According to CPIA, domestic polysilicon production in the first half of 2024 is about 1.06 million tons, a year-on-year increase of approximately 60.6%. The output of silicon wafers is about 402 GW, a year-on-year increase of approximately 58.9%. The production of solar cells is about 310 GW, a year-on-year increase of approximately 37.8%, and the output of modules is about 271 GW, a year-on-year increase of approximately 32.2%. The production capacity in each major segment continues to show an upward trend.
According to the Zhito Finance APP, Debang Securities released a research report stating that the photovoltaic sector has undergone adjustments for more than two years, and the current PB valuation is at the bottom range of the last decade. After more than two years of adjustment, pessimistic expectations have been sufficiently reflected, and the market has fully reacted to negative news from the sector. As the fundamentals bottom out, the sector has undergone ample adjustment, and market risk appetite is increasing, resulting in a high safety margin for the sector. It is recommended to pay attention to leading enterprises with relatively high performance certainty and enterprises whose profitability is expected to gradually recover.
Debon Securities' main points are as follows:
In the first nine months of 2024, new installed photovoltaic capacity in China continued to grow, with photovoltaics being the dominant source of newly added power generation capacity.
On October 21, the National Energy Administration announced nationwide statistics for the electricity industry from January to September. From January to September 2024, China's new photovoltaic installed capacity reached 160.88 GW, a year-on-year increase of 24.77%. In September, the new photovoltaic capacity was 20.89 GW, a year-on-year increase of 32.38%. In the first nine months of 2024, photovoltaics accounted for the majority of new power generation capacity.
The cumulative new power generation capacity in China from January to September 2024 totals 242.58 GW, an increase of 31.65 GW year-on-year. Among them, hydropower added 7.97 GW, an increase of 0.09 GW year-on-year; thermal power added 33.43 GW, a decrease of 6.01 GW year-on-year; nuclear power added 1.19 GW, the same as last year; wind power added 39.12 GW, an increase of 5.64 GW year-on-year; and solar power generation added 160.88 GW, an increase of 31.94 GW year-on-year. From the perspective of the new installed capacity share of various types of power generation in the first three quarters of 2024, the share of newly added photovoltaic installed capacity is absolutely dominant, with photovoltaics, wind power, nuclear power, thermal power, and hydropower accounting for 66.32%/16.13%/0.49%/13.78%/3.29%, respectively.
In the first three quarters of 2024, among the new photovoltaic installed capacity, distributed photovoltaic installations slightly exceeded centralized photovoltaic installations, with commercial and industrial distributed installations performing particularly well.
In the structure of photovoltaic installation, in the first three quarters of 2024, domestic centralized new installations reached 75.66 GW, accounting for 47.03%, while distributed new installations were 85.22 GW, accounting for 52.97%. Among these, household photovoltaic new installations accounted for 22.8 GW, representing 14.17%, and commercial photovoltaic new installations accounted for 62.42 GW, representing 38.8%. By the end of the third quarter of 2024, the total installed photovoltaic capacity in china was 772.25 GW, of which centralized photovoltaic capacity reached 430.35 GW, accounting for 55.73%, and distributed photovoltaic capacity reached 341.91 GW, accounting for 44.27%. In this, household photovoltaic capacity reached 138.52 GW, accounting for 17.94%, and commercial photovoltaic capacity reached 203.39 GW, accounting for 26.34%. Compared to the structure of photovoltaic installations at the end of 2023, the share of distributed photovoltaic installations has seen an increase.
In the first three quarters of 2024, overseas market demand remained strong, while domestic photovoltaic module exports showed an increase in volume but a decrease in price.
According to relevant media and customs data, during the first three quarters of 2024, china exported approximately 186.77 GW of modules, an increase of 18% compared to 157.65 GW in the same period last year. However, the export value was 22.769 billion USD, a decrease of 30.28% compared to 32.646 billion USD in the same period of 2023. From January to September 2024, china's photovoltaic module export value experienced a significant decline, largely due to the substantial drop in module prices compared to the same period last year.
According to Infolink, from January to September this year, the cumulative demand in the European market was approximately 77.7 GW, a decrease of 9% compared to 85.33 GW in the same period last year; in the Asia-Pacific market, the cumulative demand was approximately 54.13 GW, an increase of 62% compared to 33.39 GW last year; in the Americas market, the cumulative demand was approximately 24.31 GW, an increase of 10% compared to 22.04 GW last year; in the Middle East market, cumulative demand reached approximately 22.89 GW, a significant increase of 122% compared to 10.32 GW last year; in the African market, cumulative demand was approximately 7.74 GW, an increase of 18% compared to 6.58 GW last year.
The production capacity of various links in the industry chain continues to grow, while prices are gradually declining, entering a bottoming out phase.
According to CPIA, in the first half of 2024, domestic polysilicon output was about 1.06 million tons, a year-on-year increase of approximately 60.6%, with silicon wafer output around 402 GW, up approximately 58.9%, solar cell output approximately 310 GW, up about 37.8%, and module output approximately 271 GW, up around 32.2%. The production capacity in all major segments continues to show a growth trend. The industry chain prices are gradually declining, entering a bottoming out phase.
Taking the statistical range from December 27, 2023, to November 6, 2024, according to the infolink consulting public account, the average price of polysilicon dropped from 65 yuan/kg to 40 yuan/kg, a decrease of 38.46%; the price of monocrystalline P-type silicon wafers of 182mm dropped from 2 yuan/piece to 1.15 yuan/piece, a decrease of 42.5%; the price of monocrystalline P-type silicon wafers of 210mm dropped from 3 yuan/piece to 1.7 yuan/piece, a decrease of 43.33%; the price of monocrystalline N-type silicon wafers of 182mm dropped from 2.2 yuan/piece to 1.2 yuan/piece, a decrease of 45.45%; the price of monocrystalline N-type silicon wafers of 210mm dropped from 3.25 yuan/piece to 1.45 yuan/piece, a decrease of 55.38%; the price of monocrystalline PERC solar cells of 182mm dropped from 0.36 yuan/W to 0.275 yuan/W, a decrease of 23.61%; the price of monocrystalline PERC solar cells of 210mm dropped from 0.37 yuan/W to 0.28 yuan/W, a decrease of 24.32%; the price of TOPCon solar cells of 182mm dropped from 0.47 yuan/W to 0.275 yuan/W, a decrease of 41.49%; the price of 3.2mm coated photovoltaic glass dropped from 26.5 yuan/square meter to 21.25 yuan/square meter, a decrease of 19.81%; and the price of 2.0mm coated photovoltaic glass dropped from 17.5 yuan/square meter to 12.5 yuan/square meter, a decrease of 28.57%.
Multiple links in the industry chain are experiencing losses, but the profit margins in some segments improved significantly in the third quarter of 2024.
Affected by price declines in the industry chain and other factors, the revenue and profits of multiple links in the photovoltaic industry chain have both decreased. A review of the market situation for the first three quarters of 2024 was conducted by selecting representative companies from various links in the industry chain, with the companies in the A-share photovoltaic sector participating in the statistics shown in the table below. The sampled stocks for the period Q1-Q3 of 2024 achieved revenue of 510.815 billion yuan, a year-on-year decrease of 26.60%, and a net income of -11.753 billion yuan, a year-on-year decrease of 115%.
Looking at it by segment, both the main industry chain and auxiliary material segments are generally poor. Revenue and net income have significantly decreased across segments including silicon materials, silicon wafers, solar cells, modules, encapsulants, and glass. The inverter segment has seen a slight increase in revenue and net income, while the silver paste segment has shown increased revenue without increased profits. From the perspective of gross margin and net margin, the gross margin and net margin in each sub-segment of the sampled stocks for Q1-Q3 2024 have decreased year-on-year, but there is a noticeable improvement in multiple segments on a quarter-on-quarter basis in Q3 2024.
Policy efforts on both the supply and demand sides are laying the foundation for the fundamentals of the photovoltaic sector.
The China Photovoltaic Industry Association held a special seminar in Shanghai on October 14, 2024, to prevent 'involution-style' vicious competition in the industry. Entrepreneurs and representatives communicated fully on 'strengthening industry self-discipline, preventing 'involution-style' vicious competition, reinforcing the market mechanism of survival of the fittest, and facilitating the exit channels for outdated and inefficient production capacity' and reached a consensus on the healthy and sustainable development of the industry.
The China Photovoltaic Industry Association compiled, counted, analyzed, and organized data to estimate the cost of photovoltaic modules for October 2024, hoping to provide the market with authoritative cost data for reference by the entire industry and government regulatory departments, promoting healthy industry development. The National Development and Reform Commission and five other departments issued the 'Guiding Opinions on Vigorously Implementing Renewable Energy Substitution Actions.' Multiple policies are aimed at promoting the good development of the photovoltaic industry from both supply and demand sides.
Investment advice: After more than two years of adjustment in the photovoltaic sector, several main lines are suggested for focus:
1) Leading companies with relatively high performance certainty for the whole year: sungrow power supply (300274.SZ), deye shares (605117.SH), hangzhou first applied material (603806.SH), flat glass group (601865.SH);
2) Inverter segment: ginlong technologies (300763.SZ), jiangsu goodwe power supply technology co.,ltd. (688390.SH), sineng electric (300827.SZ), shenzhen sinexcel electric (300693.SZ), hemayi shares (688032.SH), yuneng technology (688348.SH);
3) Leading companies with profits expected to gradually recover: longi green energy technology (601012.SH), tcl zhonghuan renewable energy technology (002129.SZ), ja solar technology (002459.SZ), trina solar co., ltd. (688599.SH), and canadian solar inc. (688472.SH);
4) A favorable competitive landscape with higher elasticity in the auxiliary materials segment: jiuhe materials (688503.SH), haiyou new materials (688680.SH), and arctech solar holding (688408.SH).
Risk reminders: risks of intensified industry competition, risks of changes in industry policies, and risks of slowing industry growth.
