① A large amount of capital has flowed into the leading photovoltaic industry chain, and the industry's overseas orders and domestic installed capacity are growing; ② Prices upstream and downstream of the photovoltaic industry chain were previously sluggish, and profits were under pressure, but extremely low prices accelerated the clearance of the industry; ③ A symposium on high-quality development of the photovoltaic industry was held recently, and the agency believes that the bottom of the mid-cycle has arrived.
Financial Services Association, May 22. This afternoon, PV concept stocks set off a wave of ups and downs. The rapid rotation of various themes and styles has become the main direction of capital inflows. Longji Green Energy received a net purchase of more than 1 billion dollars from the main capital, and TCL Central received a net purchase of more than 600 million yuan. Northbound and institutional capital appeared on the Dragon Tiger list after the market. What are the factors behind the collective rise in various sectors of the photovoltaic industry?
The Middle East region has become a new hot spot for China's PV industry to “go global”
While developing the domestic market, China's photovoltaic industry is also seeking to go global. Although it is more difficult to export to the US, it is still booming in the Middle East. According to the official WeChat account of the China Photovoltaic Industry Association CPIA, the China Photovoltaic Association's delegation to the UAE returned with a full load this month. As early as 2016-2017, Saudi Arabia launched the “Vision 2030” and the “2020 National Transformation Plan”. Since it was proposed to vigorously develop natural gas and new energy, China's new energy enterprises have begun to “enter” Saudi Arabia and other countries. As the central project of Saudi Arabia's “Vision 2030”, its high-tech city plan, New Future City (Neom), initially plans to build a $500 billion zero-carbon city, and is also closely cooperating with Chinese photovoltaic equipment marketing companies.
In recent years, the amount of photovoltaic products exported by China to the Middle East has been rising steadily. Since last year, photovoltaic companies including GCL Technology, TCL Central, Trina Solar, and CITIC Expo have announced investment plans in the Middle East. The planned production capacity includes polysilicon, silicon wafers, battery modules, and auxiliary materials.
Extremely low prices in the photovoltaic industry chain: production capacity is being cleared at an accelerated pace, and there are now opportunities in the field of new technology
From a fundamental perspective, in addition to the significant increase in exports of photovoltaic products last year, domestic PV installations are still growing rapidly. On May 17, the National Energy Administration released national power industry statistics for January-April. The installed capacity of solar power generation is about 320 million kilowatts, an increase of 23.6% over the previous year. It is worth noting that last year, China's new PV installed capacity accounted for more than 15% of the world's total installed capacity, which is almost equivalent to Europe's cumulative PV installed capacity.
In terms of performance, earnings season data shows that in the first quarter of 2023 and 2024, the PV industry's revenue and net profit to mother both declined, while net profit to mother declined particularly seriously. At the same time, gross margin and net profit margin also declined significantly. Minmetals Securities said that the main reason is that prices in the industrial chain continue to decline, putting pressure on profits. At the same time, inventory depreciation and depreciation of old production lines further reduce net interest rates. However, while the main materials were under pressure, the performance of some auxiliary materials exceeded expectations. Some of them included new technologies, such as silver paste, and accelerated overseas demand, such as inverters, etc., which showed performance that exceeded expectations.
Judging from the valuation level, judging from the Wande PV Index (884045.WI) PE (TTM) for the past five years, the PV industry's valuation returned after the earnings season, but it is still at 21% of the five-year valuation. The current point has also been relatively low in the past ten years.
Wande Photovoltaic Index (884045.WI) has valued PE (TTM) in the past five years
Previously, upstream and downstream prices in the PV industry chain were sluggish. According to the Pacific Securities Power Equipment and Renewable Energy Group, as upstream extremely low prices continue, it is expected that supply-side clearance will accelerate. Irrational prices will accelerate the depletion of cash flow for second- and third-tier companies. At the same time, we should also pay attention to marginal changes in PV demand. The biggest logic is that lower prices will surely lead to more demand. Currently, we have seen this trend in the Middle East and North Africa. The installed PV capacity in the Middle East and North Africa is expected to reach 40 GW in 2024, and the growth rate is still expected to be around 30% in the next few years; at the same time, the expansion of new technology applications is expected to exceed expectations during the trough. For example, N-type BC and 0BB are expected to accelerate application.
The spot price of polysilicon fell to a low level in recent years
The high-quality development path of the photovoltaic industry is clear
In response to the previous situation where prices in China's photovoltaic industry chain have been falling all the way down and business operations are under pressure, the China Photovoltaic Industry Association recently organized a “PV Industry High Quality Development Symposium” in Beijing, which mentioned that the tangible role of the good government should be given full play, including optimizing the guiding role of PV manufacturing industry management policies in industry capacity construction, improving key technical indicators; standardizing and managing investment promotion policies of local governments to establish a unified national market; adapt to the characteristics of rapid iteration of photovoltaic technology, establish effective intellectual property protection measures; encourage industry mergers and restructuring, and smooth market exit mechanisms; The impact of vicious competition in below-cost sales; ensuring the steady growth of the domestic photovoltaic market, exploring the application of advanced technology through demonstration projects, and changing the situation of winning bids at low prices, etc.
What are the concerns about the pace of PV's rebound during the market theme rotation period?
According to the opinion of the Pacific Securities Power Equipment and New Energy Group, it is currently a good opportunity for a countercyclical and long-term layout of the main energy industry chain. As for the photovoltaic and electric vehicle industry chain, it is currently at the bottom of the mid-cycle. It is recommended that the layout be low. Currently, the position of photovoltaics is better.
Based on a fundamental analysis of the industry, Fangzheng Securities pointed out that previously, due to irrational price downturn caused by inventory accumulation, the downstream price pressure in the industry was severe. After the space was squeezed, it is expected that the bottom of silicon prices will already be at the bottom, and the price of photovoltaics will enter the bottom. Due to cost and electricity price factors, many manufacturers are in a state of loss, further limiting the downside of prices. Cell and component companies implementing a low inventory strategy are expected to benefit. However, after the release of downstream demand, the auxiliary materials sector is also expected to benefit from the logic of volume increase.