Photovoltaic Industry Weekly Report: Policy Tailwinds and Supply-Side Optimization Drive Structural Opportunities

Date: March 9, 2026
Sector: Power Equipment / Photovoltaics (PV)
Rating: Overweight (Positive)
Analyst: Zhang Xinyi (S1490522090001)
Source: Guoxin Securities Market Research Department

Executive Summary

The Chinese photovoltaic (PV) sector is currently navigating a critical transition phase characterized by intense price competition at the upstream level, coupled with significant policy-driven structural reforms. For the week ended March 6, 2026, the PV equipment index underperformed the broader market, declining by 2.38%, while the broader Power Equipment index gained 0.55%, outperforming the CSI 300 by 162 basis points. This divergence highlights a rotation within the power sector, where grid infrastructure and energy storage are gaining momentum relative to traditional PV manufacturing.

Despite short-term pressure on equity prices and upstream commodity costs, the fundamental outlook remains constructive due to three primary drivers:
1. Policy Support for Green Transition: The 2026 Government Work Report explicitly emphasizes the construction of "zero-carbon parks" and the acceleration of new power systems, reinforcing long-term demand visibility.
2. Circular Economy Mandates: New guidelines from six ministries, including the Ministry of Industry and Information Technology (MIIT), set ambitious targets for PV module recycling (250,000 tons cumulative by 2027), creating a new value chain for material recovery and sustainable manufacturing.
3. Technological Diversification: The successful grid connection of East China’s first large-scale perovskite pilot project signals the commercial viability of next-generation technologies, offering alpha opportunities for early movers.

We maintain an Overweight rating on the sector. Investors are advised to focus on companies benefiting from supply-side consolidation, technological iteration (particularly in high-efficiency cells and modules), and those positioned to capitalize on the emerging recycling economy. Key risks include continued volatility in raw material prices, potential delays in project commencements, and escalating international trade friction.

Key Takeaways

1. Market Performance: Sector Rotation and Stock Divergence

During the reporting period (March 2–6, 2026), the A-share market exhibited mixed performance. The CSI 300 Index declined by 1.07%. Within the Shenwan (SW) industry classification, only 7 out of 31 sectors recorded gains. The Power Equipment sector demonstrated resilience, rising by 0.55% and ranking 6th among all industries, thereby outperforming the benchmark by 1.62 percentage points.

However, performance within the Power Equipment sub-sectors was bifurcated:
* Outperformers: Grid Equipment (+6.66%) and Other Power Equipment II (+5.24%) led the gains, reflecting investor preference for infrastructure stability and grid modernization themes.
* Underperformers: The PV Equipment index fell by 2.38%, lagging behind Battery (-1.18%), Wind Power Equipment (-2.41%), and Motor II (-5.82%).

Company-Level Performance:
Stock performance within the PV sector was highly dispersed, indicating that idiosyncratic factors and specific company fundamentals are outweighing broad sector beta.

Note: The outperformance of inverter and integrated module players (Jolywood, Deye, GoodWe) versus pure-play equipment manufacturers (Jingsheng, Autowell) suggests the market is rewarding downstream realization of demand over upstream capacity expansion.

2. Upstream Price Dynamics: Continued Deflationary Pressure

The upstream supply chain continues to experience price declines, particularly in polysilicon and wafers, while mid-stream components (cells and modules) have stabilized. This trend indicates that supply过剩 (oversupply) in the raw material segments persists, forcing manufacturers to compete on cost efficiency rather than price premiums.

Weekly Price Monitoring (as of March 4, 2026):

Analysis:
The sharp 12.7% week-over-week decline in polysilicon prices (from ~55 to 48 CNY/kg) is the most notable data point. While lower input costs are theoretically beneficial for downstream margins, the speed of the decline creates inventory write-down risks for holders of high-cost stock. The stabilization of cell and module prices at 0.44 CNY/W and 0.84 CNY/W respectively is a critical signal. It suggests that the industry may be approaching a price equilibrium where further reductions are unsustainable without causing widespread operational shutdowns. For investors, this stabilization supports the thesis that the worst of the price war may be nearing its trough, paving the way for margin repair in Q2 2026.

3. Policy Catalysts: Regulatory Frameworks Shaping Long-Term Value

Three major policy developments this week provide a robust framework for the industry's evolution, shifting the narrative from pure capacity expansion to quality, sustainability, and system integration.

A. Circular Economy: MIIT Guidelines on PV Module Recycling

On March 3, 2026, the Ministry of Industry and Information Technology (MIIT) and five other departments issued the "Guiding Opinions on Promoting the Comprehensive Utilization of Photovoltaic Modules."

Key Targets:
* By 2027: Cumulative comprehensive utilization of retired PV modules to reach 250,000 tons.
* Technological Breakthroughs: Achieve breakthroughs in surface structure dismantling, efficient separation of laminated components, and component extraction.
* Application Expansion: Scale up the use of recycled materials in metal smelting, equipment manufacturing, and building materials.
* Standardization: Establish technical standards for green design and comprehensive utilization.
* By 2030: Enhance technical equipment levels and innovation capabilities, forming a coordinated upstream-downstream industry chain capable of handling the large-scale retirement wave.

Investment Implication:
This policy formally recognizes the impending "retirement wave" of early-installed PV assets. It creates a new, regulated market for recycling services. Companies with established capabilities in module disassembly, material recovery (silver, silicon, glass), and green manufacturing will gain a competitive moat. This favors integrated leaders who can close the loop on their product lifecycle and specialized waste management firms entering the PV space. It also imposes higher environmental compliance costs on laggards, accelerating industry consolidation.

B. Regional Support: Qinghai Province’s Concentrated Solar Power (CSP) Initiative

The Qinghai Provincial Government issued measures to promote the scaled development of CSP, addressing the province's power gap and peak-shaving needs during the "15th Five-Year Plan" period.

Key Mechanisms:
* Scale: Annual selection of independent CSP projects totaling 1–2 GW.
* Competitive Selection: Projects evaluated on regulation performance, technological advancement, construction readiness, and economic benefits.
* Pricing Support:
* Existing projects follow market-based pricing reforms.
* New incremental projects can participate in mechanism-based electricity price bidding.
* Price Floor: Set no lower than CSP costs, starting at 0.55 CNY/kWh, gradually declining to align with coal power prices by 2030.
* Capacity Compensation: Reliable capacity outside the mechanism price will receive capacity compensation payments.
* Quota Assurance: The proportion of CSP electricity included in the quota will not be lower than that of wind and PV.

Investment Implication:
Qinghai’s policy provides a clear revenue visibility model for CSP, which is crucial for bankability. The explicit price floor and capacity compensation de-risk the high upfront capital expenditure of CSP plants. This is bullish for CSP equipment suppliers (mirrors, receivers, thermal storage systems) and developers with strong presence in Northwest China. It highlights the role of CSP as a stabilizing force in the grid, complementing intermittent wind and solar.

C. National Strategy: 2026 Government Work Report

Premier Li Qiang’s report at the Fourth Session of the 14th National People’s Congress outlined aggressive goals for green transition.

Highlights:
* Achievements (2025): PM2.5 concentrations in prefecture-level cities dropped by 4.4%; surface water quality improved; non-fossil energy consumption reached 21.7%; new energy storage installations exceeded 130 GW.
* 2026 Tasks:
* Accelerate the construction of Zero-Carbon Parks and Factories.
* Establish a National Low-Carbon Transition Fund.
* Cultivate new growth points in hydrogen energy and green fuels.
* Construct a New Power System, emphasizing smart grids and new energy storage.
* Implement dual control of carbon emissions total amount and intensity.

Investment Implication:
The emphasis on "Zero-Carbon Parks" shifts demand from utility-scale standalone projects to integrated industrial solutions. This benefits companies offering distributed PV + Storage + Energy Management Systems (EMS). The mention of hydrogen and green fuels suggests a convergence of PV with Power-to-X technologies, opening long-term avenues for electrolyzer manufacturers powered by cheap renewable energy. The commitment to the "New Power System" reinforces the need for grid-forming inverters and advanced storage solutions, supporting the outperformance seen in the Grid Equipment sector.

4. Technological Innovation: Perovskite Milestone

A significant technological milestone was achieved with the grid connection of East China’s first large-scale perovskite PV demonstration project in the Xuwei New Area.

Project Details:
* Developer: Fangyang New Energy Investment Co.
* Capacity: ~1 MWp.
* Technology: Large-size (1.2m x 0.6m) double-glass perovskite modules.
* Performance: Designed annual equivalent utilization hours of 1,200h; annual generation of 1.2 million kWh.
* Environmental Impact: Saves 360.8 tons of standard coal and reduces CO2 emissions by 1,096.7 tons annually.

Investment Implication:
While 1 MW is small compared to gigawatt-scale silicon projects, this demonstration validates the scalability and reliability of perovskite technology in real-world conditions. Perovskite offers higher theoretical efficiency limits and lower manufacturing energy costs. Successful operation of this pilot reduces the technology risk premium for perovskite equipment and material suppliers. Investors should monitor companies involved in perovskite coating equipment, transparent conductive oxides, and encapsulation materials, as this technology moves from lab to fab.

Risks / Headwinds

While the long-term trajectory is positive, several near-to-medium-term risks warrant caution:

1. Raw Material Price Volatility:
   The recent sharp decline in polysilicon prices (48 CNY/kg) demonstrates the fragility of the supply chain. While lower costs help downstream margins, excessive volatility disrupts inventory valuation and contract negotiations. If prices fall below the cash cost of production for tier-2 producers, it could lead to sudden supply shocks or bankruptcies, disrupting project timelines. Conversely, any unexpected supply constraint could cause rapid price spikes, eroding project IRRs.

2. Project Commencement Delays:
   Despite policy support, actual project ground-breaking and installation rates may lag expectations. Factors such as local government fiscal constraints, grid connection approval bottlenecks, and land acquisition issues can delay revenue recognition for equipment suppliers and EPC contractors. The "start-of-construction" metric is a leading indicator that needs close monitoring; if it fails to pick up in Q2 2026, earnings forecasts for 2026 may need downward revision.

3. Escalating Trade Friction:
   The global trade environment for Chinese PV products remains contentious. With the EU and US continuing to scrutinize Chinese subsidies and supply chain practices, there is a risk of new tariffs, anti-circumvention investigations, or forced labor allegations affecting exports. Given that many leading Chinese PV firms derive significant revenue from overseas markets, any restriction on access to these high-margin markets would severely impact profitability. The "Overcapacity" narrative in Western media may lead to further protectionist measures, necessitating accelerated overseas manufacturing localization by Chinese firms, which carries its own execution and political risks.

4. Technology Iteration Risk:
   The rapid shift from P-type to N-type (TOPCon/HJT) and the emerging promise of Perovskite create a risk of stranded assets. Companies that fail to keep pace with efficiency improvements may find their existing production lines obsolete sooner than expected. Capital expenditure requirements for staying competitive remain high, pressuring cash flows.

Rating / Sector Outlook

Rating: Overweight (Positive)

We maintain an Overweight rating on the Photovoltaic sector. Our conviction is based on the belief that the industry is transitioning from a phase of chaotic capacity expansion to one of quality-driven consolidation and technological differentiation.

Sector Outlook:
* Short-Term (1-3 Months): Expect continued volatility in upstream prices and mixed equity performance. The market will digest the implications of the new recycling policies and the Government Work Report. Focus on companies with strong order books for Q2 2026.
* Medium-Term (6-12 Months): As polysilicon prices stabilize at marginal cost levels and inefficient capacity exits, profit margins for integrated leaders and technology innovators should expand. The implementation of the "Zero-Carbon Park" initiatives will drive demand for distributed PV and storage solutions.
* Long-Term (1-3 Years): The structural growth story remains intact, supported by global decarbonization goals. The addition of the recycling economy and CSP integration adds new layers of value creation beyond simple module manufacturing.

Valuation Perspective:
Current valuations for many PV stocks reflect the pessimism surrounding price wars. However, they do not fully price in the potential for margin recovery driven by supply-side clearing and the new revenue streams from recycling and system integration services. We see an attractive risk-reward ratio for long-term investors willing to tolerate short-term noise.

Investment View

Our investment strategy for the PV sector in 2026 centers on three core pillars: Supply-Side Reform Alpha, Technological Leadership, and Policy-Driven Beta. We recommend a barbell approach, balancing exposure to established leaders with selective positions in high-growth niche technologies.

1. Focus on Supply-Side Consolidation Leaders

The era of easy growth through capacity addition is over. The winners will be those who can survive the price war, maintain healthy balance sheets, and gain market share as weaker competitors exit.
* Polysilicon Leaders: Look for companies with the lowest all-in cash costs. At 48 CNY/kg, only the most efficient producers remain profitable. These companies will emerge stronger with higher market concentration.
* Module Integrators: Companies with strong brand recognition, global distribution channels, and vertical integration (controlling cells and modules) are better positioned to pass on costs and maintain margins. The stabilization of module prices at 0.84 CNY/W supports this view.

2. Capture Technological Alpha (N-Type & Perovskite)

Technology iteration is the primary driver of excess returns in the PV sector.
* High-Efficiency Cell Tech: Continue to favor companies leading in TOPCon and Heterojunction (HJT) production. Higher efficiency translates directly to lower Levelized Cost of Electricity (LCOE) for end-users, making these products preferred even in a price-sensitive market.
* Perovskite Supply Chain: The successful grid connection in Jiangsu is a catalyst. Invest in equipment manufacturers providing deposition tools and material suppliers for perovskite layers. This is a high-risk, high-reward segment suitable for satellite positions.

3. Policy-Driven Themes: Recycling and CSP

• PV Recycling: The MIIT’s 2027 target of 250,000 tons is a concrete demand driver. Identify companies with existing waste processing infrastructure or partnerships with module manufacturers for take-back schemes. This includes firms specializing in metal recovery (silver, copper) and glass recycling.
• Concentrated Solar Power (CSP): Qinghai’s policy provides a blueprint for other western provinces. Equipment suppliers for CSP (mirrors, heat transfer fluids, thermal storage tanks) are likely to see order growth. This sector offers a hedge against pure PV volatility due to its dispatchable nature.

4. Specific Company Watchlist (Based on Weekly Movers & Fundamentals)

Conclusion

The photovoltaic industry in March 2026 stands at an inflection point. The painful process of price discovery in the upstream sector is nearing completion, while policy frameworks are evolving to support sustainable, high-quality growth. Investors should look beyond the headline index declines and focus on the structural shifts: the rise of the circular economy, the maturation of next-gen technologies like perovskite, and the integration of PV into broader energy systems via CSP and zero-carbon parks.

We advise institutional investors to accumulate positions in high-quality leaders during periods of market weakness, prioritizing companies with strong cash flows, technological moats, and exposure to the emerging recycling and CSP sectors. The long-term trajectory of global decarbonization remains unchanged, and the current valuation dislocation offers a compelling entry point for patient capital.

Disclaimer: This report is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult with financial advisors before making investment decisions. The views expressed herein are subject to change without notice.