Industry Update: Power Equipment (Solar & Energy Storage)

Date: March 16, 2026
Rating: Overweight (Stronger than Market)
Analyst: Zhu Pan (S0820525070001)

Executive Summary

The global photovoltaic (PV) and energy storage sectors are exhibiting signs of robust structural recovery and demand resilience entering the second quarter of 2026. Our latest industry tracking indicates a significant rebound in production schedules for March, driven by both domestic policy tailwinds and sustained overseas demand, particularly in emerging markets.

Key developments include:
1. Production Rebound: PV module production in China is projected to reach 44-45 GW in March 2026, representing a substantial month-on-month (MoM) increase of 28-29%. Similarly, global lithium battery production (power + storage + consumer) is expected to rise by 19.0% MoM to 232 GWh, highlighting a high-quality capacity restoration concentrated among top-tier manufacturers.
2. Price Dynamics & Cost Transmission: While upstream polysilicon prices have softened slightly to RMB 46.50/kg, downstream PV module prices remain stable at RMB 0.76/W for TOPCon dual-glass modules. In the energy storage sector, cost pressures from volatile lithium carbonate prices are being successfully transmitted down the value chain. The average bid price for LFP energy storage systems rose by 1.62% MoM in February 2026, with 2-hour systems seeing a notable 22.64% MoM increase, indicating improved pricing power for integrators.
3. Demand Resilience: Domestic PV installations in December 2025 grew 82.15% year-on-year (YoY), culminating in a full-year 2025 total of 315 GW (+13.65% YoY). Overseas, inverter exports demonstrated strong momentum, with cumulative 2025 exports reaching $9.04 billion (+9.41% YoY). Notably, exports to Australia surged over 148% YoY in December, underscoring the diversification of growth engines beyond traditional European markets.
4. Policy Catalysts: The impending cancellation of VAT export rebates for certain PV products in April 2026 is acting as a short-term catalyst for front-loaded shipments, while simultaneously serving as a long-term mechanism to clear inefficient capacity and optimize industry structure.

We maintain an Overweight rating on the Power Equipment sector. We recommend investors focus on leading companies with strong global channel capabilities and technological moats. Top picks include Sungrow Power Supply (300274.SZ), Chint Power (002150.SZ), Narada Power (300068.SZ), and Shouhang New Energy (301658.SZ). We also suggest monitoring CATL (300750.SZ) and EVE Energy (300014.SZ) for exposure to the consolidating battery landscape.

Key Takeaways

1. Supply Side: Significant Ramp-Up in March Production Schedules

The supply side data for March 2026 points to a decisive acceleration in manufacturing activity, reflecting confidence in near-term demand and strategic inventory positioning ahead of policy changes.

1.1 Photovoltaic Module Production

According to data from InfoLink, the overall production schedule for PV modules in March 2026 has risen markedly to 44-45 GW. This represents a month-on-month increase of approximately 28-29%, signaling a strong recovery from the seasonal lows typically observed in the first quarter.

• Domestic Production: Output within China is estimated to reach 32-33 GW. This surge is largely attributed to manufacturers rushing to fulfill orders before the potential impact of new trade policies and the expiration of certain tax incentives.
• Overseas Production: Overseas output is projected to rise to 11-12 GW. However, performance across regions is diverging:
  • India: Production remains stable at approximately 5-6 GW, supported by local manufacturing incentives (PLI schemes) and consistent domestic demand.
  • Southeast Asia: The region faces headwinds due to escalating tariff risks and trade investigations. Consequently, some manufacturers have reduced operating rates or temporarily halted production lines, leading to a decline in overall utilization.
  • United States: Production continues to ramp up steadily, with monthly output stabilizing around 2-3 GW. This growth is underpinned by the Inflation Reduction Act (IRA) benefits and strong local demand for utility-scale projects.

1.2 Lithium Battery Production

Data from the TD Institute (Dadong Shidai Think Tank) forecasts a robust expansion in battery production for March 2026.

• China Market: The combined production schedule for power, energy storage, and consumer batteries is expected to reach 219 GWh, a 16.5% MoM increase.
• Global Market: Global production is forecast at 232 GWh, representing a 19.0% MoM growth.

Structural Insight: The higher环比 (MoM) growth rate indicates a "high-quality repair" of industry capacity. Incremental volume is increasingly concentrated in large-format energy storage cells and among head enterprises (top-tier manufacturers). Conversely, marginal or non-core capacity utilization remains weak, in some cases falling below pre-Spring Festival levels. This divergence reinforces the structural trend of industry consolidation, where market share and profitability are skewing towards leaders with superior technology, scale, and customer relationships.

Source: InfoLink, TD Institute, Aijian Securities Research Institute

2. Price Trends: Upstream Softness vs. Downstream Stability

Price movements across the PV and energy storage value chains reveal a complex interplay between raw material costs, manufacturing margins, and end-market pricing power.

2.1 Photovoltaic Chain Prices

As of March 11, 2026, the PV supply chain exhibits mixed trends, with upstream materials easing while mid-stream components hold firm.

• Polysilicon: The price for dense-grade polysilicon decreased slightly from the previous week, settling at RMB 46.50/kg. This continued softness reflects ample supply and moderate downstream procurement intensity, although the rate of decline has slowed.
• Silicon Wafers: The mainstream average price for 183mm N-type monocrystalline silicon wafers declined to RMB 105/wafer. The pressure on wafer prices is indicative of intense competition in this segment, though N-type premium persists over older P-type technologies.
• PV Cells: TOPCon cell prices dropped to RMB 0.41/W. This decline suggests that cell manufacturers are absorbing some of the upstream cost reductions but also facing competitive pressure to pass savings downstream.
• PV Modules: Crucially, TOPCon dual-glass module prices remained flat at RMB 0.76/W. The stability in module prices, despite falling upstream costs, is a positive signal for module makers' gross margins. It indicates that demand strength is sufficient to prevent a race-to-the-bottom in pricing, allowing manufacturers to retain some of the cost benefits as profit rather than passing them entirely to developers.

Source: InfoLink, Aijian Securities Research Institute

2.2 Energy Storage System Prices

The energy storage sector is experiencing a different dynamic, characterized by the transmission of upstream cost volatility to the system level. Since the beginning of 2026, lithium carbonate prices have fluctuated violently. This cost pressure is gradually propagating through the supply chain: from materials → cells → systems → EPC (Engineering, Procurement, and Construction).

In February 2026, the bidding landscape for domestic Lithium Iron Phosphate (LFP) energy storage systems showed a clear upward trend in prices:

• Overall Average Bid Price: The winning bid prices for LFP energy storage systems were primarily concentrated in the range of RMB 0.491 - 1.1152/Wh. The average quoted price was RMB 0.5657/Wh, representing a 1.62% MoM increase and an 11.69% YoY increase.
• 2-Hour Systems: The weighted average winning bid price for 2-hour LFP energy storage systems was RMB 0.6643/Wh. This marks a significant 22.64% MoM increase and an 18.49% YoY increase. The sharp rise suggests strong demand for shorter-duration, high-power applications and potentially tighter supply for specific cell configurations used in these systems.
• 4-Hour Systems: The weighted average winning bid price for 4-hour LFP energy storage systems was RMB 0.5016/Wh. This represents a 14.03% YoY increase but a 4.58% MoM decrease. The slight monthly dip may reflect competitive bidding for larger, utility-scale long-duration projects, but the YoY gain confirms that the era of ultra-low pricing is receding.

Investment Implication: The ability of system integrators to raise prices (or at least stabilize them) in the face of raw material volatility is a critical indicator of industry health. The YoY increases in both 2h and 4h systems suggest that the severe price wars of previous years are moderating, allowing for healthier margin profiles for leading integrators who can secure premium contracts.

3. Demand Analysis: Robust Domestic Growth and Diversified Overseas Markets

Demand fundamentals remain strong, driven by a combination of domestic installation rushes and resilient export markets, albeit with shifting geographic centers of gravity.

3.1 Domestic Demand (China)

Photovoltaics:
* December 2025 Performance: Domestic newly installed PV capacity reached 40.11 GW. While this represented a 43.40% MoM decline (typical seasonal adjustment after year-end rush), it was an impressive 82.15% YoY increase.
* Full Year 2025: Cumulative newly installed PV capacity for 2025 totaled 315.00 GW, a 13.65% YoY growth. This solid double-digit growth confirms that China's domestic market remains the primary engine for global PV demand, supported by national renewable energy targets and distributed generation policies.

Energy Storage:
* February 2026 Bidding: According to TrendForce, China's newly awarded energy storage contracts in February 2026 amounted to 7.72 GW / 34.45 GWh.
* Power Capacity (GW): Decreased by 18% MoM.
* Energy Capacity (GWh): Increased by 47% MoM.
* Interpretation: The divergence between power (GW) and energy (GWh) growth indicates a shift towards longer-duration storage projects. The significant jump in GWh suggests that recent tenders are favoring 4-hour or longer duration systems, aligning with grid requirements for deeper peak-shaving and renewable energy integration. This trend benefits companies specializing in large-capacity cells and integrated long-duration solutions.

3.2 Overseas Demand (Exports)

Export data from the General Administration of Customs reveals a nuanced picture of global demand, with inverters outperforming modules in terms of growth momentum.

Photovoltaic Modules:
* December 2025: Export value was approximately $2.314 billion, a 18.22% YoY increase but a 4.05% MoM decrease.
* Full Year 2025: Cumulative export value totaled $28.199 billion, a 7.84% YoY decline.
* Analysis: The annual decline in module export value reflects the significant drop in global module prices throughout 2024-2025. While shipment volumes may have remained stable or grown, the revenue value contracted due to deflationary pricing. The YoY growth in December suggests a potential stabilization in prices or a volume spike ahead of tariff changes.

Inverters:
* December 2025: Export value reached $839 million, surging 26.12% YoY and growing 9.38% MoM.
* Full Year 2025: Cumulative export value totaled $9.041 billion, a 9.41% YoY increase.
* Regional Breakdown (2025 Full Year):
* Europe: Remains the largest market with $3.437 billion in exports. Despite earlier inventory corrections, Europe continues to drive demand due to energy security concerns and REPowerEU initiatives.
* Asia: Second largest market at $3.123 billion. Growth here is fueled by emerging economies in Southeast Asia and India expanding their renewable infrastructure.
* Australia: A standout performer. In December 2025, inverter exports to Australia grew by over 148% YoY. For the full year, Australian exports totaled $493.59 million, a massive 185.05% YoY increase (see Table 13 in Appendix). This highlights Australia as a critical new growth pole, driven by high rooftop solar penetration and increasing need for grid-forming inverters and hybrid storage solutions.
* North America & South America: North America saw a 41.60% YoY increase to $537.28 million, benefiting from IRA-driven projects. South America remained relatively flat (+2.38% YoY), indicating market saturation or slower policy implementation in key countries like Brazil.

Table: 2025 China Inverter Export Performance by Region (Selected Months & Total)

*Note: Global total derived from reported cumulative sum. Regional sums may vary slightly due to rounding or unlisted minor regions.
Source: General Administration of Customs, Aijian Securities Research Institute

4. Policy Environment: The Impact of VAT Rebate Cancellation

A pivotal policy development is the scheduled cancellation of Value-Added Tax (VAT) export rebates for certain PV products, effective April 2026.

• Short-Term Impact (Q1 2026): The imminent policy change is triggering a "front-loading" effect. Manufacturers and exporters are accelerating shipments in March and early April to lock in the existing rebate benefits. This explains the significant surge in March production schedules and the strong December-January export data. This temporary demand boost provides immediate revenue visibility for listed companies.
• Long-Term Impact (H2 2026 onwards): The removal of subsidies will effectively increase the export cost for Chinese manufacturers. While this may compress margins in the short term, it serves as a powerful mechanism for supply-side reform.
  • Capacity Clearing: Lower-margin, inefficient producers who rely heavily on tax rebates to remain profitable will be forced to exit the market.
  • Structure Optimization: Leading companies with superior technology, brand power, and overseas manufacturing footprints (e.g., in the US or Southeast Asia) will be better positioned to absorb or pass on these costs. This will accelerate industry consolidation, improving the competitive landscape for survivors.
  • Pricing Power: As low-cost capacity exits, global PV prices may stabilize or rise, restoring healthy profitability for the sector.

Risks / Headwinds

While the outlook is positive, institutional investors must carefully weigh the following risks:

1. Intensified Competition and Margin Compression

Despite signs of consolidation, the PV and energy storage sectors remain highly competitive.
* Price Wars: If demand fails to keep pace with the expanded capacity coming online in 2026, manufacturers may revert to aggressive pricing strategies to maintain market share, eroding gross margins.
* Technology Obsolescence: Rapid iteration in PV technology (e.g., transition from PERC to TOPCon to HJT/BC) and battery chemistry (LFP to Sodium-ion or Solid-state) poses a risk of asset impairment for companies holding outdated production lines.

2. Policy Uncertainty and Demand Volatility

The renewable energy sector is heavily influenced by government policies.
* Subsidy Withdrawal: Beyond the VAT rebate cancellation, any reduction in domestic feed-in tariffs or subsidy programs could dampen internal demand.
* Electricity Market Reform: Changes in electricity spot market rules or capacity payment mechanisms in China and abroad could alter the economic viability of standalone energy storage projects, impacting ROI assumptions for developers and thus order volumes for equipment suppliers.
* Grid Connection Delays: Bottlenecks in grid infrastructure upgrades could delay the commissioning of new PV and storage projects, pushing revenue recognition into future periods.

3. International Trade Frictions and Geopolitical Risks

Geopolitical tensions continue to pose a significant threat to the global supply chain.
* Tariffs and Trade Barriers: The US, EU, and India have all implemented or are considering various trade remedies (anti-dumping duties, countervailing duties, local content requirements). Escalation of these measures could restrict market access for Chinese firms.
* Supply Chain Decoupling: Efforts by Western nations to build independent solar and battery supply chains ("friend-shoring") could reduce the long-term export potential for Chinese manufacturers, forcing them to invest capital in overseas factories with potentially lower returns.
* Geopolitical Conflicts: Ongoing conflicts in key regions can disrupt logistics, increase insurance costs, and create macroeconomic instability that delays renewable energy investments.

Rating / Sector Outlook

Sector Rating: Overweight (Stronger than Market)

We maintain our Overweight rating on the Power Equipment sector, specifically the Solar and Energy Storage sub-sectors.

Rationale:
1. Valuation Attractiveness: After a prolonged period of correction, valuations for many leading PV and storage companies have adjusted to reflect pessimistic expectations. Current multiples offer a favorable risk-reward ratio given the improving fundamentals.
2. Fundamental Turnaround: The March production data, stabilizing module prices, and rising storage system bids indicate that the bottom of the cycle may have passed. The industry is moving from a phase of "price-driven volume growth" to "quality-driven profit recovery."
3. Policy Tailwinds: The VAT rebate cancellation, while painful in the short term, is a constructive long-term policy that will cleanse the industry of excess capacity. Combined with global carbon neutrality goals, the secular growth trajectory remains intact.
4. Diversified Growth: The surge in inverter exports to Australia and North America demonstrates that Chinese companies are successfully diversifying their geographic revenue base, reducing reliance on any single market.

Investment View

We advise investors to adopt a "Leader-Focused" strategy. In a consolidating market, scale, technology, and global channel access are the key differentiators. Small and mid-cap players without distinct competitive advantages face existential risks.

Recommended Stocks

Stocks to Watch

Strategic Allocation Advice

1. Prioritize Inverters and Storage Integrators: These segments currently exhibit better pricing power and margin resilience compared to pure-play module manufacturers. The ability to bundle hardware with software/services creates stickier customer relationships.
2. Monitor Q1 Earnings for Confirmation: Investors should closely watch Q1 2026 earnings reports for confirmation of margin improvement and inventory normalization. Look for companies that successfully navigated the VAT rebate transition.
3. Geographic Diversification Check: Favor companies with a balanced global footprint. Those with significant manufacturing or assembly capabilities outside of China (e.g., in the US, Middle East, or Southeast Asia) are better hedged against trade friction risks.
4. Avoid Marginal Capacity Players: Steer clear of smaller manufacturers with high debt levels and outdated technology portfolios. The upcoming capacity clearing phase will likely result in bankruptcies or distressed M&A in this tier.

Detailed Data Analysis & Contextual Deep Dive

(This section provides additional depth for institutional investors seeking granular understanding of the data points presented above.)

A. The Nuance of "High-Quality Repair" in Battery Production

The report highlights that global battery production is rising, but emphasizes that this growth is "high-quality." What does this mean for investors?

1. Capacity Utilization Divergence: The phrase "marginal capacity even weaker than pre-Spring Festival levels" is critical. It implies that while top-tier factories (CATL, BYD, EVE, etc.) are running at 70-80%+ utilization to meet demand for high-spec cells, second-tier factories are struggling to secure orders. This leads to a bifurcation in financial performance. Investors should expect earnings beats from leaders and misses/l losses from laggards.
2. Shift to Large-Format Cells: The mention of "incremental volume concentrating in large-size energy storage cells" reflects the industry's move towards 314Ah+ LFP cells for utility-scale storage. These cells offer lower balance-of-system (BOS) costs per kWh. Companies that have successfully ramped up production of these newer formats (like CATL's Tianheng or EVE's 560Ah) will gain market share. Older 280Ah lines are becoming commoditized.
3. Implication for CapEx: We expect leading firms to continue investing in advanced capacity while pausing or canceling plans for standard capacity. This disciplined CapEx approach supports long-term ROIC (Return on Invested Capital).

B. Decoding the Storage Price Increase

The rise in storage system prices (Avg +1.62% MoM, 2h +22.64% MoM) is a counter-intuitive but bullish signal.

• Why did prices rise? Typically, as lithium carbonate prices fall, system prices should drop. However, the report notes "violent fluctuations" in lithium prices. This uncertainty makes suppliers hesitant to quote low fixed prices. Furthermore, the demand for 2-hour systems (likely for frequency regulation or peak shaving in specific grids) might be outstripping the immediate supply of compatible inverters/BMS systems, creating a bottleneck.
• Sustainability of Price Hikes: The 22.64% MoM jump in 2h systems is likely an anomaly or a reflection of specific high-spec projects. The 4h system price actually dipped MoM (-4.58%). This suggests that the broader utility-scale market remains competitive. However, the YoY increases (18.49% for 2h, 14.03% for 4h) are the more important metric. They prove that the floor for storage prices has risen. The days of bidding below cost to gain market share are ending as banks and developers demand bankable, sustainable supply chains.
• Margin Expansion: For integrators like Sungrow and Narada, if they locked in lithium purchases at lower prices but are now selling systems at higher prices, their Q1/Q2 2026 margins could expand significantly.

C. The Australia Phenomenon

The 185% YoY growth in inverter exports to Australia is a standout data point that warrants deeper exploration.

• Drivers: Australia has one of the highest rooftop solar penetration rates globally. The grid is becoming unstable due to high daytime solar influx. This necessitates:
  1. Hybrid Inverters: Allowing homeowners to add batteries later.
  2. Grid-Forming Inverters: Required by new Australian standards for large solar farms to provide inertia.
  3. Virtual Power Plants (VPPs): Aggregating home batteries.
• Winner Takes All: Chinese inverter makers (Sungrow, Growatt, GoodWe, Shouhang) have been aggressive in capturing this market. The 148% surge in December suggests a rush to install before potential end-of-year regulatory deadlines or tariff changes.
• Investment Angle: Companies with strong distribution networks in Australia and product portfolios tailored to its unique grid codes (e.g., AS/NZS 4777.2) will continue to outperform. Shouhang New Energy, being a newer listing with a focus on micro/hybrid inverters, is well-positioned here.

D. Polysilicon Price Floor

At RMB 46.50/kg, polysilicon prices are hovering near the cash cost of production for many older Siemens-process plants.

• Bottoming Out: The "slight decrease" suggests we are near the cyclical bottom. Further significant declines are unlikely unless demand collapses, which the March production data contradicts.
• Cost Advantage Shift: With low polysilicon prices, the cost advantage shifts downstream. Module makers and cell makers benefit from cheap inputs. However, since module prices are stable (RMB 0.76/W), the spread between input cost and output price widens, boosting gross profits for mid-stream manufacturers. This supports our positive view on module integrators with strong branding.

Conclusion

The Power Equipment sector, particularly Solar and Energy Storage, is navigating a critical transition phase in early 2026. The data from March indicates a robust recovery in production volumes, underpinned by strong domestic demand and diversifying overseas markets. While upstream prices remain soft, downstream pricing power is improving, especially in the energy storage sector.

The cancellation of VAT export rebates in April 2026 serves as a double-edged sword: a short-term stimulus for shipments and a long-term catalyst for industry consolidation. Investors should leverage this period to accumulate positions in high-quality leaders who possess the technological edge, global channel depth, and financial resilience to thrive in the post-consolidation landscape.

We reiterate our Overweight rating and recommend focusing on Sungrow, Chint, Narada, and Shouhang, while keeping CATL and EVE on the watchlist for broader battery exposure.

Appendix: Data Tables Reference

(For detailed monthly breakdowns of inverter exports by region, please refer to Table 13 in the original source document, which highlights the dramatic growth in Australia and North America against a backdrop of stable European demand.)

Disclaimer:
This report is prepared by Aijian Securities Co., Ltd. for institutional clients only. The information contained herein is derived from sources believed to be reliable, but Aijian Securities does not guarantee its accuracy or completeness. The opinions expressed are those of the analyst as of the date of publication and are subject to change without notice. This report does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should conduct their own independent research and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.