On October 23, good news broke out. The A-share photovoltaic sector suddenly rose in the afternoon, and the increase hit 7.58% at one point.

Individual stocks broke out. By the close, Aineng had risen and stopped at 30CM, Daquan Energy and Haiyou New Materials rose or stopped 20CM, and Follett, Junda shares, and Tongwei shares.

Furthermore, in the Hong Kong stock market, photovoltaic solar energy stocks also rose at the same time. As of press release, GCL Technology surged more than 23%, while Follett Glass, Xinyi Solar, and Xinte Energy surged more than 10%.

A benefit detonates the market

In the afternoon, news blew up the market, that is, there was a major change in the US PV policy towards China.

According to the official US federal website, on October 21, the US Department of Commerce initiated a change review (CCR) to consider partial cancellation of anti-dumping duties and countervailing duties on Chinese crystalline silicon photovoltaic cells. The products involved are certain small, low wattage, off-grid crystalline silicon photovoltaic (CSPV) batteries.

According to information, the US has previously adopted a series of trade protection measures to restrict the export of Chinese photovoltaic products to the US. In 2011, the US Department of Commerce announced the launch of an anti-dumping and anti-subsidy “double reverse” investigation against solar cells exported from China to the US. In 2018, the US also successively initiated “Section 201” and “Section 301” to impose tariffs on products such as solar panels and photovoltaic modules imported from China, further restricting the sales of Chinese photovoltaic products in the US.

Therefore, although the range of products involved is limited, mainly used in small-scale scenarios such as solar street lights, electronic products, and auto parts, some organizations still believe that this is a positive sign of improvement and means that the US is loosening the double reverse seal on photovoltaic products.

Industry insiders said that this will directly benefit the export of photovoltaic modules and cells, and indirectly benefit PV auxiliary materials companies, and help Chinese photovoltaic companies expand overseas markets.

On the other hand, the official website of the China Photovoltaic Industry Association recently published “Analysis of the Current Cost of PV Modules: Winning a bid below cost is suspected of being illegal”, announcing that the minimum tax-inclusive cost of PV modules in October was 0.68 yuan/W.

At the same time, the Association also stated that it will pay attention to winning the bid below cost and the acts that may occur after winning the bid below cost, and will consider adopting methods such as industry-wide notifications and reports to market supervisory authorities to strengthen industry self-discipline and promote the healthy development of the industry.

Bank of China International believes that since component manufacturers need to publicly participate in the bidding for terminal power plant projects, the bid price is highly transparent and relatively easy to be supervised by a third party, so the Association's adoption of the “cost law” to guide market prices will take the lead in driving up component prices, which is conducive to recovering profits in the component sector.

Institutions: The industry is expected to usher in marginal improvements

In recent years, the photovoltaic industry has developed rapidly, and a large number of enterprises have expanded production. Coupled with “internal competition” in the industry, it has led to serious overcapacity in all sectors. In a situation where there is an imbalance between supply and demand, prices in the PV industry chain continue to fall, and companies in the PV industry chain generally lose money.

According to the Orient Securities report, the total revenue of 71 listed photovoltaic companies in the first half of the year was 530.6 billion, down 18.86% year on year; net profit to mother was 4.3 billion yuan, down 94.6% year on year.

However, by the fourth quarter, the photovoltaic industry has entered the traditional peak installed season, and positive signals have already been sent from the demand side. The data shows that in September, the number of new PV installations reached 20.89GW, up 32.38% year on year and 26.9% month on month.

Furthermore, various departments have introduced policies to limit the expansion of low-end production capacity. The Ministry of Industry and Information Technology issued the “PV Manufacturing Industry Specification Conditions (2024 version)” in July, which aims to avoid repeated expansion at a low level by guiding photovoltaic companies to reduce projects that simply expand production capacity.

The National Development and Reform Commission and the National Energy Administration jointly issued the “Notice on Matters Relating to Promoting the Healthy Development of the Photovoltaic Industry Chain”, which states that the disorderly expansion of low-end production capacity will be effectively limited through measures such as guaranteeing reasonable output of polysilicon and supporting advanced production capacity.

Looking ahead to the future market, the photovoltaic industry is expected to usher in marginal improvements as backward production capacity continues to be cleared and industry mergers and acquisitions are accelerated.

Guojin Securities pointed out that the current price and profit of the photovoltaic industry chain are clearly at the bottom. The clean-up process of backward production capacity on the supply side began in 23Q4, and has now gone through the stages of many iconic events such as second- and third-tier companies falling behind, cross-border enterprises leaving in batches, and starting integration of leading production capacity. It has now entered the middle and late stages of this round of supply-side reshuffle. It is expected that clear signals may become more frequent.

Wanlian Securities believes that at present, the prices of products such as silicon materials, silicon wafers, and modules in the photovoltaic industry are close to or below the enterprise cost line, and various links in the industrial chain continue to lose money. The current loss situation in the entire industry is not conducive to the sustainable and healthy development of the photovoltaic industry, and the downsizing of the industry is expected to accelerate. Combined with recent positive signals of supply-side reforms frequently spread in the industry, the PV industry's supply and demand pattern is expected to gradually usher in marginal improvements. Overall, the PV sector is currently undervalued. It is recommended to focus on valuation repair opportunities driven by subsequent improvements in the supply and demand pattern.