CITIC SEC: Profit pressure promotes capacity contraction. Photovoltaic glass is expected to rise in price after the peak production season.

CITIC Securities released a research report stating that it is expected that the price of photovoltaic glass will rise after the peak production season in the photovoltaic industry, taking into consideration the changes in photovoltaic glass production capacity, inventory trends, and demand in the photovoltaic industry. The daily production volume of photovoltaic glass has decreased from a high of 115,000 tons in June 2024 to less than 90,000 tons currently, and is likely to continue to decline; the inventory cycle of photovoltaic glass has decreased from about 40 days at the end of 2024 to about 34 days currently, and is expected to continue to decrease. In terms of demand, based on an estimated 550GW of photovoltaic installations in 2025, the daily melting capacity of photovoltaic glass is close to 95,000 tons, exceeding current production capacity demand. This situation strongly supports a price increase during the peak season, and it is recommended to pay attention to photovoltaic glass companies. CITIC Securities' main points are as follows: Photovoltaic glass is expected to increase in price during the peak production season. By considering the changes in photovoltaic glass production capacity, inventory trends, and demand in the photovoltaic industry, the bank predicts that the price of photovoltaic glass will rise after the peak production season in the photovoltaic industry. Looking at the changes in photovoltaic glass production capacity, the daily melting capacity of photovoltaic glass has already decreased from a high of 115,000 tons in June 2024 to less than 90,000 tons, and is likely to continue to decline; in terms of photovoltaic glass inventory, it has already decreased from a high of about 40 days to the current 34 days, and is expected to continue to decline with changes in demand and production capacity; in terms of demand in the photovoltaic industry, based on the estimated component demand of 600GW, the daily melting capacity demand for glass would exceed 100,000 tons. Considering the current profitability of photovoltaic glass companies and the resulting changes in the three factors mentioned above, this situation strongly supports a price increase during the peak season. Profit pressure is driving the reduction of photovoltaic glass production capacity. Since Q3 2024, photovoltaic glass companies have faced significant profit pressure and started to incur losses, and with oversupply, rising inventory, and falling prices, the bank predicts that the unit losses of photovoltaic glass companies for Q4 2024 will further increase. Under continued pressure of losses, coupled with the push for industry self-regulation against "overwork", photovoltaic glass companies have begun to reduce production through methods such as maintenance. With the ongoing progress of maintenance, it is expected that the production capacity of photovoltaic glass will continue to decline, thereby providing strong support for prices and helping to reduce inventory. The inventory of photovoltaic glass is expected to continue to decline under the influence of supply and demand. In Q4 2024, with the decrease in overseas shipments and the push to clear component inventory, the demand for photovoltaic glass continued to decline, and the inventory of photovoltaic glass increased from 30 days in Q3 2024 to around 40 days in Q4. The price of 2mm photovoltaic glass has also decreased from 15 yuan/square meter in July 2024 to around 12 yuan/square meter currently. Since the end of 2024, under the influence of maintenance and other factors, the production capacity of photovoltaic glass has continued to decline, and with factors like stockpiling for the Spring Festival, the inventory of photovoltaic glass has begun to decrease; furthermore, with the continuous increase in maintenance scale and the decrease in daily melting capacity, it is expected that the inventory of photovoltaic glass will continue to decline. The demand for photovoltaic glass may outstrip supply during the peak season. If the newly installed capacity in 2025 exceeds 550GW, calculated based on a 1.2 capacity ratio, the demand for photovoltaic components would be about 660GW, corresponding to a monthly output of approximately 55GW. In this case, the demand for the daily melting capacity of photovoltaic glass would be close to 95,000 tons, exceeding the current production capacity of photovoltaic glass. Considering a certain level of component inventory, the demand for components in 2025 is expected to increase further, thereby driving the recovery of the demand for photovoltaic glass. Therefore, it is expected that the price of photovoltaic glass will have strong support and a certain degree of increase during the peak production season in the photovoltaic industry. Risk factors: The newly installed capacity in the photovoltaic industry is lower than expected, the restrictions on the production capacity of photovoltaic glass are less than expected, and the decrease in inventory of photovoltaic glass is less than expected.