volumes. Components of fuel cells, such as systems, stacks, and hydrogen storage containers, which have high value, will benefit first.

The Ministry of Finance issued an early reward of 1.625 billion yuan, accelerating fuel cell vehicle volume by 2025. On November 15, the Ministry of Finance, following the funding distribution plan proposed by various demonstration city clusters for fuel cell vehicles, provided advance funding for energy conservation and emission reduction subsidies for provinces (regions, cities) in 2025, disbursing 1.625 billion yuan for the second year's fuel cell vehicle demonstration applications, a 42% increase from the first year's 1.142 billion yuan. This covered 25 cities and districts in 10 provincial-level administrative regions including Beijing, Tianjin, Hebei, Inner Mongolia, Shanghai, Zhejiang, Jiangsu, Shandong, Henan, and Ningxia, adding Beijing Economic and Technological Development Zone, Handan, Xinji, Suzhou, Luoyang, Jiaozuo, and Ningdong Energy and Chemical Industry Base. Among these, Tangshan received 398.3 million yuan, Shanghai 313.49 million yuan, Zhengzhou 263.68 million yuan, Beijing 243.08 million yuan, and Tianjin 112.07 million yuan, ranking in the top five. The subsidies announced in this round for the second year, along with those announced in April of this year for the first year, amount to a total of approximately 2.767 billion yuan, with national funding boosting enterprise recovery. The speed of the second round of subsidies exceeded expectations, bolstering downstream fuel cell companies and driving confidence in hydrogen vehicles, accelerating the volume of fuel cell vehicles by 2025.

The trading logic of the hydrogen sector is based on the further expected policy drive and continued growth in overall volume: 1) The hydrogen sector is expected to further adjust from a policy perspective; 2) The overall sector momentum is gradually shifting from the cost end to the demand end; 3) The commercial model of 'green electricity, green hydrogen + fuel cell vehicle operation' is expected to form a preliminary loop.

Upstream: Accelerating economic viability, expecting a dual drive of bidding and consumption;

Midstream: Pipeline planning and liquid hydrogen regulations are implemented, with the Big Three Oil Companies driving development;

Downstream: Fuel cell technology is on the rise, with toll fee waivers expected to continuously drive the sector.

Risk warning:

Policy adjustments, lower-than-expected execution effects: Although wind power generation has gradually achieved grid parity, the energy transition and dual-carbon target tasks still rely heavily on policy guidance. If the introduction and execution effects of relevant policies are lower than expected, it may affect the development of the related industry chain.

Industry chain price competition intensity exceeding expectations: Against the backdrop of clear dual-carbon targets, the capacity expansion of the new energy industry has significantly accelerated. There are signs of a large influx of cross-border capital, which may lead to the risk of a stage competition pattern and deterioration of profitability in some links due to the degree of overcapacity exceeding expectations.