Minmetals Securities: Short-term constraints on photovoltaic demand, "Two Seas" guides the growth trend of wind power.

Minmetals Securities released a research report stating that the demand for photovoltaics is currently in a weak state in the short term, with continuous production decline in recent months. In the medium term, the domestic market is constrained by electricity prices, the European market is affected by insufficient grid facilities, and the US market is hampered by the rapid decline in subsidies due to the Large and Medium-sized Enterprises Act, resulting in weak demand. In the wind power industry, the current demand is mainly in the European market, with CAGRs of 14% and 34% for onshore and offshore wind, respectively. Currently, European wind power orders and FID data are showing good growth trends, particularly with a 1.8 times year-on-year increase in FID amount for offshore wind power in the first half of 2025, making the growth in European offshore wind even more impressive. The main points of Minmetals Securities are as follows: New Energy Electricity Prices After the introduction of new energy, due to the surplus of new energy electricity, spot electricity prices have declined, with most mechanism electricity prices lower than the benchmark price for coal-based electricity. Moreover, the degree of mismatch between supply and demand for photovoltaic electricity is higher than that for wind power electricity, resulting in lower photovoltaic electricity prices, which may negatively impact investment demand for photovoltaics, with wind power being minimally affected. Photovoltaic: Short-term demand is limited, focus on countering internal competition In the short term, demand for photovoltaics is in a weak state, with continuous production decline in recent months. In the medium term, the domestic market is constrained by electricity prices, the European market is affected by insufficient grid facilities, and the US market is hampered by the rapid decline in subsidies due to the Large and Medium-sized Enterprises Act, resulting in weak demand. Therefore, the industry focus is mainly on the supply side. Counteracting internal competition has already brought about good results, with prices in the industry chain, especially upstream, having returned to reasonable levels. Prices in the middle and lower ends of the chain also show an upward trend, and it is necessary to wait for accompanying measures to counter internal competition to lead to price increases. By giving each link a net profit margin of 5%, the calculated component selling price including tax ranges from 0.80 to 0.85 yuan per watt. The investment opportunities mainly lie in 1) the valuation restoration brought about by the counteraction of internal competition; 2) new technologies such as the cost reduction plan for copper replacing silver, and the opportunities brought about by the industrialization of calcium titanium ores. Wind Power: Guiding growth trend with "two seas" Wind power demand is mainly in the European market, with CAGRs of 14% for onshore wind and 34% for offshore wind. Currently, European wind power orders and FID data are showing a good growth trend, especially with a 1.8 times year-on-year increase in FID amount for offshore wind power in the first half of 2025, making the growth in European offshore wind even more impressive. The counteraction of internal competition in wind turbines is also progressing. Since the third quarter of 2024, wind turbine bidding prices have been continuously rising, leading to gradual improvements in wind turbine profitability reflected on financial statements. Looking ahead, the slowing down of the trend towards larger wind turbines will reduce the pressure on wind turbine prices, leading to continued profitability improvement. The global wind power supply chain is mainly in the Asia-Pacific region, with China being the core of the wind power supply chain. According to GWEC estimates, the European and American markets have many links (such as gearboxes, blades, inverters, wind turbines, tower barrels, etc.) that require supply chain support from China. This provides Chinese wind power companies with opportunities to go abroad, and overseas profit margins are generally higher than domestic margins, thus increasing the motivation for companies to go abroad. Many companies have already started expanding their production capacity in overseas markets, and some companies' overseas business revenue has reached high levels, providing significant support to their performance. This trend is expected to continue in the future. Investment recommendations Positive outlook for the restoration of photovoltaic industry valuation due to the counteraction of internal competition, as well as growth opportunities brought about by new technologies such as copper replacing silver and calcium titanium ores; Positive outlook for the growth opportunities in offshore wind power and for the profitability-enhancing opportunities brought about by going abroad for companies. Risks Industry demand falling short of expectations, leading to further deterioration in corporate profitability; The counteraction of internal competition not progressing as expected or industry supply clearing out slowly, resulting in continued strain on cash flow and operational pressure; Intensified global trade protectionism, increased requirements for localized production and risks associated with exports and overseas factory construction; Technologies such as copper replacing silver, and the progress of tenders for calcium titanium batteries not meeting expectations.