In "Major Banks," China International Capital Corporation (CICC): Next year may be the year of reversal for the main photovoltaic industry chain

CICC published a report stating that the photovoltaic industry is expected to achieve marginal improvements in supply and demand by 2026, with leading companies in various segments likely to turn losses into profits, presenting investment opportunities for turnaround. Due to prominent issues with photovoltaic consumption, there is a push for the domestic electricity market to become more market-oriented and for the development of adjustable power sources, with energy storage benefiting from a resonance of prosperity both domestically and internationally.

The report indicates that 2026 may be the year of reversal for the main photovoltaic industry chain. With the help of anti-involution, the main photovoltaic industry chain is expected to gradually bottom out or even improve in the second half of 2025, but the improvement in financial statements has slowed market clearing, making the continued promotion of anti-involution imperative, with component pricing being core. The firm believes that although demand may weaken temporarily in 2026, the anti-involution on the supply side and the alpha of leading companies will help some enterprises turn losses into profits in 2026, while energy storage installations will enhance consumption capacity, and photovoltaic demand is expected to recover in the latter half of the 14th Five-Year Plan.

Additionally, the consumption pressure brought about by the ongoing energy transition promotes domestic energy storage policies and demand, combined with the parity of overseas energy storage due to declining costs, as well as the power gap and load fluctuations in data centers leading to storage demand. The firm believes that the global new energy storage installation growth rate is expected to approach 50% in 2026. With the weakening of installations, there is differentiation in glass adhesive films, and attention should be paid to copper paste and semiconductors as the second growth curve. As for the high silver prices promoting the industrialization of silver-coated copper paste materials, companies in auxiliary materials are actively seeking second growth curves in semiconductors and storage fields under industry pressure.

The firm points out that the current valuation of major companies in the main industry chain is still in the historical bottom range of 1 to 2.5 times PB. With demand recovery in the second quarter of next year + promotion of anti-involution + optimization of product structure, there is hope for a batch of performance turning positive and sector opportunities. After the rise in the second half of this year, energy storage valuations have been somewhat repaired, and attention should be paid to the next wave of market trends brought about by demand exceeding expectations. Recommendations include: 1) High-quality large storage and industrial and commercial storage companies such as Canadian Solar (688472.SH), Sineng (300827.SZ), and DeYue Co., Ltd. (605117.SH) (covered by the Electric New Group), Tongrun Equipment (002150.SZ), and YN Tech (688348.SH); 2) High-power component companies such as JinkoSolar (688223.SH), Aiko Solar (600732.SH), and TRINA SOLAR (688599.SH); 3) Silicon material companies such as GCL-Poly Energy (03800.HK), Tongwei Co., Ltd. (600438.SH), and Daqo New Energy (688303.SH); 4) Optimized pattern companies such as Xinyi Solar (00968.HK) and Flat Glass Group (06865.HK); 5) Companies with new product realization such as DKE (300842.SZ) and Juhua Materials (688503.SH)