Guotai Junan Securities: Optimistic about the globalization of photovoltaic industry capacity and opportunities for technological iteration breakthroughs

According to the Zhitong Finance APP, Guojin Securities has released a research report stating that the main photovoltaic industry chain has been in continuous loss for nearly a year, with most segments entering a cash flow loss state. Under the joint action of the association's initiatives and corporate self-discipline, "production reduction and price support" has become the phased consensus action direction for leading enterprises in various segments of the industry chain. Considering that current industry capital expenditures have significantly slowed down, and with the gradual elimination of backward production capacity, the trend of oversupply in the industry is expected to gradually ease, and profitability in various segments is expected to recover.

As the prices in the industry chain quickly fell back after a rush to install, the market's pessimistic expectations for domestic demand in the second half of the year have been fully reflected in stock prices. With the introduction of local mechanism electricity price policies and the commencement of bidding work from this month, as well as stable component production scheduling, demand expectations are expected to gradually recover. The easing of China-U.S. trade relations is undoubtedly the biggest positive marginal change recently, and the upcoming exhibition will see a concentrated release of new technologies and products, leading to many positive catalysts in the future.

The main views of Guojin Securities are as follows:

Supply: Top-level attention + corporate self-discipline collaboration to drive a reversal of difficulties

The supply-side contradictions of the photovoltaic industry chain have become prominent. Since the end of last year, China's top-level policy-making institutions have repeatedly conveyed their determination to resolve the structural contradictions in key industries represented by photovoltaics. Considering the capacity structure characteristics and participant characteristics of the photovoltaic manufacturing industry, the firm believes that market forces are an indispensable and promising factor in promoting improvements on the supply side of the industry. From a market-oriented perspective, since the second half of 2024, several second- and third-tier battery module companies have sold equity or entrusted management to state-owned enterprises, accelerating industry mergers and acquisitions, and the supply-side clearance has already begun.

Currently, the main photovoltaic industry chain has been in continuous loss for nearly a year. Companies are strengthening cash management through production based on sales and scaling down, while also increasing fundraising efforts. However, there is a differentiation in fundraising capabilities among companies. Considering that most companies have asset-liability ratios exceeding 70%, it is expected that the fundraising capabilities of second- and third-tier companies will be limited, and the pressure of funding and debt repayment will gradually become prominent. Looking ahead, the firm believes that market-oriented clearance in the industry, corporate self-discipline collaboration, along with the policy coordination and supervision of relevant government departments and regulatory agencies, is expected to drive a reversal of the photovoltaic difficulties.

Demand: Stable domestic connection, overseas prosperity maintained, global demand continues to grow

The rush to install has driven high growth in domestic demand, and the lag in component shipments, along with the adjustment of domestic and foreign orders by companies, is expected to support demand during the "vacuum period." The "Shagehuang" large base and potential policy support will promote subsequent demand, with several provincial-level details of Document No. 136 being introduced to facilitate stable demand connection. The firm believes that terminal demand in the second half of 2025 will not experience the "cliff-like" decline that the market generally fears, and growth in both domestic and global demand is still expected for the whole year. Under the background of domestic rush installations, exports will maintain high prosperity, and it is expected that new photovoltaic installations will maintain a growth rate of 5%-10% in 2025, with demand for photovoltaic modules expected to rise to 650-700GW.

Under the trend of globalizing component capacity, focus on differentiated capacity advantages

The trend of re-globalization of the photovoltaic supply chain is inevitable. Trade barriers highlight the scarcity of overseas low-tariff battery cell capacity, while the rapid globalization of module packaging capacity enhances the advantage of overseas auxiliary material capacity. Looking ahead, companies with rich multinational production and operation experience and the ability to expand in different locations are expected to further expand their competitive advantages and market share during the re-globalization process, maintaining a certain degree of barrier excess profits New Technology: Focus on the Advancement and Differentiated Advantages of Three Technological Routes, Track the Penetration Rhythm of Low-cost Metal Pastes

Leading battery manufacturers are expected to break the profit dilemma caused by long-term homogenization competition in the industry through TOPCon capacity upgrades this year, and be the first to emerge from the cyclical bottom; HJT and XBC will highlight their cost-effectiveness in differentiated scenarios/markets due to their respective product characteristics; in addition, metallization remains a key link in cost reduction across all technological routes throughout the year, closely monitor the industrialization progress of low-silver/no-silver pastes and the cost reduction effectiveness after the introduction of steel meshes.

At this current point, the bank recommends focusing on the following main lines

1. Independent third-party cell suppliers expected to see value reshaping against the backdrop of globalized module capacity: JunDa Co., Ltd., DMEGC;

2. Leading equipment component manufacturers in segmented technological routes: Aiko Solar, Dier Laser, Aotai Technology, Maiwei Co., Ltd., and recommend paying attention to Jiejia Weichuang;

3. Suppliers of low-silver/no-silver metallization paste solutions: Juhe Materials;

4. Leading companies with stable operations and superior financial statements: Xinyi Solar, Flat Glass Group, Foster, LONGi Green Energy, Metron;

5. Potential beneficiaries of silicon material segment integration: Tongwei Co., Ltd.

Risk Warning

Significant (downward) volatility risk in traditional energy prices; risk of deterioration in the international trade environment; risk that cost reductions in energy storage and flexible resources do not meet expectations