The Zhitong Finance App learned that Ping An Securities released a research report stating that at the industry level, considering that the PV module production schedule is still high in April, glass ignition has increased since March, but production capacity will take time to climb. Short-term glass prices still have a slight upward margin under tight supply and demand. Combined with declining prices of raw materials such as soda ash, the profit of photovoltaic glass has improved. In addition, in the medium to long term, in addition to focusing on the scale of new ignition, we should also pay attention to the impact of float glass on photovoltaic back panel glass. At the company level, it is recommended to focus on Follett (601865.SH), Kibing Group (601636.SH), and Xinyi Solar (00968).

The main views of Ping An Securities are as follows:

Photovoltaic glass is an important component of modules, and products tend to be lighter and thinner

As an important protective component for photovoltaic modules, photovoltaic glass mainly uses a rolling production process. Compared with ordinary float glass, it has higher technical barriers and heavier asset attributes. The investment amount for a kiln with a daily melting capacity of 1,200 tons is about 1 billion yuan. Downstream customers are mainly photovoltaic module companies. PV glass accounts for the share of module costs after aluminum frames and EVA photovoltaic film among auxiliary materials.

As the penetration rate of double glass modules has increased dramatically in recent years and the demand for lightness has increased, the market share of components using 2mm front cover glass has risen from less than 2% to 65.5% in 2018-2023, and cover glass will continue to evolve towards thinning in the future. Upstream costs are mainly soda ash, quartz sand and natural gas. According to Rainbow New Energy's prospectus, the direct materials consumed by photovoltaic glass in simulated financial statements account for about 40% of the cost, and the energy cost accounts for 35-40%. Compared with ordinary float glass, photovoltaic glass has higher requirements for quartz sand, etc., and the comprehensive cost is higher.

Demand for production capacity has continued to rise in recent years, and the short-term balance between supply and demand is tightening

In recent years, global photovoltaic installations have increased rapidly, and the penetration rate of superimposed double glass has increased, and demand for photovoltaic glass has improved dramatically. Furthermore, in 2021, the Ministry of Industry and Information Technology will no longer require the replacement of photovoltaic glass production capacity, which will triple in three years.

As of April 11, the daily melting volume in domestic production was 106,000 tons/day. Considering that industry profits are still low and mainstream companies are planning to start production, it is estimated that domestic production capacity will be added by about 20,000 tons/day. Also, referring to Ping An Securities forecast (the DC side of the world's new PV installed capacity in 2024 is 538 GW), it is estimated that the balance between glass supply and demand is relatively relaxed throughout the year, but there may be a tight phased balance. In particular, prices in the industrial chain have declined since 2023H2, and the market expects the red line for PV consumption to be lifted. From January to February 2024, China's new PV installations increased 80% year-on-year, continuing the high increase since December 2023. Production of superimposed photovoltaic glass has slowed, and manufacturers are more willing to raise prices against the backdrop of falling inventories and meager profits. As of 4/11, the average price of 2mm coated photovoltaic glass was 18.5 yuan/square meter, up 2 yuan/square meter from the March low.

Ping An Securities believes that considering that the module production schedule for April is still high, glass ignition has increased since March, but it will take time for production capacity to rise. There is still some room for glass prices to rise in the short term. Considering the relative easing of supply and demand throughout the year, profit improvements have been brought about by falling costs such as soda ash, etc., and there may be limited room for glass to rise. In the medium to long term, in addition to focusing on the scale of new ignition, we should also pay attention to the impact of float glass on photovoltaic back panel glass.

The oligarchy of Xinyi and Follett are stable, and Kibing and others are actively catching up

At the end of 2023, the domestic production capacity of Xinyi Solar and Follett ultra-white rolled glass was 23,900 tons/day and 18,600 tons/day, respectively, accounting for 24% and 19% of the total domestic production capacity, ranking among the top two in the industry. Among them, Xinyi Solar Energy is leading the industry in terms of scale production capacity, and has advantages in scale, customer, technology, etc.; at the same time, it also relies on Xinyi Glass, the leading float glass leader, to form a synergy effect in centralized cost procurement, etc., and the company continues to lead the industry in gross margin; it plans to add 6 new production lines in 2024 (total daily melting capacity of 6,400 tons).

Follett became the first domestic enterprise to break the technology and market monopoly of international giants over photovoltaic glass through independent research and development in 2006. Currently, it also has advantages in scale, customer, technology, etc., and has mineral resource reserves exceeding 167 million tons, further deepening the cost advantage; in 2024, the Anhui Phase IV project and the Nantong project (total daily melting capacity of 9600 tons/day) are expected to ignite and operate.

As a leader in float glass, Kibing Group has vigorously developed the photovoltaic business in recent years. With the advantages of many years of operating experience in float glass, the cost procurement advantages brought by the collaboration between superimposing float and photovoltaic glass businesses, and the high yield and material energy efficiency brought about by the use of large kilns, it is worth looking forward to the subsequent increase in PV business volume and single flat profit.

Risk warning: 1) Downstream installed performance falls short of expectations; 2) PV glass ignition scale exceeds expectations and competition intensifies; 3) supply and demand estimates are biased; 4) float glass is widely promoted as a photovoltaic backplane.