Equity Research Report: Junda Shares (002865.SZ)

Date: August 26, 2025
Analyst: Shuaibo Yang (SAC Reg. No.: S1340524070002)
Rating: Overweight (Downgraded from Buy)
Current Price: CNY 46.20
Target Price: Implied Valuation based on 2026E PE of 21x
Market Cap: CNY 13.5 Billion

Executive Summary

Junda Shares (002865.SZ), a leading manufacturer of high-efficiency solar cells, released its interim financial results for the first half of 2025 (1H25) on August 25, 2025. The report reveals a company navigating a period of intense industry consolidation and price volatility. While top-line revenue and bottom-line profitability faced significant headwinds due to fierce domestic competition, strategic pivots toward overseas markets and technological leadership in N-type cell efficiency are beginning to show structural resilience.

Key Financial Highlights for 1H25:
* Revenue: CNY 3.63 billion, representing a year-over-year (YoY) decline of 42.5%.
* Net Profit Attributable to Shareholders: A loss of CNY 260 million, a YoY deterioration of 58.5%.
* Non-GAAP Net Profit: A loss of CNY 470 million, narrowing by 19.2% YoY.
* Gross Margin: Improved slightly to 2.0% (+0.9 percentage points YoY), driven by a shift in sales mix rather than pure pricing power.
* Net Margin: Declined to -7.2% (-4.6 percentage points YoY), primarily due to an increase in the four major expense ratios by 4.2 percentage points.

Despite the challenging near-term financials, our analysis identifies a critical inflection point in Junda’s business model. The company has successfully accelerated its internationalization strategy, with overseas sales占比 (proportion) surging from 23.85% in 2024 to 51.87% in 1H25. Crucially, the overseas segment achieved a gross margin of 4.5% (+2.8 pcts YoY), while the domestic segment remained under severe pressure with a negative gross margin of -0.8%. This divergence underscores the efficacy of Junda’s "anti-involution" (avoiding destructive domestic price wars) strategy through geographic diversification.

Technologically, Junda continues to lead in N-type TOPCon efficiency improvements and is actively preparing for the next generation of Tunnel Oxide Passivated Contact (TBC) and perovskite tandem cells. The company’s mid-trial TBC cells have demonstrated efficiency gains of 1-1.5 percentage points over mainstream N-type cells, positioning it favorably for the next technology cycle.

Investment Stance:
We maintain an "Overweight" rating but have downgraded it from "Buy" to reflect the prolonged duration of industry competition and the time required for overseas capacity to fully translate into robust profitability. We forecast revenues of CNY 11.66 billion, CNY 14.23 billion, and CNY 17.31 billion for 2025, 2026, and 2027, respectively. Net profit is expected to remain negative in 2025 (CNY -362 million) before turning positive in 2026 (CNY 649 million) and accelerating in 2027 (CNY 1.06 billion). The current valuation implies a 2026E P/E of approximately 21x, which we deem reasonable given the anticipated earnings recovery and the company’s premium positioning in high-efficiency cell technology.

Key Takeaways

1. Structural Shift: Overseas Expansion as the Primary Profit Driver

The most significant development in Junda’s 1H25 performance is the dramatic restructuring of its revenue geography. The photovoltaic (PV) industry in China has been characterized by "involution"—a term describing hyper-competitive, zero-sum market dynamics where prices fall below cost, eroding margins for all participants. Junda’s strategic response has been to aggressively pivot toward international markets, where pricing structures remain more favorable due to supply-demand imbalances and trade barriers protecting local industries.

1.1 Revenue Mix Transformation

In 1H25, overseas sales accounted for 51.87% of total revenue, a substantial increase from 23.85% in the full year of 2024. This shift is not merely a volume story but a quality story. The ability to sell more than half of its production outside of the saturated domestic market provides Junda with a crucial hedge against domestic price erosion.

Source: Company Reports, China Post Securities Research Institute

The data indicates that while the domestic business is currently loss-making at the gross level (-0.8%), the overseas business is generating positive gross profits (4.5%). The overall gross margin improvement to 2.0% is entirely attributable to this mix shift. Without the overseas expansion, the company’s overall margin would likely have remained deeply negative, exacerbating the net loss.

1.2 Strategic Overseas Capacity Deployment

Junda is not relying solely on exports from China, which are increasingly subject to tariff risks and trade restrictions (e.g., U.S. UFLPA, EU carbon border adjustments). Instead, the company is pursuing a localized manufacturing strategy to secure long-term market access and improve margins.

• Turkey Strategic Partnership: Junda has formally signed a strategic cooperation agreement with a local Turkish module customer to co-build a high-efficiency battery project. This move addresses a structural shortage of battery cell capacity in the region. Turkey serves as a critical gateway to both the European and Middle Eastern markets, offering a favorable trade environment compared to direct exports from Asia.
• Oman 5GW Project: The company is prudently advancing its 5GW battery capacity project in Oman. The Middle East is emerging as a new hub for PV manufacturing, supported by sovereign wealth funds and government initiatives to diversify energy sources. Oman’s strategic location allows for efficient logistics to Europe, Africa, and Asia. By establishing production here, Junda mitigates geopolitical risks associated with Chinese-origin goods and potentially qualifies for preferential trade treatments.

This dual-pronged approach (Turkey for immediate regional fill, Oman for large-scale future capacity) demonstrates a sophisticated understanding of global trade dynamics. It suggests that Junda is transitioning from a pure manufacturing player to a global supply chain integrator, which should command a valuation premium over peers reliant solely on domestic production.

2. Technological Leadership: N-Type Efficiency and Next-Gen R&D

In the solar cell industry, technology iteration is the primary driver of cost reduction and premium pricing. As the industry transitions from P-type PERC to N-type TOPCon and beyond, leaders in conversion efficiency and non-silicon cost control will survive the consolidation phase. Junda has consistently demonstrated strong R&D capabilities, which are evident in its 1H25 operational metrics.

2.1 N-Type TOPCon Optimization

During 1H25, Junda achieved two critical operational milestones in its mainstream N-type TOPCon production:
1. Conversion Efficiency Increase: The average mass-production conversion efficiency increased by more than 0.2 percentage points. In the context of mature manufacturing, a 0.2% gain is significant, translating directly to higher wattage output per cell and lower Levelized Cost of Energy (LCOE) for downstream customers.
2. Non-Silicon Cost Reduction: The non-silicon cost per watt decreased by approximately 20%. Non-silicon costs include silver paste, electricity, labor, and depreciation. A 20% reduction indicates successful implementation of process optimizations, such as silver-coated copper plating or improved yield rates. This cost discipline is vital for maintaining competitiveness even when silicon prices fluctuate.

These improvements explain why the company’s gross margin improved despite falling average selling prices (ASPs). The ability to squeeze more efficiency out of the same material input and reduce processing costs provides a buffer against price wars.

2.2 Preparation for TBC Mass Production

Looking beyond TOPCon, Junda is actively preparing for the commercialization of Tunnel Oxide Passivated Back Contact (TBC) technology. TBC combines the benefits of TOPCon (passivation) and IBC (back contact, eliminating front-side shading), offering higher theoretical efficiency limits.

• Mid-Trial Performance: Junda’s mid-trial TBC cells have achieved conversion efficiencies that are 1-1.5 percentage points higher than mainstream N-type cells. This efficiency gap is substantial enough to justify a premium price in high-end markets (e.g., distributed residential rooftop, space-constrained commercial projects).
• Mass Production Readiness: The company is continuously pushing forward with preparations for the next stage of TBC mass production. While the exact timeline for full-scale rollout is not specified, the progress in mid-trials suggests that Junda aims to be among the first movers in this next-generation technology. Being a first mover in TBC could allow Junda to capture early adopter premiums before the technology becomes commoditized.

2.3 Long-Term Horizon: Perovskite Tandem Cells

For the longer term, Junda is collaborating with external institutions on perovskite-silicon tandem cells. The laboratory efficiency has reached 32.08%. While this is still in the R&D phase and far from commercial viability, it signals the company’s commitment to staying at the forefront of photovoltaic science. Perovskite tandems are widely regarded as the "holy grail" of PV technology, with the potential to break the Shockley-Queisser limit of single-junction silicon cells. Junda’s involvement ensures it will not be technologically disrupted in the 2030 timeframe.

3. Financial Analysis: Navigating the Trough

The 1H25 financial results reflect the painful bottoming-out process of the PV industry. While the top-line contraction is severe, a deeper dive into the income statement and balance sheet reveals signs of stabilization and strategic cost management.

3.1 Income Statement Decomposition

Note: 1H24 estimates derived from reported YoY changes.

The divergence between the GAAP net loss (-260 million) and the Non-GAAP net loss (-470 million) requires careful interpretation. Typically, Non-GAAP figures exclude one-time items. However, in this context, the report states Non-GAAP net profit was -470 million, narrowing by 19.2% YoY. This implies that the core operating performance (excluding certain non-recurring gains/losses or impairment adjustments included in GAAP) is actually improving. The widening of the GAAP loss relative to Non-GAAP may be due to specific asset impairment charges or fair value changes in financial instruments, which are non-cash or temporary in nature. The narrowing of the Non-GAAP loss is a stronger indicator of operational trend, suggesting that the bleeding from core operations is slowing down.

The increase in the four major expense ratios (Sales, Admin, R&D, Finance) by 4.2 percentage points is a classic symptom of revenue contraction. As revenue fell by 42.5%, fixed administrative and R&D costs did not fall proportionally, leading to higher expense ratios. However, management has kept absolute R&D spending stable (CNY 198 million in 1H25 vs. CNY 199 million in 2024 full year annualized run-rate), demonstrating a commitment to innovation even during downturns.

3.2 Quarterly Trend Analysis (Q2 2025)

• Q2 Revenue: CNY 1.79 billion.
  • YoY: -32.8%
  • QoQ: -4.6%
• Q2 Net Profit: Loss of CNY 160 million.
  • YoY: +15.2% (Loss narrowed)
  • QoQ: -49.0% (Loss widened sequentially)

The sequential deterioration in Q2 net profit (-49.0% QoQ) is concerning and warrants attention. While revenue declined only modestly QoQ (-4.6%), the profit drop was sharp. This could be attributed to:
1. Seasonal Factors: Potential inventory write-downs or seasonal demand lulls.
2. One-off Charges: Possible accruals for restructuring or legal costs.
3. Margin Pressure: A temporary dip in overseas margins or a spike in raw material costs.

However, the YoY improvement in Q2 net profit (+15.2%) confirms that the year-over-year trajectory is positive. The company is performing better now than it did at the same time last year, which is the relevant benchmark for assessing recovery.

3.3 Balance Sheet and Liquidity

Junda maintains a relatively strong liquidity position, which is critical for surviving the industry winter.

• Cash Reserves: Monetary funds stood at CNY 3.54 billion at the end of 2024 and are projected to grow to CNY 4.59 billion in 2025E. This cash buffer provides ample runway to fund ongoing operations and overseas CAPEX without excessive reliance on debt.
• Debt Structure: The asset-liability ratio is high at 76.4% (2024A), projected to rise slightly to 79.0% in 2025E before declining to 75.2% in 2027E. This high leverage is typical for capital-intensive manufacturing firms during expansion phases. However, the current ratio is tight at 0.99 (2024A), improving to 1.00 in 2025E. This indicates that short-term liabilities are roughly matched by short-term assets, requiring careful working capital management.
• Inventory Management: Inventory levels decreased from CNY 552 million (2024A) to a projected CNY 417 million (2025E). The inventory turnover rate is projected to improve significantly from 15.44x (2024A) to 23.60x (2025E). This aggressive destocking is a positive sign, reducing the risk of inventory obsolescence in a rapidly changing technology landscape.

Risks / Headwinds

While the investment thesis is anchored in Junda’s strategic pivots, several significant risks could derail the recovery trajectory. Investors must carefully monitor these headwinds.

1. Industry Self-Discipline and "Anti-Involution" Failure

The core bullish thesis relies on the assumption that the industry will achieve a degree of self-discipline, leading to stabilized prices and margins. If major players continue to engage in predatory pricing to gain market share, the "price war" could intensify.
* Risk Scenario: If domestic module prices fall further below cash cost, Junda’s domestic segment (currently -0.8% gross margin) could drag down overall profitability more severely. Even with strong overseas performance, a prolonged domestic bleed could exhaust cash reserves.
* Monitoring Indicator: Watch for industry-wide capacity utilization rates and average selling price trends in China. Any sign of renewed aggressive capacity expansion by tier-1 competitors would be a negative signal.

2. Intensifying Market Competition

The solar cell sector is becoming increasingly crowded with vertically integrated module manufacturers producing their own cells.
* Risk Scenario: Integrated giants (e.g., LONGi, Jinko, Trina) may prioritize internal supply, squeezing out independent cell suppliers like Junda. If Junda loses key domestic customers to vertical integration, its volume utilization could drop, leading to higher unit fixed costs and further margin erosion.
* Mitigation: Junda’s overseas focus partially mitigates this, as international customers often prefer specialized, high-efficiency cell suppliers. However, if global trade barriers restrict Chinese cell exports, Junda’s addressable market could shrink.

3. Overseas Expansion Execution Risks

Junda’s future profitability is heavily dependent on the success of its Turkey and Oman projects.
* Geopolitical and Regulatory Risk: Building factories in Turkey and Oman involves navigating complex local regulations, labor laws, and potential political instability. Delays in permitting, construction, or ramp-up could push back the timeline for profitability.
* Demand Uncertainty: The assumption that Turkey and the Middle East will absorb 5GW+ of new capacity relies on sustained policy support in those regions. If local subsidies are cut or demand slows, Junda could face overcapacity in its overseas hubs.
* Cost Overruns: International construction projects are prone to cost overruns. If the CAPEX for the Oman project exceeds expectations, it could strain the company’s balance sheet and delay ROI.

4. Technology Iteration Risk

The PV industry is characterized by rapid technological obsolescence.
* Risk Scenario: If competitor’s TBC or HJT (Heterojunction) technologies achieve mass production efficiency gains faster than Junda’s, Junda’s current TOPCon assets could become stranded. The 1-1.5% efficiency advantage of TBC is significant, but if rivals achieve similar gains with lower CAPEX, Junda’s competitive edge could diminish.
* R&D Failure: There is always a risk that the transition from lab-scale perovskite/tandem cells to mass production encounters unforeseen technical hurdles (e.g., stability issues, yield problems).

5. Financial and Liquidity Risk

With a debt-to-asset ratio nearing 80% and negative net income in 2025, Junda faces refinancing risks.
* Interest Rate Sensitivity: Although financial expenses are projected to be zero in the forecast (likely assuming capitalization or offsetting interest income), any rise in global or local interest rates could increase borrowing costs.
* Credit Access: If the company’s credit rating is downgraded due to prolonged losses, access to cheap financing could be restricted, forcing equity raises that dilute existing shareholders.

Rating / Sector Outlook

Sector Outlook: Consolidation and Globalization

The global photovoltaic sector is entering a phase of deep consolidation. The era of easy growth driven by subsidy-fueled demand is over; the new era is defined by cost leadership, technological differentiation, and global supply chain resilience.
* Supply Side: Excess capacity in China is being slowly cleared through bankruptcies of smaller players and capacity delays by larger ones. We expect supply growth to slow in 2025-2026, aiding price stabilization.
* Demand Side: Global demand remains robust, driven by energy security concerns and climate goals. However, the location of demand is shifting. Europe, the Middle East, and emerging markets are growing faster than China, rewarding companies with international footprints.
* Technology: N-type TOPCon is the current standard, but TBC and HJT are gaining traction. Companies that can efficiently manage the transition between these technologies will capture the next wave of value.

Investment Rating: Overweight (Downgraded)

We downgrade Junda Shares from Buy to Overweight.

Rationale for Downgrade:
1. Extended Timeline to Profitability: The 1H25 results confirm that the industry bottom is deeper and more prolonged than previously anticipated. The expectation of a swift V-shaped recovery has been replaced by a U-shaped recovery profile.
2. Near-Term Earnings Visibility: With a projected net loss in 2025, near-term earnings visibility is low. The stock may experience volatility as investors react to quarterly misses or delayed overseas ramp-ups.
3. Valuation Reset: While the long-term story is intact, the near-term multiple compression is justified. The "Overweight" rating reflects our belief that the current price (CNY 46.20) adequately discounts the 2025 losses and offers attractive upside for the 2026-2027 recovery, but lacks the immediate catalyst for a "Buy" rating.

Target Valuation Framework:
We base our valuation on the 2026E earnings, as 2025 is a transition year.
* 2026E EPS: CNY 2.22
* Target P/E: 21x (Conservative premium for technology leader and overseas growth)
* Implied Target Price: CNY 46.62 (Note: This is close to current price, suggesting limited immediate upside but strong medium-term potential as 2027 earnings of CNY 3.62 EPS come into view. A 2027E PE of 13x implies a target of ~CNY 47, but growth stocks often re-rate higher as earnings visibility improves. We see potential for multiple expansion to 25x on 2027E earnings, implying a longer-term target of ~CNY 90).

Note: The "Overweight" rating implies an expected return of 10-20% relative to the benchmark (CSI 300) over the next 6 months. Given the current price and 2026E valuation, the stock is fairly valued for the near term but undervalued for the 2027 horizon.

Investment View

Core Investment Logic

1. The "Anti-Involution" Alpha:
Junda Shares is executing a textbook counter-cyclical strategy. While peers are trapped in the domestic price war, Junda is escaping to higher-margin overseas markets. The shift to >50% overseas revenue is not just a statistical change; it is a fundamental de-risking of the business model. Investors should view Junda not as a generic Chinese manufacturer, but as a global niche player with exposure to diverse geographic demand curves. This diversification reduces correlation with domestic policy shocks and price cycles.

2. Technology Moat as a Survival Kit:
In a commodity market, the lowest-cost producer wins. In a differentiated market, the highest-efficiency producer wins. Junda is positioning itself in the latter category. The 0.2% efficiency gain in TOPCon and the promising TBC trials provide a tangible product differentiation. As the market matures, customers (especially in Europe and high-end residential segments) will pay a premium for efficiency. Junda’s R&D spend ensures it remains on the right side of this curve.

3. Inflection Point in 2026:
Our financial models predict a sharp turnaround in 2026, with net profit swinging from -CNY 362 million in 2025 to +CNY 649 million in 2026. This swing is driven by:
* Full contribution from overseas capacities (Turkey/Oman).
* Stabilization of domestic prices as capacity clears.
* Operating leverage kicking in as revenue grows (22% YoY in 2026).
* Improved product mix with higher-margin TBC cells entering production.

Investors looking to position for the 2026 recovery should consider accumulating positions during the 2025 consolidation phase, accepting near-term volatility for medium-term gain.

Strategic Recommendations for Institutional Investors

For Long-Only Funds:
* Accumulate on Weakness: Use any further dips below CNY 40 as buying opportunities. The downside is limited by the company’s cash position and asset value, while the upside to 2027 earnings is significant.
* Monitor Quarterly Overseas Margins: The key metric to watch is not just total revenue, but the gross margin of the overseas segment. If this margin expands above 5-6%, it confirms the success of the globalization strategy and justifies a higher valuation multiple.

For Hedge Funds / Active Traders:
* Pair Trade: Consider going long Junda and short a pure-play domestic PV manufacturer with low overseas exposure. This captures the relative outperformance of Junda’s "anti-involution" strategy against the broader sector beta.
* Event-Driven Catalysts: Watch for announcements regarding the Oman project’s completion date or new strategic partnerships in Europe. These events could serve as short-term catalysts for re-rating.

Conclusion

Junda Shares is a company in transition. It is shedding its identity as a domestic volume player and emerging as a global technology-led specialist. The 1H25 results, while superficially weak, contain the seeds of this transformation: rising overseas share, improving overseas margins, and steady technological progress.

The downgrade to "Overweight" reflects a prudent acknowledgment of the near-term pain and execution risks. However, the core investment thesis remains intact. For investors with a 12-24 month horizon, Junda offers a compelling risk-reward profile, backed by a clear path to profitability in 2026 and strong growth prospects in 2027. The company’s ability to navigate the "involution" of the Chinese PV industry through globalization and innovation makes it a standout candidate for portfolio inclusion in the renewable energy sector.

Appendix: Detailed Financial Forecasts & Assumptions

1. Revenue Forecast Breakdown

Assumption: Revenue growth is driven primarily by volume expansion in overseas markets, offsetting stagnant or slowly growing domestic volumes. Average Selling Prices (ASPs) are assumed to stabilize in 2025 and grow slightly in 2026-2027 due to product mix improvement (higher efficiency cells).

2. Profitability Forecast

Assumption: Gross margin expansion is driven by:
1. Mix Shift: Higher proportion of high-margin overseas sales.
2. Cost Reduction: Continued non-silicon cost reductions (20% target achieved in 1H25, further gains expected).
3. Tech Premium: TBC cells commanding a price premium.
4. Scale Economies: Fixed costs spread over larger revenue base in 2026-2027.

Net margin improvement follows gross margin expansion, with operating expense ratios declining as revenue grows (operating leverage).

3. Cash Flow and Capital Expenditure

Assumption: Capital expenditures remain elevated in 2025-2026 to fund the Oman and Turkey projects. Free Cash Flow turns strongly positive in 2026 as operating cash flow surges and CAPEX intensity normalizes. This supports debt repayment and potential dividend initiation in the future.

4. Valuation Multiples

Analysis: The high EV/EBITDA in 2024 reflects depressed EBITDA. The rapid compression to 6.7x in 2026E highlights the earnings leverage. A 2026E P/E of 21x is in line with historical averages for high-growth PV technology leaders during recovery phases. The 2027E P/E of 12.8x suggests the stock becomes attractively valued as growth matures.

Disclaimer and Analyst Certification

Analyst Certification:
The analyst(s) responsible for this report, Shuaibo Yang, hereby certifies that the views expressed in this report accurately reflect his/her personal views about the subject securities or issuers. No part of the analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

Important Disclosures:
* Conflict of Interest: China Post Securities Co., Ltd. and its affiliates may hold positions in the securities mentioned in this report and may engage in trading activities. They may also provide investment banking, financial advisory, or other services to the companies mentioned.
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End of Report