Zhongjin: The profitability of the photovoltaic glass industry is becoming more polarized, with the possibility of increasing the proportion of exports.

Zhongjin released a research report stating that demand for photovoltaic glass has been weak recently, inventory days have been accelerating, and prices have dropped to 11.5 yuan/square meter. The profits of the top 4 leading companies in the industry are close to the break-even point, while other companies are experiencing deeper losses, leading to a greater differentiation in industry profits. Looking ahead to 2026, the utilization rate of photovoltaic glass production capacity is expected to become more polarized, and if supply and demand reach a balance, domestic photovoltaic glass production capacity may need to be reduced by 5,000-20,000 tons compared to this year. Due to a decrease in domestic component demand next year, corresponding demand for photovoltaic glass is expected to decline by about 23-36%; overseas component demand is expected to grow by about 60GW compared to this year, with total demand reaching 150GW. It is estimated that domestic capacity needs to be reallocated by 8,800 tons in glass form for direct sales overseas. Key points of Zhongjins analysis: In terms of supply and demand, if supply and demand reach a balance, domestic photovoltaic glass production capacity may need to be reduced by 5,000-20,000 tons compared to this year. Due to a decrease in domestic component demand next year, corresponding demand for photovoltaic glass is expected to decline by about 23-36%; overseas component demand is expected to grow by about 60GW compared to this year, with total demand reaching 150GW. It is estimated that domestic capacity needs to be reallocated by 8,800 tons in glass form for direct sales overseas. In this situation, Zhongjin believes that photovoltaic glass companies with a base of overseas customers can still maintain relatively good operating rates, while companies with limited product export capacity will eventually face increasing inventory and inability to generate revenue, leading to increased pressure on production and operations and ultimately causing a breakdown in cash flow and passive capacity clearance. In terms of prices and costs, prices in the coming year are expected to stabilize compared to this year. The average price of 2.0mm photovoltaic glass with tax this year was 12.59 yuan/square meter, a year-on-year decrease of 15.83%. Zhongjin believes that the average price next year is expected to be maintained at 13-13.5 yuan/square meter throughout the year, according to the guideline that the price should not be lower than the cost price. In terms of costs, there is a slight room for downward pressure next year overall, mainly due to an oversupply of soda ash and ultra-white quartz sand, with a slight downward price adjustment potential, stable natural gas prices, and a gradual reduction in antimony usage in clarifiers. In terms of profit, the profit margins of leading companies are expected to increase, while there is a risk of continued downward exploration of profit for second-tier and below companies. Domestically, the profitability of leading glass companies is expected to improve compared to this year, while second-tier and below glass companies are facing difficulties in increasing glass sales volume through prices below the industry average, making profit conversion difficult. Internationally, due to the continuous increase in demand from foreign component manufacturers, expected net profits are expected to remain above 3 yuan/square meter. Leading companies can increase their comprehensive profit margins by increasing the proportion of overseas shipments. Zhongjin estimates that the comprehensive profit margins of two leading companies are expected to increase by 5 percentage points compared to this year; the comprehensive profit margins of second-tier leading companies CSG Holding Co., Ltd. and Zhuzhou Kibing Group are expected to increase by 2-3 percentage points; most second-tier and below companies in China do not have a base of overseas customers and therefore find it difficult to improve their survival status by exporting products to earn higher profits. Stock recommendations: XINYI SOLAR (00968), Flat Glass Group (601865.SH), recommended to pay attention to CSG Holding Co., Ltd. (000012.SZ) and Zhuzhou Kibing Group (601636.SH). Risk factors: macroeconomic risks, policy risks, trade friction risks, industrial chain game risks; fluctuations in raw material prices, product substitution risks.