The Zhitong Finance App learned that Debon Securities released a research report saying that after more than two years of correction in the PV sector, the market has fully responded to the negative news in the sector, and the PV market as a whole is about to usher in opportunities to increase valuation. Currently, the production capacity of all links in the industrial chain is still growing. Prices in the industrial chain are gradually falling and gradually entering the bottoming stage. Both supply and demand on the policy side are working hard to lay the foundation for the PV sector. The number of new domestic PV installations continued to grow in the first 9 months, and the new domestic installed capacity for power generation was mainly photovoltaics; overseas market demand did not decrease in the first three quarters of '24, and domestic PV module exports showed a volume increase and price decline.

The main views of Debon Securities are as follows:

The number of new domestic PV installations continued to grow in the first 9 months, and from January to September '24, the new domestic installed capacity was mainly photovoltaics.

On October 21, the National Energy Administration released national power industry statistics for January-September. From January to September 2024, China added 160.88GW of PV installations, an increase of 24.77% over the previous year. Among them, PV added 20.89GW in September, an increase of 32.38% over the previous year.

From January to September '24, the total installed capacity for domestic power generation was 242.58 GW, up 31.65 GW from January to September 2024, with a year-on-year increase of 31.65 GW, including hydropower added 7.97 GW, a year-on-year increase of 0.09 GW, thermal power added 33.43 GW, a year-on-year decrease of 6.01 GW, and a year-on-year increase of 1.19 GW for nuclear power, which remained the same as last year. Wind power added 39.12 GW, an increase of 5.64 GW, and solar power added 160.88 GW, an increase of 31.94 GW.

Looking at the share of installed capacity of various types of new power generation in the first three quarters of 2024, the share of new PV installations was in an absolute leading position. Photovoltaics, wind power, nuclear power, thermal power, and hydropower accounted for 66.32%/16.13%/0.49%/13.78%/3.29%, respectively.

Among the new PV installations in the first three quarters of 2024, the new installed capacity of distributed photovoltaics slightly exceeded the number of new installations of centralized photovoltaics. Among them, distributed industrial and commercial installations were superior.

Looking at the structural composition of PV installations, in the first three quarters of 24, 75.66 GW of centralized PV installations were added, accounting for 47.03%, and distributed 85.22 GW of new installed capacity, accounting for 52.97%. Among them, household PV added 22.8 GW of installed capacity, accounting for 14.17%, and industrial and commercial photovoltaics added 62.42 GW of installed capacity, accounting for 38.8%.

By the end of the third quarter of '24, domestic photovoltaics had accumulated a total of 772.25 GW, of which centralized photovoltaics had a cumulative total of 430.35 GW, accounting for 55.73%, distributed PV had a cumulative total of 341.91GW, accounting for 44.27%, of which household PV had a cumulative total of 138.52 GW, accounting for 17.94%, and industrial and commercial photovoltaics had a cumulative total of 203.39 GW connected to the grid, accounting for 26.34%. Compared with the PV installed structure at the end of 2023, the share of distributed photovoltaic installations has increased.

Overseas market demand remained unabated in the first three quarters of 24 years, and domestic PV module exports showed volume increases and prices fell.

According to relevant media and the General Administration of Customs data, China exported about 186.77 GW of components in the first three quarters of 24, up 18% from 157.65 GW in the same period last year, but the export value was 22.769 billion US dollars, down 30.28% from 32.646 billion US dollars in the same period in 2023. From January to September 2024, China's PV module export value dropped significantly year-on-year, mainly due to the sharp drop in PV module prices compared to the same period last year.

According to relevant media, the cumulative volume of goods pulled in the European market from January to September this year was about 77.7 GW, down 9% from 85.33 GW in the same period last year; the cumulative cargo volume of the Asia-Pacific market was about 54.13 GW, up 62% from 33.39 GW in the same period last year; the cumulative volume of goods pulled in the American market was about 24.31 GW, up 10% from 22.04 GW in the same period last year; the cumulative volume of goods pulled in the Middle East market was about 22.89 GW, up 122% from 10.32 GW in the same period last year; the cumulative volume of goods pulled in the African market was about 7.74 GW. This is an 18% increase compared to 6.58 GW in the same period last year.

The production capacity of all links in the industrial chain is still growing, and prices in the industrial chain are gradually falling and gradually entering the bottoming stage.

According to CPIA, 24H1 domestic polysilicon production is about 1.06 million tons, up about 60.6% year on year, silicon wafer production is about 402 GW, up about 58.9% year on year, cell production is about 310 GW, up about 37.8% year on year, and module output is about 271 GW, up about 32.2% year on year. Production capacity in all major sectors continues to grow. Prices in the industrial chain have gradually declined and gradually entered the bottom-building stage.

Using 2023/12/27-2024/11/6 as the statistical range, according to relevant media, the average price of polycrystalline silicon dropped from 65 yuan/kg to 40 yuan/kg, a decrease of 38.46%; monocrystalline P-type silicon wafer-182 mm fell from 2 yuan/piece to 1.15 yuan/piece, a decrease of 42.5%; monocrystalline P-type silicon wafer-210 mm fell from 3 yuan/piece to 1.7 yuan/piece, a decrease of 43.33%; 182 mm of monocrystalline N-type silicon wafers fell from 2.2 yuan/piece to 1.2 yuan/piece, a decrease of 4.5.5.5% 45%; monocrystalline N-type silicon wafer 210mm fell from 3.25 yuan/piece to 1.45 yuan/piece, a decrease of 55.38%; 182mm of monocrystalline PERC cells fell from 0.36 yuan/w to 0.275 yuan/w, a decrease of 23.61%; monocrystalline PERC cell 210mm fell from 0.37 yuan/w to 0.28 yuan/w, a drop of 24.32%; Topcon cell 182 mm fell from 0.47 yuan/w to 0.275 yuan/w, a drop of 41.49%; photovoltaic glass 3.2mm coating fell from 526.5yuan/square meter to 21.25 yuan/square meter, a decrease of 19.81%; the 2.0mm photovoltaic glass coating fell from 17.5 yuan/square meter to 12.5 yuan/square meter, a decrease of 28.57%.

Many links in the industrial chain fell into losses, but profit margins in some links improved markedly from month to month in 24Q3.

Due to falling prices in the industrial chain, etc., the revenue and profits of various links in the photovoltaic industry chain have declined. We selected representative company groups from various links in the industry chain to review the market situation in the first three quarters of 24. The A-share photovoltaic sector companies participating in the statistics are shown in the table below. The sample stocks participating in the statistics achieved operating income of 510.815 billion yuan in 2024Q1-Q3, a year-on-year decrease of 26.60%, and achieved net profit to mother of -11.753 billion yuan, a year-on-year decrease of 115%.

Looking at each link, the main industry chain and auxiliary materials are generally poor. Revenue and net profit from silicon materials, silicon wafers, cells, components, adhesive film, glass, etc. all declined markedly. Revenue and net profit in the inverter sector increased slightly, and the silver paste sector showed no increase in revenue. From the perspective of gross margin and net margin, in the various segments of the 24Q1-Q3 sample stocks, the 24Q1-Q3 gross margin and net interest rate declined year-on-year in all segments, but there was a significant month-on-month improvement in multiple areas of 24Q3.

The PV sector has been adjusted for more than two years, and the current PB valuation is in the bottom range of nearly ten years.

As of November 11, 2024, the Wind PV Index (884045) has retracted as much as 64.21% from its highest point. The PB is currently 2.28. Looking at the ten-year dimension, it is at the 29.35% quantile, and is still at the bottom of nearly ten years. After more than two years of adjustments, pessimistic expectations have been fully reflected. Currently, the sector has a high margin of safety.

On the policy side, supply and demand are making efforts to lay the foundation for the fundamentals of the PV sector.

The China Photovoltaic Industry Association held a symposium on preventing “internal rolling” vicious competition in the industry in Shanghai on October 14, 2024. The entrepreneurs and representatives fully communicated and reached consensus on “strengthening industry self-discipline, preventing 'internal' vicious competition, strengthening the market survival of the fittest mechanism, and unblocking exit channels for backward and inefficient production capacity” and the healthy and sustainable development of the industry. The China Photovoltaic Industry Association calculated the cost of PV modules for October 2024 through summary, statistics, analysis and collation. It is hoped to give the market an authoritative cost data for reference by the entire industry and government regulators to promote the healthy development of the industry. Six departments including the National Development and Reform Commission issued “Guiding Opinions on Vigorously Implementing Renewable Energy Replacement Actions”. A number of policies focus on promoting the good development of the photovoltaic industry starting from both supply and demand.

Investment advice: In the process of reaching the bottom of fundamentals, sufficient sector adjustments, and improving market risk appetite, it is recommended to focus on several main lines:

1) Leading companies with relatively high certainty of annual results: Sunshine Power (300274.SZ), Deye Co., Ltd. (605117.SH), etc.;

2) Inverter links: Jinlang Technology (300763.SZ), Goodway (688390.SH), Shangneng Electric (300827.SH), Shenghong (300693.SZ), Hemai (688032.SH), Yuneng Technology (), etc.; 688348.SH

3) Leading companies that are expected to gradually recover profits: Longji Green Energy (601012.SH), TCL Central (002129.SZ), Jingao Technology (002459.SZ), Trina Solar (688599.SH), Artes (688472.SH), etc.;

4) The competitive pattern is good, and individual stocks are highly flexible auxiliary materials: polymeric materials (688503.SH), Haiyou New Materials (688680.SH), CITIC (688408.SH), etc.

Risk warning: industry competition increases risk, industry policy change risk, industry growth slowdown risk