Fundamentals improve faster than expected, continue to be optimistic about the photovoltaic sector

The inflection point of photovoltaic volume growth has already appeared, and the increase in module production in January exceeded expectations. According to channel research, this week, some first-tier module companies have increased their January production schedule by 5-10% compared with the plan at the end of last month, exceeding market expectations. We believe that it may reflect the expected changes in the demand for the market outlook of leading companies that are expected to come out of the off-season, and the price reduction of the industrial chain to destock is expected to come to an end. According to PVInfo, the operating rate of TOP10 module companies in January/February increased by 3/4ppt to 68%/72%.

We continue to be bullish on:

1) Overseas inventory has been eliminated. With the end of the Christmas holiday, terminal activity has taken the lead in improving;

2) China is expected to see a recovery in bidding from February to March after the Spring Festival;

3) There are signs of marginal improvement in the import trade activities of photovoltaics in the United States, and attention should be paid to the opportunities in the second quarter.

The profit redistribution of main production has entered the second half, and the profit of silicon wafer battery components is expected to be restored first. Taking Solarzoom’s quotation as an example, since the price reduction of the industrial chain in mid-November, the prices of silicon materials, silicon wafers, batteries, and modules have been reduced by 0.28, 0.42, 0.41, and 0.11 yuan/watt, and the profit per watt is -0.24, -0.11, -0.03, +0.39 yuan/watt, and the latest prices are 180 yuan/kg, 0.542 yuan/watt, 0.85 yuan/watt, and 1.84 yuan/watt (taking monocrystalline PERC182 as an example).

Looking forward to the market outlook:

1) The latest prices of silicon wafers and batteries, which took the lead in reducing prices in the early stage to remove inventory, have fallen into our pessimistic expectations for this year. The current price of silicon wafer batteries can support the mass production of components at 1.6-1.7 yuan/watt, effectively stimulating the terminal need. We believe that the marginal rebound in the operating rate of components in the near future is expected to be gradually transmitted to the inflection point of silicon wafers, cell operating rates, prices, and profits.

2) The order signing cycle of the component link is long. The order visibility of leading enterprises has reached more than 60% to 70% in the first quarter, and some of them have reached a certain degree of visibility in the second quarter. We judge that the profit of existing orders is expected to benefit from the excess adjustment of upstream prices in stages, and the mainstream prices of newly signed orders are expected to become clearer after the Spring Festival. In the era of parity, we observe that the output value of photovoltaic modules is strongly related to overseas energy prices. This year, energy prices are expected to fall. We believe that it is still possible to support the average module price of 1.6-1.7 yuan/watt.

3) The inflection point of upstream polysilicon prices may appear at the end, mainly considering that the polysilicon link is still in the inventory increase cycle (we judge that the inventory of the whole industry is expected to be more than a month, and the long-term order will be signed or it will basically recover after February), and the price is subject to the sell-off pressure or continue to fluctuate in the range of 100-150 yuan/kg.