Photovoltaic Industry Weekly Report: Supply-Side Reform Drives Valuation Repair Amidst Structural Transition

Date: February 10, 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 demonstrated robust relative strength during the week of February 2–6, 2026, outperforming the broader market significantly. The Shenwan PV Equipment Index rose by 3.36%, ranking among the top performers within the Power Equipment sector, which itself gained 2.20% and outpaced the CSI 300 Index (-1.13%) by 353 basis points. This performance underscores a shifting market sentiment, driven less by immediate demand surges and more by anticipations of supply-side structural reforms and policy-driven consolidation.

While main-chain prices (polysilicon, wafers, cells, modules) remained largely stable, indicating a bottoming-out phase in price wars, the industry faces a critical juncture. Recent commentary from industry leaders, including Mr. Wang Bohua of the China Photovoltaic Industry Association (CPIA), suggests that 2026 may witness a temporary contraction or negative growth in installed capacity as the market transitions from "scale competition" to "value competition." Concurrently, provincial governments in Shanxi and Jiangxi are actively implementing policies to eliminate backward capacity and promote large-scale renewable energy bases, signaling a decisive move towards healthier industry dynamics.

We maintain an Overweight rating on the sector. Our investment thesis centers on three pillars:
1. Profitability Restoration via Supply-Side Reform: Policy interventions aimed at curbing "involutionary" (destructive) competition and exiting inefficient capacity are expected to stabilize margins.
2. Alpha Opportunities from Technological Iteration: Leaders with superior technology moats (e.g., high-efficiency cell technologies) will capture disproportionate value.
3. Beta Rebound from Marginal Demand Shifts: While short-term growth may slow, long-term demand from emerging markets (India, Middle East, North Africa) and domestic grid-integration projects provides a solid floor.

Investors should focus on polysilicon leaders, module integrators with strong brand/channel power, and equipment manufacturers enabling next-generation tech upgrades. Key risks include raw material volatility, project delays, and escalating trade friction.

Key Takeaways

1. Market Performance: Sector Outperformance Led by Integrated Players

The week ended February 6, 2026, saw a divergence in market performance, with the PV sector acting as a defensive yet growth-oriented haven amidst broader market weakness.

• Broad Market Context: The CSI 300 Index declined by 1.13%. Of the 31 Shenwan industry indices, 18 recorded gains, highlighting a selective risk-on sentiment in specific sectors.
• Power Equipment Sector Strength: The Shenwan Power Equipment Index rose 2.20%, ranking 3rd among all industries. It outperformed the CSI 300 by 3.53 percentage points (pct).
• Sub-Sector Dynamics: Within Power Equipment, performance was mixed but skewed positive for solar and battery segments:
  • PV Equipment: +3.36% (Leading sub-sector)
  • Battery: +3.24%
  • Grid Equipment: +2.04%
  • Wind Power Equipment: -0.88%
  • Other Power Equipment II: -3.28%
  • Electric Motors II: -0.94%

Top Performers (Weekly Gainers):
The rally was led by companies benefiting from integrated business models and equipment demand:
1. GCL System Integration (协鑫集成)
2. JinkoSolar (晶科能源)
3. Jingsheng Mechanical & Electrical (晶盛机电)
4. Autowell (奥特维)
5. Zhonglai Shares (中来股份)

Underperformers (Weekly Decliners):
Conversely, certain inverter and material suppliers faced pressure:
1. Sungrow Power Supply (阳光电源)
2. Jinbo Shares (金博股份)
3. Lianhong New Materials (联泓新科)
4. GoodWe (固德威)
5. Yubang New Materials (宇邦新材)

Analyst Note: The outperformance of module integrators (JinkoSolar, GCL) and equipment makers (Jingsheng, Autowell) suggests the market is pricing in the benefits of consolidation and technological upgrade cycles, rather than pure volume growth. The decline in inverter stocks like Sungrow and GoodWe may reflect concerns over short-term inventory adjustments or margin compression in the overseas distribution channel.

2. Pricing Trends: Stabilization Across the Main Chain

Price stability across the primary PV supply chain indicates that the severe price erosion seen in previous years has largely abated. The market appears to have reached a tentative equilibrium, although margins remain thin.

Weekly Price Monitor (as of Feb 4, 2026):

Implication: The most notable data point is the 33.3% drop in silver paste prices. Given that silver paste is a significant non-silicon cost component, especially for TOPCon and HJT technologies, this reduction directly improves gross margins for cell and module manufacturers. Combined with stable polysilicon and module prices, this suggests a potential window for margin repair in Q1 2026, even without top-line revenue growth. The slight dip in wafer prices (-0.1 RMB/piece) warrants monitoring; if sustained, it could signal continued pressure on wafer manufacturers who lack integrated downstream capabilities.

3. Policy & Industry News: The Great Transition

Three major developments this week highlight the structural shift in the Chinese PV industry: from unchecked expansion to regulated, value-driven growth.

A. Shanxi Province: Large-Scale Base Development & Coal-PV Integration

Event: Shanxi Governor Lu Dongliang’s Government Work Report (Feb 2026).
Key Details:
* Target: Complete the construction and operation of the Northern Shanxi Coal Mining Subsidence Area New Energy Base.
* Scale: Layout a batch of provincial-level large-scale wind/solar bases with capacities exceeding 500 MW each.
* Capacity Goals: Arrange 30 GW of wind/PV installation scale, with 20 GW connected to the grid.
* Strategy: Promote integrated and fused development of new energy. Continue smart, green, and safe coal mining (targeting 1.3 billion tons output) while adding 60 new intelligent coal mines.

Analysis: Shanxi’s approach exemplifies the "New Energy System" strategy—leveraging existing coal infrastructure and subsided land for renewable deployment. This creates predictable, large-scale demand for utility-scale PV modules and EPC services. For investors, this favors large-state-owned enterprises (SOEs) and leading module suppliers capable of delivering gigawatt-scale orders reliably.

B. National Grid Absorption Data: Curtailment Risks Persist in West

Event: Release of 2025 New Energy Grid Absorption Data by the Electric Power Planning & Engineering Institute (Feb 6, 2026).
Key Data:
* National Wind Utilization Rate: 94.3%
* National PV Utilization Rate: 94.8%
* Problem Areas: PV utilization rates in Gansu, Qinghai, Xinjiang, and Tibet fell below 90%.

Analysis: A national utilization rate above 94% is generally healthy, but the sub-90% figures in western provinces highlight persistent grid congestion and local oversupply. This reinforces the need for:
1. UHV Transmission Lines: Accelerating west-to-east power transmission.
2. Energy Storage: Mandatory storage pairing for new projects in these regions.
3. Local Consumption: Developing energy-intensive industries in the west to absorb local green power.
Investment Implication: Companies involved in energy storage systems (ESS) and grid-flexibility solutions will benefit from regulatory mandates in these high-curtailment regions. Pure-play PV developers in these provinces may face revenue risks due to curtailment.

C. CPIA Outlook: From "Scale" to "Value" – Anticipating a 2026 Correction

Event: CPIA Annual Conference (Feb 5, 2026). Speech by Advisor Mr. Wang Bohua.
Key Insights:
1. 2026 Installation Forecast: Potential negative growth or significant slowdown in new installations. This follows a period of abnormal high-speed growth.
2. Reasons for Slowdown:
* Policy shifts following the IEA predictions.
* Market wait-and-see attitude due to distributed PV management reforms and electricity market liberalization.
* Digestion of previous excess capacity.
3. Long-Term View: Post-2026, demand is expected to rebound driven by India, the Middle East, and North Africa. Domestic demand will recover as "green power direct connection" and integration policies take effect.
4. Strategic Shift: The industry must transition from "Competing on Scale/Price" to "Competing on Value."
* Policy Role: Create a healthy environment, push for industrial upgrading.
* Corporate Role: Build technical moats, develop second growth curves, and foster ecosystem synergy.

Analysis: Mr. Wang’s comments are pivotal. The admission of potential "negative growth" is a candid acknowledgment of the industry's cyclical downturn. However, this is not a bearish signal for quality assets; rather, it is a clearing mechanism.
* Short-Term Pain: Revenue growth for pure-volume players will stall.
* Long-Term Gain: The shift to "Value Competition" favors companies with:
* Proprietary high-efficiency technology (e.g., BC, HJT, advanced TOPCon).
* Strong balance sheets to survive the consolidation.
* Diversified global markets (reducing reliance on saturated domestic/utility segments).
* Investor Action: Avoid companies competing solely on price. Overweight those with clear technological differentiation and robust overseas channels.

D. Jiangxi Province: Cracking Down on "Involutionary" Competition

Event: Jiangxi 2025 Economic Plan Execution & 2026 Draft Report.
Key Actions:
* Reform: Deepening zero-based budgeting and SOE reforms.
* Market Cleanup: Removed 1,230 policy measures hindering unified market competition.
* Specific Target: Comprehensive rectification of "involutionary" (neijuan) competition.
* Outcome: Orderly exit of backward capacity in New Energy Vehicles (NEV) and Photovoltaics.

Analysis: Jiangxi’s explicit mention of eliminating "backward PV capacity" is a microcosm of national intent. Local governments are moving from subsidizing expansion to enforcing exit criteria. This will accelerate the bankruptcy or merger of smaller, inefficient manufacturers, improving the market share and pricing power of remaining leaders. This is a direct catalyst for the "Supply-Side Reform" investment theme.

Investment Logic & Strategy

Based on the weekly data and macro-policy signals, we refine our investment framework for the PV sector into three core dimensions:

1. Supply-Side Reform: The Primary Driver of Profit Repair

The era of unlimited capacity expansion is over. With Jiangxi and other provinces actively pushing out backward capacity, and polysilicon prices stabilizing at cash-cost levels for many producers, the supply curve is steepening.
* Logic: As inefficient capacity exits, the utilization rates of leading firms will improve, allowing them to regain pricing power.
* Focus: Polysilicon Leaders and Integrated Module Makers. Look for companies with low cash costs and strong balance sheets that can withstand the current winter and emerge stronger in spring.

2. Technological Alpha: The Moat Against Commoditization

As Mr. Wang Bohua noted, the industry is shifting to "Value Competition." Standard PERC or basic TOPCon products are becoming commodities. The premium lies in next-generation efficiencies.
* Logic: Equipment manufacturers and cell producers with proprietary tech (e.g., 0BB, Silver-free metallization, HJT, BC) will command higher margins.
* Focus: Equipment Suppliers (e.g., Jingsheng, Autowell) who sell the "shovels" for the tech upgrade, and Cell/Module Innovators who can demonstrate verified efficiency gains and bankability.

3. Demand Beta: Navigating the Short-Term Dip

While 2026 domestic installations may flatten or dip, the global picture is nuanced.
* Logic: Domestic slowdown is offset by emerging market growth (Middle East, India) and the eventual recovery driven by grid integration policies.
* Focus: Companies with diversified global footprints. Those heavily exposed to the US/Europe may face trade headwinds, but those with strong presence in Belt and Road Initiative (BRI) countries or emerging markets will see smoother growth trajectories.

Recommended Portfolio Structure

Risks / Headwinds

Investors must remain cognizant of the following risks, which could derail the recovery thesis:

1. Raw Material Price Volatility:

   • While polysilicon is stable, sudden spikes in silver, aluminum, or glass prices could erode the margin improvements expected from supply-side reforms. The recent drop in silver paste is beneficial, but its sustainability depends on broader precious metal markets.

2. Project Commencement Delays:

   • The Shanxi and other provincial bases rely on timely grid connections and financing. If project start-ups are delayed due to administrative hurdles, financing tightness, or grid approval bottlenecks, Q1/Q2 2026 revenues for module suppliers will miss expectations.

3. Intensifying Trade Friction:

   • The EU and US continue to scrutinize Chinese PV imports. Any new tariffs, anti-circumvention investigations, or forced labor-related restrictions could severely impact the export margins of leading Chinese manufacturers. The shift to emerging markets helps, but cannot fully replace the profitability of Western markets in the short term.

4. Technology Disruption Risk:

   • The rapid pace of tech iteration (e.g., from TOPCon to HJT/BC) carries execution risk. Companies betting on the wrong technology path may face stranded assets. Conversely, faster-than-expected adoption of a new tech could render current mainstream capacity obsolete prematurely.

5. Macro-Economic & Policy Uncertainty:

   • The predicted "negative growth" in 2026 installations is a base case, but if domestic economic recovery stalls further, renewable energy subsidies or grid purchase guarantees could be delayed, exacerbating the downturn.

Rating / Sector Outlook

Sector Rating: Overweight (Positive)

We maintain our Overweight stance on the Photovoltaic sector. While the headline growth numbers for 2026 may appear tepid or even negative, the quality of earnings and the structural health of the industry are improving. The combination of supply-side cleanup (Jiangxi/Shanxi policies), cost reductions (silver paste), and technological maturation creates a favorable risk-reward profile for selective investors.

Outlook:
* Short-Term (1-3 Months): Volatile. Market will digest the "negative growth" narrative. Expect rotation into high-dividend or low-valuation leaders.
* Medium-Term (6-12 Months): Positive. As backward capacity exits and Q3/Q4 demand picks up (seasonal + policy implementation), earnings visibility will improve.
* Long-Term (1-3 Years): Bullish. The global energy transition is intact. Chinese PV leaders, having survived the consolidation, will dominate a more rational, profitable global market.

Investment View

Strategic Allocation Recommendations

For institutional investors, we recommend a barbell strategy within the PV sector:

1. Core Holding: Integrated Leaders with Strong Balance Sheets

   • Rationale: These companies (e.g., JinkoSolar, GCL System Integration) are best positioned to survive the consolidation phase. They benefit from vertical integration (cost control) and brand recognition (premium pricing). They are the primary beneficiaries of large-scale base projects like those in Shanxi.
   • Action: Accumulate on dips. Focus on those with low debt ratios and high overseas exposure to diversify domestic slowdown risk.

2. Satellite Holding: Technology Enablers (Equipment & Materials)

   • Rationale: Regardless of total capacity growth, the mix of capacity is shifting to higher efficiency. Equipment makers like Jingsheng Mechanical & Electrical and Autowell provide essential tools for this transition. Their revenue is linked to tech upgrades, not just net capacity addition. The drop in silver paste prices also benefits material innovators who offer cost-saving alternatives.
   • Action: Overweight equipment stocks with strong order books for N-type/BC/HJT lines.

3. Avoid/Underweight: Pure-Play Wafer Makers & High-Cost Producers

   • Rationale: The wafer segment shows signs of continued price pressure (-0.1 RMB/piece WoW). Without downstream integration, these firms are squeezed between stable polysilicon costs and weak module pricing. Small, high-cost polysilicon or cell producers facing exit in provinces like Jiangxi pose significant downside risk.

Conclusion

The week of February 2-6, 2026, marks a pivotal moment in the PV industry's narrative. The market is beginning to price in the end of the "capacity war" and the beginning of the "value era." While the prospect of negative installation growth in 2026 sounds alarming, it is a necessary correction that clears the deck for sustainable, profitable growth in 2027 and beyond.

Investors should look past the headline volume numbers and focus on margin resilience, technological leadership, and policy-aligned consolidation. The stabilization of main-chain prices, coupled with significant input cost reductions (silver paste), provides a tangible foundation for earnings recovery in the coming quarters. We advise maintaining a constructive posture, focusing on quality leaders who will emerge from this consolidation cycle with enhanced market share and pricing power.

Disclaimer: This report is prepared by Guoxin Securities Market Research Department. The information contained herein is based on sources believed to be reliable, but no representation or warranty, express or implied, is made regarding its accuracy or completeness. This report is for institutional investor reference only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Investors should conduct their own independent assessment and consult with financial advisors before making investment decisions.