The Zhitong Finance App learned that Tianfeng Securities released a research report saying that according to weekly frequency data, recent photovoltaic glass inventory has been in storage for two consecutive weeks. As of March 7, 2024, the number of photovoltaic glass inventory days dropped to 25.7 days, -10% week over week. In anticipation of a continued improvement in downstream demand, the bank believes that the supply and demand relationship for photovoltaic glass is gradually easing. Currently, most glass manufacturers are following up with orders and are relatively saturated, and inventory removal is expected to continue. Reviewing the situation last year, when the inventory period in September '23 was only about 18 days, the price of photovoltaic glass ushered in a slight increase in price. Based on the current storage situation and speed, the bank believes that PV glass is expected to rise in price in April.

Tianfeng Securities's views are as follows:

According to weekly frequency data, recently photovoltaic glass inventory has been out of storage for two consecutive weeks.

As of March 7, 2024, the number of photovoltaic glass inventory days dropped to 25.7 days, -10% week over week. On the demand side, the operating rate of component manufacturers increased. As production progressed, some just needed to be purchased, and some were prepared in an appropriate amount, and the turnover increased compared to the previous period. According to SMM, domestic component production is expected to reach around 54GW in March, up 80% from February. This is mainly due to early historical orders and the recovery in demand from domestic and overseas markets after the Spring Festival. For the Q2 market, it is expected that component companies are currently in good hands with orders in hand, with Tier 1 and 2 companies concentrated around 80%, and some companies that value market share are even close to full orders. This will provide strong support for Q2's component production schedule.

Effective addition of production capacity in the first half of the year is limited, and price increases can be expected when leaving the warehouse

As of March 7, 2024, there were 487 photovoltaic glass production lines nationwide, with a total daily melting capacity of 9,080 tons/day. Judging from the firing pace last year, 5 ignition production lines were supplied from October to December '23 (corresponding to 5450t/d). Considering the time when production capacity climbed, the bank determined that the effective increase in photovoltaic glass production capacity in the first half of this year was quite limited.

In summary, with the expectation that downstream demand will continue to improve, the bank believes that the supply and demand relationship for photovoltaic glass is gradually easing. Currently, most glass manufacturers are relatively saturated with orders, and inventory removal is expected to continue. Reviewing the situation last year, when the inventory period in September '23 was only about 18 days, the price of photovoltaic glass ushered in a slight increase in price. Based on the current storage situation and speed, the bank believes that PV glass is expected to rise in price in April.

Cost: The price of soda ash continues to fall, and the peak gas season has passed

From a cost perspective, the bank can see that soda ash has dropped a lot since this year, from close to 3,000 yuan/ton to less than 2,000 yuan/ton at present, a significant drop. In terms of natural gas, prices have now dropped since winter heating has passed. As a result, photovoltaic glass is expected to benefit from the double benefits of rising prices and falling costs in the future, and profitability is expected to pick up.

Investment advice: From the situation of ignition companies last year, the bank has observed that leading companies have added a lot of new production capacity, which is expected to further widen the gap with small and medium-sized enterprises. Since the 21-year high, the sector has been fully adjusted. The bank continues to be optimistic about the industry leaders Xinyi Solar (00968) and Follett (601865.SH), and focuses on the second-line standard Kibing Group (601636.SH) (the rolling production capacity was 6000 t/d at the end of February '24).

Risk warning: Production capacity investment exceeds expectations, prices fall short of expectations, cost reduction falls short of expectations