Junda Shares (002865.SZ): Navigating the Cycle – Overseas Expansion and Technological Leadership as Key Catalysts for Recovery

Date: August 2025
Analyst: Zhong Xincai, Liu Qiang | Pacific Securities
Rating: BUY (Maintained)
Current Price: CNY 46.08
Market Cap: CNY 13.48 Billion

Executive Summary

Junda Shares (002865.SZ), a leading global supplier of high-efficiency photovoltaic (PV) cells, has released its semi-annual report for 2025. The results reflect the intense pressure currently characterizing the global PV industry, marked by severe supply-demand imbalances and aggressive price competition. In the first half of 2025 (1H25), the company reported revenue of CNY 3.663 billion, a year-over-year (YoY) decline of 42.53%, and a net loss attributable to shareholders of CNY 264 million, representing an widened loss compared to the previous period. Specifically, in the second quarter (2Q25), revenue stood at CNY 1.788 billion (YoY -32.76%, Quarter-over-Quarter [QoQ] -4.61%), with a net loss of CNY 158 million. While the quarterly loss narrowed year-over-year, it expanded sequentially due to a significant compression in gross margins, which turned negative at -2.15% in 2Q25.

Despite the challenging operating environment, Junda Shares demonstrates resilience through strategic pivots and operational excellence. Two critical structural improvements are evident:
1. Accelerated Overseas Expansion: The proportion of overseas sales surged from 23.85% in 2024 to 51.87% in 1H25. This shift not only diversifies revenue streams but also captures higher-margin opportunities in emerging markets across Asia, Europe, North America, Latin America, and Australia.
2. Operational Efficiency: Amidst revenue contraction, the company successfully reduced its four major expense ratios (selling, administrative, R&D, and financial expenses) from 10.07% in 1Q25 to 8.32% in 2Q25, a notable improvement of 1.76 percentage points (pcts). This underscores management’s commitment to cost control and精益 (lean) management during industry downturns.

Technologically, Junda remains at the forefront of the industry. The company is actively preparing for the mass production of Tunnel Oxide Passivated Contact (TBC) cells, which offer a 1-1.5% efficiency advantage over mainstream N-type cells. Furthermore, its perovskite tandem cell research has achieved a laboratory efficiency of 32.08%, solidifying its position in next-generation PV technology.

Looking ahead, we anticipate that the industry’s "involution" (excessive internal competition) will gradually subside as capacity rationalization takes effect. We project a turnaround in profitability starting in 2026, driven by the recovery in module demand, the stabilization of cell prices, and the contribution from new overseas capacities. We have adjusted our earnings forecasts to reflect the current bottoming-out phase but maintain a "BUY" rating, citing Junda’s superior technological moat, successful internationalization strategy, and potential for significant earnings elasticity as the cycle turns.

Key Takeaways

1. Financial Performance: Bottoming Out Amidst Industry Headwinds

The 1H25 financial results are a direct reflection of the broader PV sector’s distress, characterized by oversupply and plummeting product prices. However, a granular analysis reveals signs of stabilization and strategic adaptation.

Revenue and Profitability Analysis

• 1H25 Overview: Revenue declined by 42.53% YoY to CNY 3.663 billion. The net loss widened to CNY 264 million. This top-line contraction is primarily attributed to the sharp decline in average selling prices (ASPs) for PV cells, which fell below cash costs for many manufacturers, forcing volume-driven players to operate at losses to maintain market share and factory utilization.
• 2Q25 Dynamics:
  • Revenue: CNY 1.788 billion, down 32.76% YoY and 4.61% QoQ. The sequential decline indicates that price pressures persisted into the second quarter, although the rate of decline may be slowing.
  • Gross Margin: The most concerning metric is the gross margin of -2.15% in 2Q25. This negative margin highlights the severity of the price war, where selling prices failed to cover direct manufacturing costs. This represents a significant deterioration from 1Q25, dragging down overall profitability.
  • Net Loss: The net loss of CNY 158 million in 2Q25 was narrower than the same period last year (indicating some structural improvement or lower base effects) but wider than 1Q25. The widening sequential loss is directly correlated with the collapse in gross margins.

Expense Control: A Beacon of Operational Excellence

In stark contrast to the margin compression, Junda Shares demonstrated exceptional operational discipline.
* Four-Expense Ratio Reduction: The combined ratio of selling, administrative, R&D, and financial expenses dropped from 10.07% in 1Q25 to 8.32% in 2Q25.
* Implication: This 1.76 pct reduction is substantial. It suggests that management is actively optimizing organizational structure, reducing non-essential expenditures, and improving working capital efficiency. In a low-margin or negative-margin environment, such cost control is vital for survival and preserves cash flow for future investments. It positions Junda to capture disproportionate profit upside once margins normalize.

(Note: 1Q25 revenue derived from H1 total minus 2Q; 1Q25 net profit derived from H1 total minus 2Q.)

2. Strategic Pivot: Overseas Expansion as a Growth Engine

Junda Shares is successfully executing a strategic shift towards international markets, mitigating reliance on the saturated and hyper-competitive domestic Chinese market.

Surge in Overseas Sales Contribution

• Metric: The share of overseas sales in total revenue increased dramatically from 23.85% in 2024 to 51.87% in 1H25.
• Significance: This more than doubling of overseas exposure is a pivotal development. International markets, particularly in Europe, the Middle East, and emerging economies, often offer better pricing power and higher margins compared to the domestic Chinese market, where prices have been driven to unsustainable lows.
• Market Diversification: The company has actively expanded its customer base and obtained certifications in key regions including:
  • Asia: Leveraging proximity and growing renewable energy mandates.
  • Europe: Maintaining presence in high-value markets despite trade policy uncertainties.
  • North America & Latin America: Tapping into growing utility-scale and distributed generation projects.
  • Australia: A mature market with high adoption rates for premium efficiency modules.

Prudent Overseas Capacity Layout

Junda is adopting a cautious yet strategic approach to building overseas manufacturing capacity, balancing risk and reward amidst complex geopolitical landscapes.

• Oman Project (5GW High-Efficiency Cell Capacity):

  • Status: Progress is being advanced prudently.
  • Rationale: The decision to proceed cautiously reflects an awareness of international trade dynamics, tariff policies, and fluctuating market conditions. Oman offers strategic advantages, including access to European and African markets, potential free trade agreements, and lower energy costs. However, the company is ensuring that capital allocation aligns with confirmed demand and favorable policy environments before full-scale ramp-up.
  • Impact: Once operational, this facility will serve as a crucial hub for non-Chinese supply chains, potentially exempting Junda from certain tariffs applicable to Chinese-origin goods, thereby enhancing competitiveness in Western markets.

• Turkey Project (Strategic Partnership):

  • Development: Junda has formally signed a strategic cooperation agreement with a local Turkish module manufacturer.
  • Model: Co-construction of a high-efficiency battery project.
  • Strategic Fit: Turkey serves as a bridge between Europe, Asia, and the Middle East. By partnering with a local player, Junda mitigates political and operational risks while leveraging its core competency in cell technology.
  • Market Opportunity: The project aims to fill a structural gap in regional battery capacity. There is urgent demand in Turkey and surrounding regions for high-performance, high-reliability PV cells to support local module assembly and meet growing renewable energy targets. This asset-light or joint-venture model allows Junda to export its technology and management expertise without bearing the full burden of greenfield investment.

3. Technological Leadership: Securing the Next-Generation Moat

In the PV industry, technological iteration is the primary driver of long-term competitiveness. Junda Shares continues to lead in both immediate commercial technologies (TOPCon/TBC) and future disruptive technologies (Perovskite).

TBC (Tunnel Oxide Passivated Back Contact) Cells

• Efficiency Advantage: According to investor relations disclosures, Junda’s pilot TBC cells demonstrate a conversion efficiency that is 1-1.5 percentage points higher than mainstream N-type cells (likely referring to standard TOPCon).
• Commercialization Status: The company is actively preparing for mass production.
• Investment Implication: As the industry transitions from PERC to TOPCon, and subsequently to BC (Back Contact) technologies, early movers with high-yield mass production capabilities will command premium pricing. A 1-1.5% efficiency gain is substantial in the PV sector, translating directly to lower Levelized Cost of Electricity (LCOE) for end-users. This positions Junda to capture the high-end segment of the market as TBC becomes the new standard for premium modules.

Perovskite Tandem Cells

• Breakthrough Efficiency: In collaboration with external research institutions, Junda has achieved a laboratory efficiency of 32.08% for perovskite-silicon tandem cells.
• Industry Standing: This figure is at the forefront of global industry standards. While still in the R&D/pilot phase, this achievement validates Junda’s strong R&D infrastructure and its ability to integrate next-generation materials.
• Long-Term View: Perovskite tandems represent the theoretical ceiling for silicon-based PV efficiency. Achieving >30% efficiency in the lab signals that Junda is well-positioned for the next major technological leap, likely 3-5 years out. This reduces the risk of technological obsolescence and enhances the company’s valuation premium as a technology leader rather than just a manufacturer.

4. Revised Financial Forecasts and Valuation

Given the prolonged industry downturn and the deeper-than-expected margin compression in 2Q25, we have revised our financial estimates for Junda Shares. Our new forecast assumes a U-shaped recovery, with 2025 remaining a challenging year, followed by a robust rebound in 2026 and 2027.

Earnings Forecast Adjustments

Key Assumptions behind the Forecast:
1. 2025 (Bottoming Year): We expect revenue to contract further by ~20% as low-priced orders from late 2024 and early 2025 are recognized. Gross margins will remain under pressure, averaging low single digits, as the industry clears excess inventory and inefficient capacity. The net loss is expected to narrow compared to 2024 due to improved expense control and a slight stabilization in prices towards year-end.
2. 2026 (Recovery Year): We anticipate a significant turnaround. As supply-side rationalization completes and demand grows (driven by global energy transition goals), cell prices should recover to sustainable levels. The commissioning of overseas capacities (Oman/Turkey) will contribute higher-margin revenue. Gross margins are projected to rebound to ~14%, reflecting a healthier industry equilibrium and the premium from TBC products.
3. 2027 (Growth Year): With the full ramp-up of new technologies and overseas facilities, revenue growth accelerates to ~32%. Net margins expand to >9% as operating leverage kicks in and the product mix shifts towards higher-efficiency TBC and tandem cells.

Valuation Analysis

• Current Valuation: At the current price of CNY 46.08, the stock trades at a Market Cap of CNY 13.48 billion.
• Forward P/E: Given the expected losses in 2025, P/E is not meaningful for the current year. However, looking forward:
  • 2026E P/E: ~19.95x
  • 2027E P/E: ~10.02x
• Peer Comparison: Historically, leading PV cell manufacturers trade at forward P/Es ranging from 10x to 20x during growth phases. Junda’s projected 2027 P/E of 10x appears attractive, especially considering its technological leadership and overseas expansion potential.
• PB Ratio: The Price-to-Book ratio is estimated at 3.86x for 2025E, declining to 2.44x by 2027E. This de-rating reflects the current cyclical trough but offers a compelling entry point for long-term investors who believe in the company’s ability to regain ROE (projected at 24.38% by 2027).
• EV/EBITDA: The EV/EBITDA multiple is expected to compress from 25.54x in 2025E to 5.86x in 2027E, indicating significant value creation potential as EBITDA recovers.

Risks / Headwinds

While the investment thesis is robust, investors must consider several material risks that could impact Junda Shares’ performance and stock price.

1. Raw Material Price Volatility

• Risk: The cost of silicon wafers, silver paste, and other key inputs constitutes a significant portion of COGS. While silicon prices have fallen, volatility remains. A sudden spike in raw material costs, if not passed through to customers due to weak pricing power, could further erode already thin margins.
• Mitigation: Junda’s scale and long-term supply contracts help mitigate this, but extreme volatility remains a threat.

2. Downstream Demand Uncertainty

• Risk: Global PV demand is sensitive to macroeconomic conditions, interest rates, and government subsidies. A slowdown in key markets like Europe or the US, or delays in grid connectivity projects in emerging markets, could lead to inventory buildup and further price declines.
• Specific Concern: If the anticipated demand surge in 2026 fails to materialize, the industry’s oversupply problem could persist longer than expected, delaying the profitability turnaround.

3. Intensifying Market Competition

• Risk: The PV cell industry is capital-intensive with relatively low barriers to entry for established players. Competitors may engage in prolonged price wars to maintain cash flow and market share, even at the expense of profitability. The rapid adoption of TOPCon by competitors means the window for premium pricing on current-gen tech is narrowing.
• Mitigation: Junda’s focus on TBC and perovskite tandems is a defensive move to differentiate its product portfolio.

4. Policy and Geopolitical Risks

• Trade Barriers: The US, EU, and India have implemented various trade remedies (tariffs, anti-dumping duties) against Chinese PV products. While Junda’s overseas expansion (Oman, Turkey) is designed to circumvent these, changes in rules of origin or new tariffs on Southeast Asian/Middle Eastern exports could undermine this strategy.
• Subsidy Changes: Reductions in feed-in tariffs or renewable energy subsidies in key markets could dampen demand.
• Geopolitical Tension: Escalating tensions between China and Western nations could lead to stricter decoupling measures, affecting Junda’s ability to operate or sell in certain jurisdictions.

5. Technology Iteration Risk

• Risk: The PV industry is characterized by rapid technological change. If a competitor achieves a breakthrough in HJT (Heterojunction) or another BC variant that is cheaper or more efficient than Junda’s TBC, Junda’s R&D investments could face impairment, and its market share could erode.
• Mitigation: Junda’s strong R&D pipeline and partnerships in perovskite tandems provide a hedge against single-technology dependency.

Rating / Sector Outlook

Sector Outlook: From "Involution" to Rationalization

The global photovoltaic industry is currently undergoing a painful but necessary consolidation phase. The term "involution" (neijuan) accurately describes the current state: fierce internal competition leading to diminishing returns. However, we believe the sector is approaching an inflection point.

1. Supply-Side Clearing: Persistent losses are forcing weaker players to exit or delay capacity expansions. Bankruptcy risks for highly leveraged, inefficient manufacturers are rising, which will ultimately reduce total industry supply.
2. Demand Resilience: Despite short-term fluctuations, the long-term trajectory for global renewable energy adoption remains upward, driven by climate commitments (Paris Agreement), energy security concerns, and the declining LCOE of solar power.
3. Technology Premium: The market is increasingly rewarding companies that can deliver higher efficiency modules. The spread between standard PERC/TOPCon and advanced BC/Tandem cells is widening, creating a two-tier market where technology leaders can maintain healthier margins.

Outlook: We maintain a Positive long-term view on the sector, expecting a gradual recovery in profitability starting in late 2025 and accelerating in 2026. The "bottom" is likely near, making this an opportune time for selective accumulation of high-quality assets.

Company Rating: BUY (Maintained)

We maintain our BUY rating on Junda Shares (002865.SZ).

• Rationale:

  • Resilience in Downturn: The company’s ability to reduce expense ratios and expand overseas sales share during a severe industry downturn demonstrates strong management execution.
  • Technological Alpha: Leadership in TBC and perovskite tandems provides a clear competitive moat that will drive premium pricing and market share gains in the next cycle.
  • Valuation Appeal: The stock is trading at levels that price in significant pessimism. The projected recovery in 2026-2027 offers substantial upside potential, with a forward P/E of ~10x by 2027.
  • Strategic Optionality: The overseas capacity projects in Oman and Turkey provide valuable optionality to navigate trade barriers and capture higher-margin international demand.

• Target Price Consideration: While a specific target price is not explicitly recalculated in this note, the implied valuation based on 2027 earnings (CNY 4.60 EPS) and a conservative 12-15x P/E multiple suggests a fair value range significantly above the current price of CNY 46.08. Investors should view current levels as an attractive entry point for a 2-3 year investment horizon.

Investment View

Core Investment Logic

Junda Shares represents a compelling "turnaround play" within the photovoltaic sector. The investment thesis rests on three pillars: Cyclical Recovery, Structural Transformation, and Technological Superiority.

1. Cyclical Recovery: Buying at the Bottom

The PV industry is cyclical, and we are currently in the trough. The negative gross margins reported in 2Q25 are unsustainable for the industry at large and signal that the bottom is near. History shows that investing in leading manufacturers during periods of peak pessimization and negative profitability yields superior returns as the cycle turns. Junda’s financials are expected to improve sequentially from 2H25 onwards, with a full return to profitability in 2026.

2. Structural Transformation: The Overseas Arbitrage

Junda is successfully transitioning from a predominantly domestic-focused supplier to a global player. The increase in overseas sales to >50% is not just a numerical change; it represents a fundamental shift in business quality.
* Margin Arbitrage: International markets generally offer better pricing than the domestic Chinese market. As Junda’s overseas revenue mix grows, its blended gross margin should structurally improve, even if domestic prices remain depressed.
* Risk Diversification: Geographic diversification reduces reliance on any single market’s policy or demand shocks.
* Capacity Localization: The Oman and Turkey projects are strategic moves to localize production near key demand centers, reducing logistics costs and tariff risks. This transforms Junda from a pure exporter to a global manufacturer, enhancing its valuation multiple.

3. Technological Superiority: The Efficiency Premium

In a commoditized market, technology is the differentiator. Junda’s leadership in TBC and perovskite tandems ensures it will not be left behind in the next technology wave.
* TBC Commercialization: As TBC enters mass production, Junda will be among the first to offer this high-efficiency product at scale. Early adopters in the premium module segment will prefer Junda’s cells, allowing the company to command a price premium.
* R&D Pipeline: The 32.08% efficiency in perovskite tandems is a testament to the company’s innovation capability. This keeps Junda relevant and attractive to strategic partners and customers looking for future-proof supply chains.

Important Financial and Operational Changes

• Profitability Pressure: Investors must acknowledge the short-term pain. The negative gross margin in 2Q25 is a stark reminder of the industry’s brutality. Expect continued volatility in quarterly earnings until supply/demand rebalances.
• Cash Flow Management: With negative operating cash flow projected for 2025 (-CNY 1.619 billion), monitoring the company’s liquidity position is crucial. The balance sheet shows sufficient cash reserves (CNY 2.258 billion estimated for 2025E) and access to financing, but capital expenditure discipline will be key.
• Expense Ratio Improvement: The drop in the four-expense ratio to 8.32% is a positive signal that should be monitored in subsequent quarters. Sustained low overheads will amplify profit elasticity when revenues recover.

Investment Implications for Institutional Investors

1. Long-Term Accumulation: For institutional investors with a 2-3 year horizon, current levels offer an attractive risk-reward profile. The downside is limited by the company’s asset value and technological IP, while the upside is significant given the projected earnings recovery.
2. Monitor Leading Indicators: Investors should track:
   • PV Cell Prices: Stabilization or slight increases in ASPs will be the first sign of margin recovery.
   • Overseas Project Progress: Timelines for the Oman and Turkey facilities. Any delays could impact the 2026-2027 growth story.
   • TBC Yield Rates: Successful mass production yields will confirm the technological advantage and margin potential.
3. Sector Rotation: As the PV sector bottoms out, capital is likely to rotate back into high-quality leaders. Junda, with its clear differentiation, is well-positioned to benefit from this inflow.
4. Risk Management: Given the volatility, a phased entry strategy may be prudent. Hedging against broader market risks or currency fluctuations (given the high overseas exposure) should be considered.

Conclusion

Junda Shares is navigating one of the most challenging periods in the photovoltaic industry’s history with strategic foresight and operational discipline. While the 1H25 financial results reflect the severity of the industry downturn, the underlying trends—surging overseas sales, rigorous cost control, and technological leadership—point to a resilient franchise capable of emerging stronger from the crisis.

We believe the market has overly penalized the stock for short-term cyclical weaknesses, ignoring the long-term structural improvements. As the industry supply clears and demand rebounds, Junda’s unique positioning in overseas markets and next-generation technologies will drive a significant re-rating. We maintain our BUY rating, encouraging investors to look through the current noise and focus on the compelling recovery narrative for 2026 and beyond.

Appendix: Detailed Financial Data

Income Statement Summary (CNY Million)

Balance Sheet Highlights (CNY Million)

Cash Flow Statement Summary (CNY Million)

Key Financial Ratios

(Source: Pacific Securities Research, Wind, Company Reports)

Disclaimer and Regulatory Information

Analyst Certification:
The analysts responsible for this report, Zhong Xincai (S1190524110004) and Liu Qiang (S1190522080001), certify that the views expressed in this report accurately reflect their personal views about the subject securities and issuers. No part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

Important Disclosures:
* Rating Definition:
* BUY: Expected return >15% relative to CSI 300 over the next 6 months.
* OVERWEIGHT: Expected return 5%-15% relative to CSI 300.
* HOLD: Expected return -5% to 5% relative to CSI 300.
* UNDERWEIGHT: Expected return -5% to -15% relative to CSI 300.
* SELL: Expected return <-15% relative to CSI 300.
* Industry Rating:
* OVERWEIGHT: Industry return >5% above CSI 300.
* NEUTRAL: Industry return between -5% and 5% of CSI 300.
* UNDERWEIGHT: Industry return <5% below CSI 300.

Legal Notice:
This report is issued by Pacific Securities Co., Ltd. It is intended solely for the use of professional investors and clients who have signed a service agreement with Pacific Securities. If you are not a designated client, please delete this report immediately. The information contained herein is based on sources believed to be reliable, but Pacific Securities does not guarantee its accuracy or completeness. This report does not constitute an offer to sell or a solicitation of an offer to buy any securities. Past performance is not indicative of future results. Investors should make their own investment decisions based on their own objectives and risk tolerance. Pacific Securities and its affiliates may hold positions in the securities mentioned and may perform investment banking services for the companies covered.

Contact Information:
* Pacific Securities Research Institute
* Address: 31st Floor, Tongde Plaza Office Building, No. 926 Beijing Road, Panlong District, Kunming, Yunnan Province, China.
* Beijing Office: Block D, Huayuan Enterprise No. 9, Beizhan North Street, Xicheng District, Beijing 100044, China.
* Complaint Hotline: 95397
* Email: kefu@tpyzq.com

(End of Report)