Zhitong Finance and Economics APP learned that Huaan Securities issued a research report stating that in 2024H2, the photovoltaic sector is expected to enter the final stage of this round of downturn cycle. Currently, the accumulation of bullish factors in the sector is gradually increasing, and there is no new addition to the marginal bearish factors. The bottom is not pessimistic. The current bearish situation in the sector is relatively fully recognized and reflected by the market, including prices falling below the company's cash cost, declining capacity utilization rates, project delays or suspensions, and most companies' cash flows cannot support long-term losses. At present, the photovoltaic sector is more concerned with the stability and rebound of beta, and subsequent market trends are driven by factors such as production scheduling, demand, clearance, and price increases. Subsequent bullish factors in the sector will gradually accumulate. To cross the cycle, the company's cash flow and cost advantages are more important.

Key Points: The company's performance declined due to the impact of orders from US customers. According to the company's 23-year annual report, the company achieved a revenue of 471 million yuan (YOY-1.31%); net income attributable to the parent company was 146 million yuan (YOY-20.19%), and the 23-year performance decline was mainly due to (1) The company's endoscope body shipments increased significantly, and the actual launch time of the new system for US customers was postponed compared to the original plan, affecting the company's shipment volume; (2) The company implemented stock-based incentives in 23 years, resulting in an increase in share-based payment expenses; gross margin was 63.72% (YOY-0.63pp). According to Wind, the company achieved a revenue of 118 million yuan in 24Q1 (YOY-20.74%), net income attributable to the parent company was 38 million yuan (YOY-20.68%), and the decline in performance was mainly due to the scale of lens body shipments in 23Q1, which doubled compared to previous years, and the high base period had an impact on this period's performance.

In 2024H2, the photovoltaic sector is expected to enter the final stage of this round of downturn cycle. Against the background of the “global demand growth rate of the PV industry in 2024 decreased year-on-year + rapid release of supply”, after experiencing the rapid fall of prices in the main Tier 1 companies of the industrial chain in 2024H1, the main industrial chain companies entered the stage of comprehensive negative cash cost. The cash flow of most companies can only support losses for up to 2 years. Considering the situation of cash flow, it may have reached the end of the downturn cycle.

Currently, the accumulation of bullish factors in the sector is gradually increasing, and there is no new addition to the marginal bearish factors. The bottom is not pessimistic. The current bearish situation in the sector is relatively fully recognized and reflected by the market, including prices falling below the company's cash cost, declining capacity utilization rates, project delays or suspensions, and most companies' cash flows cannot support long-term losses. The photovoltaic industry will gradually enter the bottom of cash flow and capital expenditure because cash cannot support losses.

At present, the photovoltaic sector is more concerned with the stability and rebound of beta, and subsequent market trends are driven by factors such as production scheduling, demand, clearance, and price increases. Subsequent bullish factors in the sector will gradually accumulate. To cross the cycle, the company's cash flow and cost advantages are more important.

Investment advice:

1. The logic of the photovoltaic cycle deduction, the bottom of the cycle should pay more attention to cash flow, and choose links and companies with better cash flow. Focus on integrated components, silicon materials, and related companies in the industry chain, including Ja Solar Technology, Tongwei Co., Ltd., Daquan Energy, and Longi Green Energy Technology.

2. The logic of the photovoltaic cycle deduction, only companies with the most cost-effective can cross the cycle, and choose companies with higher operational stability in the steepest part of the cost curve. Focus on film, silicon material links, and related companies in the industry chain, including Hangzhou First Applied Material, Tongwei Co., Ltd., and Daquan Energy.

Risk warning:

1. The risk of slower than expected pace of clearing excess capacity. The slower pace of clearing excess capacity will affect the bottom-finding pace of the sector's downturn cycle.

2. The risk of global photovoltaic demand being lower than expected. The lower-than-expected demand for photovoltaics will exacerbate the supply-demand imbalance.

3. The risk of deviation between estimation and actual situation. Estimation and actual situation may deviate, and actual situation should prevail.