According to the Zhitong Finance APP, Minsheng Securities released a research report stating that since 2023, the photovoltaic industry has been experiencing an oversupply situation, leading to a decline in product prices, inventory accumulation, and pressure on corporate profits, with varying degrees of losses occurring in various sectors. Since the second half of 2024, the policy has clearly shifted, and the industry is expected to accelerate supply clearing through price limits, production limits, and energy consumption control policies. On the demand side, domestic and foreign demand maintains a high level of prosperity, and Emerging Markets are expected to see an increase in volume. It is recommended to pay attention to Tongwei Co., Ltd (600438.SH), LONGi Green Energy Technology (601012.SH), JA Solar Technology (002459.SZ), and Trina Solar Co., Ltd. (688599.SH).

Minsheng Securities' main viewpoints are as follows:

Market review and financial data analysis.

As of November 29, the photovoltaic index has dropped approximately 2.81% since 2024, underperforming the electrical equipment index by 17.26 percentage points and the SSE Composite Index by 22.06 percentage points. In terms of financial data, the operation of the main photovoltaic industry chain has faced pressure in 2024, with profits declining sharply, significant asset impairment in the main chain, a slowdown in fixed asset growth, and an obvious increase in cash on hand, interest-bearing liabilities, and debt repayment capabilities of enterprises in the main industry chain, reflecting concerns about some companies over current capital expenditures, operational funding pressures, and future difficulties in bank credit.

Supply is expected to accelerate clearing, while domestic and foreign demand maintains high prosperity.

Since 2023, the photovoltaic industry has been experiencing an oversupply situation, leading to a decline in product prices, inventory accumulation, and pressure on corporate profits, with varying degrees of losses occurring in various sectors. Since the second half of 2024, it can be seen that the policy has clearly shifted, and the industry is expected to accelerate supply clearing through price limits, production limits, and energy consumption control policies. On the demand side, with the continuous promotion of large-scale wind and solar projects, combined with the lifting of the consumption cap and accelerated Ultra High Pressure construction, it is expected that domestic photovoltaic installations will add 250GW in 2024; overseas, the European market is accelerating inventory clearance, and Emerging Markets are expected to see volume increases. According to the SPE, it is expected that global installations will reach 544/614GW from 2024 to 2025, with growth rates of 39%/13%.

Review and Outlook of the Industry Chain

Main Industry Chain: The supply of silicon materials is declining, and with the advancement of supply-side reforms, it is expected to be the first to see capacity clearance, with high-quality capacities that consume less energy likely to deeply benefit. Silicon wafer inventory is high, and in November, the production orders for silicon wafers have decreased again month-on-month, with subsequent supply and demand expected to improve marginally. In terms of Solar Cells, N-type currently dominates the market, with some older production lines set to be phased out, resulting in a relatively good supply-demand relationship. As industry demand continues to rise, there is a significant contradiction in supply and demand, with this sector having the lowest inventory, potentially achieving great profit elasticity under the expectation of price increases and stockpiling. The USA market is facing a shortage of Solar Cells, and some manufacturers have already begun laying out relevant capacities, which are expected to benefit from high profits in the USA market. In terms of modules, leading manufacturers have significant advantages, and the photovoltaic association has proposed cost prices of 0.68 and 0.69 yuan/W for October and November respectively. With the advancement of supply-side reform, profitability is expected to rebound, and concentration is likely to continue to increase.

Supplementary Industry Chain: The profitability of the film has hit bottom, and the supply and demand pattern determines that prices and profitability may continue to stay at the bottom, with only leading enterprises able to achieve profitability through cost advantages. The supply of Glass is not overly surplus, making it easier to reshape supply and demand. Silver paste remains the largest non-silicon cost, attention should be paid to the progress in the direction of reducing silver/no-silver technology. The profitability of PV Ribbon is under pressure, and leading manufacturers have introduced new products that are expected to enhance profitability. The inventory reduction for Power Inverters is nearing its end, with demand in Emerging Markets improving. There is a bullish outlook on domestic enterprises going abroad.

For a long time, investment in China's power grid has been characterized by an emphasis on 'power generation' over 'power grid', and 'transmission' over 'distribution'. As the new power system is gradually promoted, the 'dual high' characteristics are becoming more pronounced, and the operational safety risks of the distribution network, as the 'last mile', are sharply increasing. During the 14th Five-Year Plan period, both networks will focus on distribution network construction as a key area, and the importance of the grid to distribution network construction is increasingly emphasized. In 2024, significant policies are expected to be released, providing further guidance on the details of distribution network investment and construction in the coming years, with investments in distribution transformers, secondary equipment, and other areas expected to accelerate.

Investment Suggestions: Focus on GCL TECH, Tongwei Co., Ltd, Daqo New Energy, Canadian Solar, Hainan Drinda New Energy Technology, LONGi Green Energy Technology, JA Solar Technology, JinkoSolar, Trina Solar Co., Ltd., Shanghai Aiko Solar Energy, Yubang New Materials, Sungrow Power Supply, Arctech Solar Holding, and Sineng Electric.

Risk Warning: Policy not meeting expectations, intensified industry competition leading to unexpectedly low prices, new capacity/new technology developments falling short of expectations, raw material price fluctuations exceeding expectations, overseas trade risks, etc.