Soochow: Photovoltaic main chain under comprehensive pressure, Dragon Head with strong resilience in large storage and auxiliary materials differentiation.

Soochow released a research report stating that the revenue of the photovoltaic sector in the first half of 2024 decreased by 19%, and the net profit attributable to owners decreased by 95%. The net profit of the ancillary chain in Q2 of 24 showed a better growth rate, but overall profitability is under pressure. Inverter-wise, the rise of emerging markets has driven an increase in grid demand, with Europe's rooftop storage reaching a turning point, emerging markets showing growth, high demand for storage in China and the US, and large-scale storage growth in Europe, the Middle East, and other markets driving continuous high growth. Short-term module price pressures due to the release of pressure from multiple links, high-cost outdated production capacity entering the phase of clearance, with the expectation that profits will bottom out in the slow season of Q2 of 2024, and the leading companies will show greater resilience. The revenue of the photovoltaic sector in the first half of 2024 decreased by 19%, and the net profit attributable to owners decreased by 95%. The revenue of the photovoltaic sector in the first half of 2024 was 507.5 billion yuan, a decrease of 19% year-on-year, with net profits attributable to owners of 4.12 billion yuan, a decrease of 95% year-on-year. In Q1 of 24, the revenue of the photovoltaic sector was 235.1 billion yuan, a decrease of 17% compared to the previous quarter, and a decrease of 29% year-on-year, with net profits of 6.5 billion yuan, a decrease of 83% compared to the previous quarter and an increase of 142% compared to the same period last year. In Q2 of 24, the revenue of the photovoltaic sector was 272.5 billion yuan, a decrease of 20% compared to the previous quarter, an increase of 16% compared to the previous quarter, and a net profit attributable to owners of -2.4 billion yuan, a decrease of 106% compared to the previous quarter, and a decrease of 137% compared to the same period last year. The net profit growth rate of the ancillary chain in Q2 of 24 is better, but overall profitability is under pressure. Looking at the net profit growth rate of Q2 of 24: EPC (120.8%) > Inverter (58.1%) > Silver paste (9.2%) > Glass (2.1%) > Equipment (-6.8%) > Bracket (-17.2%) > Film (-17.3%) > Diamond wire (-97.9%) > Quartz crucible (-127.2%) > Photovoltaic (-136.8%) > Silicon wafer (-285.9%) > Other auxiliary materials (-522.5%) > Module (-567.9%) > Cell (-2728.6%) > Silicon material (-4232.9%); As for the net profit growth rate, Bracket (24.0%) > EPC (3.5%) > Silver paste (-3.4%) > Inverter (-7.3%) > Glass (-9.4%) > Equipment (-16.4%) > Film (-19.3%) > Diamond wire (-99.1%) > Quartz crucible (-102.7%) > Photovoltaic (-106.1%) > Module (-122.5%) > Other auxiliary materials (-131.4%) > Silicon material (-141.5%) > Silicon wafer (-195.6%) > Cell (-252.2%). Inverters benefit from energy storage + overseas markets, Q2 has established a turning point, with significant cost advantages for film, glass, and brackets in the ancillary chain, while small auxiliary materials face profit pressure, and sub-sectors benefit from technological iterations. Inverter-wise: the rise of emerging markets drives an increase in grid demand, Europe sees a turning point in rooftop storage, emerging markets show growth, strong demand for storage in China and the US, and large-scale storage growth in Europe, the Middle East, and other markets driving continuous high growth. Short-term module price pressures due to the release of pressure from multiple links, with slowing expansion of production capacity and controlled overcapacity. There is a significant cost gap between first and second-tier film producers, with Hangzhou First Applied Material holding a leading position and new players starting to exit. Tracking overseas order placements for brackets, benefiting from the emergence of new markets in the Middle East and Southeast Asia, leading to an improvement in profit structure. LECO aims to improve the difficulty level and continue with technological innovations, with premium pricing expected to be maintained. Tungsten wire prices are rapidly declining, making it the core competitive point for subsequent pantograph wires. Investment advice: Currently, the slowdown in new production in multiple links, with high-cost outdated production capacity entering the clearing stage, Soochow expects a bottoming out of profits in the slow season of Q2 of 2024, with leading companies showing greater resilience; Inverter-wise, the turning point of Q2 is evident, with significant cost advantages for film, glass, and brackets. Key recommendations: Inverters (Sungrow Power Supply, Ningbo Deye Technology, Ginlong Technologies, Hoymiles Power Electronics Inc., Jiangsu Goodwe Power Supply Technology Co., Ltd., Shenzhen Sinexcel Electric, SolaX Power Network Technology, Jiangsu Tongrun Equipment Technology, Yuneng Technology, Shenzhen Kstar Science & Technology, with focus on Kehua Data Co., Ltd.), and leading companies with stable structures and clear advantages in materials (Flat Glass Group, Hangzhou First Applied Material, Arctech Solar Holding, etc.); components with cost and overseas channel advantages (Jinko Solar, CSI Solar C...)o., Ltd. (688472.SH), Trina Solar Co., Ltd. (688599.SH), JA Solar Technology (002459.SZ), LONGi Green Energy Technology (601012.SH), and Tongwei Co., Ltd. (600438.SH) are paying close attention to Hengdian Group DMEGC Magnetics (002056.SZ), Risen Energy (300118.SZ), EGing Photovoltaic Technology (600537.SH), as well as the leading battery silicon wafer companies (Hainan Drinda New Energy Technology (002865.SZ), Shanghai Aiko Solar Energy (600732.SH), TCL Zhonghuan Renewable Energy Technology (002129.SZ), etc.) and the leading auxiliary materials companies (Changzhou Fusion New Material (688503.SH), Wuxi Dk Electronic Materials Co., Ltd. (300842.SZ), Suzhou YourBest New-type Materials (301266.SZ), Yangling Metron New Material (300861.SZ), etc).Risk warning: intensifying competition, unexpected policy changes, etc.