According to the research report released by Soochow Securities, in 2023, the photovoltaic industry will experience a supply-demand imbalance after TOPCo's large-scale production expansion, which will put pressure on downstream performance and slow down production expansion, and the capacity needs to be cleared. However, each cycle of the photovoltaic industry is driven by technological iteration. On the silicon wafer side, silicon wafer thinning, low oxygen single crystal furnaces, and tungsten wire diamond cutting contribute to technological innovation; on the cell side, HJT with new quality production capacity has accelerated cost reduction and efficiency improvement, and since the end of 2023, HIT modules have occupied an important position in the bidding of central enterprises. In terms of overseas markets, with the release of self-built capacity in overseas countries/regions such as the United States, Europe, India, and the Middle East, as well as the rise of the overseas layout of China's photovoltaic industry chain, domestic equipment manufacturers are embracing opportunities to go global.

Soochow Securities has selected 11 key symbols in the photovoltaic equipment industry: Zhejiang Jingsheng Mechanical & Electrical, Qingdao Gaoce Technology, Liancheng CNC, Suzhou Maxwell Technologies, Shenzhen S.C New Energy Technology Corporation, Wuhan DR Laser Technology Corp., Wuxi Autowell Technology Co., Ltd., Yingkou Jinchen Machinery, KBC Corporation, Shuangliang Eco-Energy Systems, and Robotechnik Intelligent Technology. In terms of revenue, the total revenue for the first half of 2024 reached 41.423 billion yuan, a year-on-year increase of 11%, showing a slower growth rate compared to 2023. In terms of profitability, the total net income attributable to the parent company in the first half of 2024 reached 4.128 billion yuan, a year-on-year decrease of 31%, mainly due to the slowdown in order acceptance and the impact of more provision for impairment. Profitability is at a low level, with a slight decrease in the R&D expense ratio in the first half. The overall gross margin for the first half of 2024 was 26.39%, a year-on-year decrease of 2.59 percentage points; the net margin was 9.97%, a year-on-year decrease of 6.02 percentage points, mainly due to the impact of provision for impairment of inventory and accounts receivable; and the operating expense ratio was 8.58%, a year-on-year decrease of 1.78 percentage points. The R&D expense was 1.115 billion yuan, a year-on-year decrease of 46%, and the R&D expense ratio was 2.69%, a year-on-year decrease of 2.83 percentage points.

The future highlights of the photovoltaic equipment industry are as follows: (1) Clearance of downstream and technological iteration: In 2023, after TOPCo's large-scale production expansion, the photovoltaic industry will face a supply-demand imbalance, with downward pressure on downstream performance and slower production expansion, and the capacity needs to be cleared. However, each cycle of the photovoltaic industry is driven by technological iteration. On the silicon wafer side, silicon wafer thinning, low oxygen single crystal furnaces, and tungsten wire diamond cutting promote technological innovation; on the cell side, new quality production capacity HJT has accelerated cost reduction and efficiency improvement, and since the end of 2023, HIT modules have occupied an important position in the bidding of central enterprises; on the component side, new technologies such as 0BB, light-transmitting adhesive film, and grid stacking have promising futures. (2) Overseas opportunities: With the release of self-built capacity in overseas countries/regions such as the United States, Europe, India, and the Middle East, as well as the rise of the overseas layout of China's photovoltaic industry chain, domestic equipment manufacturers are embracing opportunities to go global.

Investment advice:

For the silicon wafer segment, the main recommendations are Zhejiang Jingsheng Mechanical & Electrical (300316.SZ), which is a leading silicon wafer equipment company; for the slicing processing segment, Qingdao Gaoce Technology (688556.SH) with gradually realized logic for outsourced slicing; for the solar cell segment, the main recommendation is Suzhou Maxwell Technologies (300751.SZ), which is a leading HJT equipment company; for the module equipment segment, the main recommendation is Wuxi Autowell Technology Co., Ltd. (688516.SH), which is a leading tabber stringer machine company.

Risks to be aware of: The installed capacity of photovoltaics may not meet expectations, and the progress of new technological upgrades may not meet expectations.