In "Major Banks," China International Capital Corporation predicts that the prices and costs in the photovoltaic glass industry will stabilize next year, recommending XINYI SOLAR, FLAT, and others

CICC published a report indicating that demand for photovoltaic glass is weak, inventory days are accelerating upward, and prices have dropped to RMB 11.5 per square meter. The profits of four leading companies are close to the breakeven line, while other companies are deepening their losses.

In terms of supply and demand, the firm believes that by 2026, the capacity utilization rate will become more polarized. If supply and demand reach a balance, domestic photovoltaic glass production capacity needs to be reduced by 5,000 to 20,000 tons compared to this year. Due to weakened domestic module demand next year, corresponding photovoltaic glass demand is expected to decline by about 23% to 36%; overseas module demand is expected to increase by about 60GW compared to this year, with total demand expected to reach 150GW. The firm estimates that 8,800 tons of domestic capacity will still need to be allocated for direct sales of glass to overseas markets. Based on this situation, the firm believes that photovoltaic glass companies with an overseas customer base can still maintain a relatively good operating rate; while companies with limited export capabilities will ultimately face increased pressure on production and operations due to continuously rising inventory that cannot be converted into revenue, leading to cash flow breakage and passive capacity clearance.

In terms of prices and costs, the firm believes that next year is expected to stabilize compared to this year. This year, the tax-inclusive average price of 2.0mm photovoltaic glass is RMB 12.59 per square meter, a year-on-year decline of 15.83%. The firm believes that next year's average price, guided by the principle of not selling below cost, is expected to maintain at RMB 13 to 13.5 per square meter for the whole year.

In terms of profits, the firm believes that the profit margin center of leading companies is expected to rise, while there is a risk of continued decline in profits for companies below the second tier. The firm estimates that the comprehensive profit margin of the two leading companies is expected to increase by 5 percentage points compared to this year; the comprehensive profit margins of second-tier leading companies, CSG (000012.SZ) and KIBING (601636.SH), are expected to increase by 2 to 3 percentage points; while most domestic second-tier companies in the central and lower tiers lack an overseas customer base, making it difficult to obtain higher profits through product exports to improve their survival status.

The firm recommends XINYI SOLAR (00968.HK) and FLAT (06865.HK), and suggests paying attention to CSG (000012.SZ) and KIBING (601636.SH), maintaining the company's valuation and profit forecast unchanged