Hua Long Securities: Losses in the photovoltaic industry chain narrow, significant improvement in cash flow for silicon materials.

Hualong Securities released a research report stating that in terms of industry, looking ahead to 2026, the new energy industry is expected to continue its positive trend, with excess capacity in the photovoltaic supply side being cleared and battery technology upgrades expected to bring new opportunities. The industry maintains a "recommended" rating. In terms of individual stocks, it is suggested to focus on leading companies in the primary industry chain that have cash and technological advantages in the photovoltaic sector, and to pay attention to the high-demand bracket segment in the auxiliary materials sector. Companies such as the copper substitute silver trend, slurry and powder materials, and photovoltaic equipment enterprises that are expected to benefit from the good shipment performance of inverter companies. Key Points from Hualong Securities research: The net profit of the photovoltaic sector is negative, but the net profit margin and ROE have improved overall. In Q1-Q3 of 2025, the photovoltaic equipment industry achieved operating income of 618.9 billion yuan, a year-on-year decrease of -11.05%; and achieved a net profit attributable to the parent company of -6.8 billion yuan, a year-on-year decrease of -158.82%. During the same period, the industry achieved a gross profit margin of 10.76%, an improvement of 1.1% compared to 2024; a net profit margin of 1.42%, an increase of 1.8% compared to 2024; and an ROE of -1.20%, an increase of 3.3% compared to 2024. Selected 41 representative companies for segment analysis, the primary industry chain remains in deficit in Q3, with inverters maintaining positive net profit growth since 2025. In Q3 of 2025, the various links of the photovoltaic primary industry chain (silicon materials, silicon wafers, solar cells, modules) still had negative net profits, but the silicon material and solar cell links showed significant year-on-year improvements, with the losses in the silicon material link shrinking significantly. The performance of auxiliary materials showed a slight year-on-year growth in Q3 of 2025, with a decline in revenue and net profit year on year for photovoltaic equipment, showing some differentiation. The inverter segment has maintained a high growth rate, with positive net profit growth since 2025. The net profit losses in the main material links have narrowed, and the cash flow in the silicon material link has improved significantly. In Q1-Q3 of 2025, the net profits of the photovoltaic silicon materials/silicon wafers/solar cells/modules were -6.343 billion yuan, -5.769 billion yuan, -0.951 billion yuan, and -13.967 billion yuan respectively, with some companies turning profitable in a single quarter. In Q3 of 2025, the cash and cash equivalents balance in the main material links was 157.4 billion yuan, a decrease of 1.9 billion yuan compared to the previous quarter, with the module link under significant pressure. Financing increased by 5.4 billion yuan, and industry leaders financing funds helped to alleviate the operating pressure of the industry during the bottoming period. Operating cash flow increased by 2.7 billion yuan compared to the previous quarter, and the cash flow in the silicon material link improved significantly. Cash payments for the purchase of fixed assets, intangible assets, and other long-term assets increased by 2.4 billion yuan compared to the previous quarter, and the industry's investment activities are expected to gradually recover. The performance of auxiliary materials in Q3 of 2025 showed overall growth, with a decrease in the performance of the photovoltaic bracket segment, and marginal improvement in the glass segment. Profitability of the photovoltaic equipment segment was under pressure, with a net profit attributable to the parent company of 1.654 billion yuan, a year-on-year decrease of -34.33% in Q3 of 2025. The overall performance of inverters in Q3 of 2025 showed a high growth rate, with a net profit attributable to the parent company of 5.664 billion yuan, a year-on-year increase of 26.39%. Risk Warning: Risks such as economic downturn, unexpected policies, significant fluctuations in upstream raw material prices, unexpected major technological advances, overseas trade protection policies, intensified industry competition, risks resulting from errors in third-party data statistics, and performance falling below expectations should be closely monitored.