China Securities Co., Ltd. Securities: Photovoltaic marginal repair has appeared, downstream demand is expected to gradually recover after the Spring Festival.

date
15/01/2025
avatar
GMT Eight
China Securities Co., Ltd. released a research report stating that the recent rebound in photovoltaic prices is mainly due to the fact that silicon wafers and batteries have gone through several months of destocking cycles, resulting in inventory reaching a bottom. At the same time, demand has been concentrated due to the industry stockpiling before the Spring Festival, leading to a release of demand. Currently in the industry's off-peak season, downstream demand is expected to gradually recover after the Spring Festival, continuing the destocking trend in the industry. Prices along the industry chain are expected to recover above cash costs, but further price increases will depend on the clear destocking of inventory, especially silicon materials inventory. It is estimated that a significant reduction in silicon material inventory to below 1 month may occur from Q4 2025 to H1 2026, potentially leading to a further increase in silicon material prices. There is relatively greater elasticity in new technologies within the sector, including BC, copper paste, and double-sided grids. The main points of China Securities Co., Ltd.'s research are as follows: Changes in industry supply and demand dynamics: Low inventory levels of silicon wafers and batteries, coupled with concentrated demand release before the holidays, are driving up prices of silicon materials, silicon wafers, batteries, and components. Recent price increases in silicon materials, silicon wafers, and batteries are primarily due to: the low inventory levels of silicon wafers and batteries after several months of destocking cycles, where silicon wafers are at about 10-12 days and batteries are within 1 week; the concentrated release of demand before the holidays, with low inventory levels in the silicon wafers and batteries segments leading to lower operating rates, resulting in short-term supply constraints; the concentrated procurement of silicon materials by polysilicon plants, leading to a significant decrease in silicon material inventory in the plants and providing a basis for price support. Overall assessment: Supply and demand of silicon materials are the key factors for the sector's beta, with an inflection point in inventory expected in March, leading to a reduction in inventory levels to below 1 month from Q4 2025 to H1 2026. The supply and demand of silicon materials are the most critical variables determining effective supply of key materials in the photovoltaic industry, making them key indicators of industry sentiment. Looking ahead, it is expected that the industry will experience a slow season in January and February, with a potential recovery in demand in March and an anticipated increase in component production. Current monthly production of silicon materials has dropped to around 90,000 tons/month, and it is expected that after the increase in downstream production in March, the overall inventory of silicon materials is expected to reach a marginal turning point (recent declines in silicon material inventory are mainly in silicon material plant inventory, considering the amount of silicon material procured by polysilicon plants, the overall change in inventory is expected to be minimal), at which point silicon material prices are expected to recover above the cash costs of leading companies. As for further price increases along the industry chain, a return of inventory to below 1 month is required, with this inflection point expected to occur from Q4 2025 to H1 2026. It is anticipated that subsequent silicon material prices will gradually recover. Recommendations within the sector include focusing on new technological directions, such as BC, copper paste, and double-sided grids. From an industry beta perspective, it is expected that global photovoltaic demand will grow by 5%-10% by 2025, with a need for continued monitoring of industry self-regulation progress and changes in unit profitability margins. Internally within the sector, new technologies are expected to have a certain logic for increased penetration, with some potential for excess profits compared to existing technologies. Recommendations include: BC batteries: The industry's shift from 1 to 10 by 2025 is relatively clear, with the expectation that related equipment, auxiliary materials, and main materials will all have a certain elasticity, with a core focus on industry chain volume and BC profitability. Copper paste: With industry profits at a low point, there is a strong demand for cost reductions in TOPCon technology, where metalization costs are currently high in TOPCon, with a focus on the progress of TOPCon's introduction of copper paste. Double-sided grids: TOPCon modules can simultaneously increase efficiency and reduce costs, but the technical difficulties are greater, with a key focus on the introduction of leading TOPCon companies. Risk warnings An increase in upstream raw material production and an acceleration of midstream manufacturing expansion could intensify industry competition. Currently, each link in the main industry chain has a large production capacity, and there are plans for expansion by some new players. If there is sufficient raw materials in the future and expansions in each link can be implemented, it is expected that industry competition may intensify. Risks of bottlenecks in grid integration and other stages leading to lower-than-expected industry demand. In recent years, the rapid integration of new energy installations in China, the United States, and Europe may have a certain impact on grid integration capacity, potentially slowing down the growth rate of new photovoltaic installations. Risks of decreased profitability due to the rapid spread of new technologies. Currently, the expansion plans for TOPCon cells in the photovoltaic industry are relatively large. If there is a speeding up of industry expansions in the future and there is not much difference between the various players, this could lead to a decrease in the profitability of TOPCon cells.

Contact: contact@gmteight.com