Sinolink: Accelerated supply clearance in photovoltaic glass; leading players' profit recovery and share rebound highly certain.

Sinolink released a research report stating that the interim reports of photovoltaic companies further verify that industry chain prices and profitability have bottomed out. Against the backdrop of sustained industry losses, tail-end capacity and companies are gradually being cleared out. Coupled with the implementation of mandatory national standards and cost accounting guidelines, the photovoltaic sector's left-side bottoming is being consolidated. Currently, second- and third-tier companies remain in cash losses, and subsequent supply still has room to decline, with approximately 33,000 tons of capacity regarded as substantive clearance. Leading companies have relatively high certainty of profit recovery and are expected to leverage their profitability and capital advantages to maintain capacity growth faster than the industry, achieving a rebound in market share. Sinolink's main points are as follows: Against the backdrop of deep losses, the industry is accelerating cold repairs and supply is rapidly declining, with prices bottoming out and recovering In 2026, photovoltaic demand weakened, and supply-demand pressure on photovoltaic glass intensified. In late May, industry inventory rose to 53.4 days, a historic high. The price of 2.0mm glass dropped to a low of 8-8.5 yuan/sqm, and calculations indicate the entire industry has entered a state of cash losses. Under operating pressure, production line cold repairs accelerated. According to Sublime China Information, year-to-date the industry has cold-repaired a total of 19,600 tons of production lines (corresponding to annualized module demand of approximately 127GW). As of September 10, the nominal capacity of global/domestic photovoltaic glass production lines in operation totaled 85,000/72,000 tons, corresponding to annualized module demand of approximately 553/466 GW. Considering that some companies are reducing output by maintaining kilns or sealing kiln openings under profitability pressure, actual industry supply is expected to be even lower. After supply contraction, industry inventory has fallen from its peak. In mid-July/early August/early September, photovoltaic glass prices rose for three consecutive times to 10.25 yuan/sqm, up 24% from the previous low. The cost curve is relatively steep, and supply has room for further decline The photovoltaic glass cost curve is relatively steep. Calculations show that at current prices (10-10.5 yuan/sqm), second- and third-tier companies remain in cash losses, and industry supply is expected to have further room to decline: currently, domestic kilns in operation below 1000t/d total 5,900 tons (corresponding to annualized module demand of approximately 38GW), mainly concentrated among second- and third-tier companies, of which kilns below 700t/d account for 2,550 tons. Against the backdrop of persistently low prices, this portion of capacity has a relatively high probability of shutdown; in addition, under sustained deep losses, some tail-end companies maintain only a single kiln in production to preserve market share, or even control output and inventory by blocking kilns. If prices remain low subsequently, this portion of capacity has a relatively high probability of being forced by cash flow and debt pressure to shut down kilns and completely exit the market. The proportion of substantive capacity clearance is relatively high. Second- and third-tier companies have both weak willingness and ability to ignite/recommence production, and the potential supply increase is limited and controllable The core work of cold repair for glass production lines is replacing refractory materials in the kiln and repairing and upgrading the kiln, which requires a certain amount of capital investment. Since 24H2, second- and third-tier companies have suffered sustained deep losses for nearly two years. It is expected that most second- and third-tier companies will not have the ability to actually carry out cold repair projects after their production lines are shut down for cold repair; in addition, igniting and resuming production on cold-repaired lines requires 3-6 months of ramp-up, and after ignition, output is rigid and supply adjustment is difficult. Unless photovoltaic glass prices and profitability recover significantly and the recovery is expected to be sustainable, most second- and third-tier companies are expected to have weak willingness to ignite/resume production. Among current cold-repaired production lines, the bank estimates that approximately 33,000 tons of capacity (production line scale below 700t/d, or companies that currently have no capacity in operation) can be regarded as substantive clearance. Looking ahead, leading companies currently have more than 8,000 tons of ignitable production lines. Considering the large cost gap in the industry, it is expected that over a two-to-three-year horizon, capacity with the willingness and ability to be released will mainly be concentrated among leading and leading second-tier companies, and the potential supply increase is limited and controllable. Leading companies' profitability advantages are stable, and overseas differentiated capacity consolidates barriers. Profit recovery and market share rebound are highly certain Photovoltaic glass leaders XINYI SOLAR (00968) and Flat Glass Group (601865.SH), by virtue of raw material self-supply and large-scale procurement, energy consumption and yield advantages, have long maintained a gross margin gap of more than 10PCT with second- and third-tier companies. In recent years, they have benefited from the volume release of overseas premium capacity, widening the profitability gap. Looking ahead, the increase in overseas photovoltaic glass supply is limited, leading companies have significant cost advantages in overseas capacity, and the premium is expected to be maintained; against the backdrop of profitability pressure, second- and third-tier companies' domestic capacity is accelerating clearance. Leading companies have relatively high certainty of profit recovery and are expected to leverage their profitability and capital advantages to maintain capacity growth faster than the industry, achieving a rebound in market share. Risk warnings Risk of downstream installation demand falling short of expectations, risk of industry supply being released too quickly, risk of deterioration in the international trade environment, and risk of raw material price fluctuations.