The Zhitong Finance App learned that CICC announced the PV industry's performance forecast for the first quarter of '24, indicating that after experiencing a leading increase in batteries, glass, and film due to module production exceeding expectations in March, the increase in module production narrowed to single digits in April. At the same time, as silicon prices began to drop sharply in April, main production prices once again entered a downward channel. Profit restoration of 1Q24 batteries and auxiliary materials, and other aspects are under relative pressure. Judging from price trends, the main battery sector in 1Q24 production benefited from price increases and cost side silicon wafer prices declined. The auxiliary materials sector benefited from price increases for photovoltaic glass and film, silver paste benefited from the introduction of new technology, and profits were recovered. The inverter process continued to be removed from storage during 1Q. Profits are under relative pressure in the rest of the chain.

The main views of CICC are as follows:

PV demand: Domestic expectations have been revised in 24 years, and the global growth rate is about 20%

In 2023, global photovoltaics added about 390 GW (AC) of installed capacity, +70% compared to the same period last year, exceeding market expectations. Demand was impressive in January-February 2024. Mainland China exported 44 GW of modules in total, +52% year on year, added 36.7 GW of installed domestic PV capacity, +80.3% year on year, and imported about 4.6 GW of modules from the US in January, +20.8% year on year. Looking ahead to the whole year, CICC expects the domestic installed capacity to increase by more than 15% to 250GW+ (AC) in 24. Other regions such as the US, India, the Middle East and Africa will grow relatively fast, and global demand may grow at around 20%.

Main photovoltaic production: The profit of the N-type battery sector was clearly recovered after the Spring Festival, and the 1Q unit profit for the rest of the chain or remained declining month-on-month

Benefiting from an increase in module production schedules in March, TopCon battery prices increased by 2-3 cents/watt after the Spring Festival. At the same time, the cumulative decline in N-type silicon wafers in February-March was about 4 points, and battery profits recovered markedly in March. In other areas, the 1Q price of silicon was relatively strong, but the cost side was affected by rising electricity prices in some regions and the increase in the N-type ratio, and the cost of some enterprises increased by about 10%. The price of N-type silicon wafers continued to drop by 15-20% in 1Q due to high production schedules. There was a slight price increase for the component market in March, but terminal acceptance was average.

PV auxiliary materials: Auxiliary materials benefit from an increase in module production schedules after the Spring Festival, demand is booming, and I am optimistic about 1Q24 profit recovery

CICC pointed out that the number of days in the glass sector after the Spring Festival fell 2.3-2.8 days on a weekly basis, and the rate of decline was higher than in the same period. Glass prices remained stable in March when costs fell, and they are optimistic about the 1Q glass sector's profit recovery. In the film industry, since the Spring Festival, plastic film factories have been operating quite fully. The operating rate of the industry is about 80%, manufacturers raised prices by nearly 8%-10%, and profits were slightly restored in March. Furthermore, there was a change in the demand structure in 1Q. Topcon batteries switched from PoE film packaging solutions to EVA film, and demand for EVA film increased.

In the inverter segment, the inverter export data for January was recovered month-on-month. Among them, regions such as South Africa and India showed strong performance. The month-on-month increase in the number of units exported from the Zhejiang region may reflect the end of European exports, while the month-on-month increase in the number of units exported from Anhui reflects strong concentrated overseas demand.

Directions worth paying attention to at this point:

1) In the battery, glass, film, and silver paste sector with relatively good performance in 1Q, focus on Xinyi Solar (00968), Follett (601865.SH), Haiyou New Materials (688680.SH), Shijing Technology (301030.SZ); 2) the inverter process and changes in marginal demand, recommend Sunshine Power Supply (300274.SZ), and it is recommended to focus on Shangneng Electric (300827.SZ); 3) The subsequent bottoming of silicon prices brings opportunities for a steady rise in prices in the main industry chain.

risks

PV demand falls short of expectations, international PV trade policy risks, and risk of oversupply worsening.