The Zhitong Finance App learned that Orient Securities released a research report saying that the price increase represents the expectations of leading companies to push the industry out of the quagmire of low price competition and return to a healthy competitive environment. Since 2022, prices in the entire photovoltaic industry chain have continued to decline. Among them, prices of industry-related products such as silicon, silicon wafers, and cells have plummeted. Overcapacity and slowing demand are internal causes of this round of price adjustments, and all links in the main chain have basically reached the point of losing cash. The monthly output of the silicon wafer sector continued to decline in the third quarter, and the operating rate of leading companies also began to decline. As the two major leaders in the silicon wafer industry, Longji Green Energy (601012.SH) and TCL Central (002129.SZ) raised prices simultaneously, reflecting the efforts of leading companies to return to a normal price competition environment. Combined with the two price increases for silicon materials in early August, it is expected to trigger a chain reaction.

Incident: On August 27, Longji Green Energy and TCL Zhonghuan simultaneously raised the price of silicon wafers. According to the external price of Longji Green Energy silicon wafers, the price of N-G10L is 1.15 yuan/piece, and the price of N-G12R is 1.3 yuan/piece; TCL Zhonghuan simultaneously raised the price of G10N 1.15 yuan/piece, G12R 1.3 yuan/piece, and G12N 1.5 yuan/piece. The average prices for N182, N210R, and N210 products were increased by 8 points/piece, 6 minutes/piece, and 2 minutes/piece, respectively, in response to SMM's announcement the previous day.

Price increases represent the expectations of leading companies to push the industry out of the quagmire of low price competition and return to a healthy competitive environment. Since 2022, the price of the entire photovoltaic industry chain has continued to decline. Among them, the price of silicon has dropped from a high of more than 0.3 million/ton to more than 0.03 million/ton; the price of silicon wafers fell from a high of 9.13 yuan/sheet to a low of 1.68 yuan/sheet (P type 210); the price of cells dropped from a high of 1.35 yuan/W to 0.29 yuan/W (PERC-182); and the price of modules dropped from a maximum of 2.05 yuan/W in 2022 to the current 0.72 yuan/W (P type). Overcapacity and slowing demand are internal causes of this round of price adjustments, and all links in the main chain have basically reached the point of losing cash. The monthly output of the silicon wafer sector continued to decline in the third quarter, and the operating rate of leading companies also began to decline. As the two major players in the silicon wafer industry, the simultaneous price increases of Longji Green Energy and TCL Zhonghuan reflect the efforts of leading companies to return to a normal price competition environment. Combined with the two price increases for silicon materials in early August, it is expected to trigger a chain reaction.

Policies continue to be cared for, and positive factors are frequent to protect the photovoltaic industry. In addition to tightening financing and supervision, China's policies still strongly support the energy transition and the new energy sector. Since this year, relevant departments have continuously issued multiple documents to restrict and encourage the steady development of the industry. Among them, the “PV Manufacturing Industry Specification Conditions (2024 version)” has greatly raised the entry threshold for photovoltaic manufacturing, and technical indicators for existing production capacity have also been raised accordingly to meet the current latest level; the “2024-2025 Energy Conservation and Carbon Reduction Action Plan” requires that non-fossil energy power generation account for about 39% by the end of 2025; the “Notice on Accomplishing New Energy Consumption Work to Ensure the High-Quality Development of New Energy Sources” issued by the National Energy Administration focuses on 4 major tasks. 1 is to accelerate the construction of supporting new energy grid projects, especially UHV lines with large base output. 2 is active To promote the improvement of system regulation capabilities and the coordinated development of grid sources, 3 is to give full play to the role of a power grid resource allocation platform to improve the power grid's ability to control a high proportion of new energy sources, and 4 is to scientifically optimize the utilization rate of new energy sources, and further clarify that, in principle, it must not be less than 90%. As can be seen from the intensive publication of documents in the first half of this year, policy correction continues to make efforts to provide a favorable external environment for the PV industry's supply and demand optimization process.

Investment advice and investment targets

Driven by policy and price declines, demand for PV terminals remained high in the first half of this year, with domestic installed capacity exceeding 102 GW, a year-on-year increase of nearly 30%; module exports grew at a rate of more than 33%, and many emerging overseas countries and regions showed good potential. The China Telecommunication Union raised the domestic annual forecast for new PV installations from 171 GW to 240 GW. At the industry level, enterprises have spontaneously reduced capital expenditure, suspended newly started projects, eliminated old production capacity, continued to increase investment in new technology, and actively carried out mergers and acquisitions. Therefore, Orient Securities believes that spontaneous recovery in the industry has begun, and the industry will undergo more positive changes in the future, which is expected to drive valuation repair in the secondary market.

Looking at the medium to long term, as production capacity from all links in the industrial chain is cleared at an accelerated pace, market prices are also expected to return to a reasonable level, corporate profits will gradually recover, and excellent industry targets have investment value. At present, it is recommended to focus on leading integrated enterprises and leading auxiliary materials companies with share advantages. It is recommended to focus on Tongwei Co., Ltd. (600438, unrated), Longji Green Energy (601012, unrated), Jingke Energy (688223, unrated), Jingao Technology (002459, unrated), Tianhe Solar (688599, unrated), Artes (688472, unrated), Follett (601865, unrated), Foster (603806, unrated), Sunshine Power (300274, unrated), Deye (605117, buy) Zhenjiang Co., Ltd. (603507, purchase), etc.

Risk warning

the risk that demand will fall short of expectations;

Downstream price increases do not accept risks;

Operating risks due to continued losses