Sector Update: Power Equipment & New Energy

Date: February 3, 2026
Rating: Overweight (Stronger than Market)
Analyst: Zhu Pan (S0820525070001) | Lu Jiayi (S0820124120008)
Source: Aijian Securities Research Institute

Executive Summary

The global photovoltaic (PV) and energy storage sectors are undergoing a pivotal structural transition in early 2026, characterized by diverging supply-side dynamics, robust export resilience, and transformative policy support in China. Our analysis of the latest industry data reveals a complex but generally positive outlook for leading players in the "Light-Storage" (PV + Storage) value chain.

Key Structural Shifts:
1. Policy Catalyst for Storage: On January 30, 2026, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) jointly issued the "Notice on Improving the Capacity Price Mechanism for Generation-Side Projects." This marks the first national-level establishment of a capacity price mechanism for grid-side independent new energy storage. By guaranteeing stable returns based on reliable capacity, this policy fundamentally de-risks the business model for standalone storage assets, accelerating their integration into the electricity market alongside pumped hydro storage.
2. Supply Side Rationalization in Batteries: The lithium battery sector is experiencing a deep supply-side restructuring. While overall production schedules for February 2026 are projected to decline month-on-month (MoM), this contraction is selective. Leading enterprises maintain full order books for large-format cells, while outdated or non-core production lines are being actively idled. Concurrently, multiple manufacturers are launching dedicated energy storage production lines, signaling strong long-term confidence in the storage segment despite short-term cyclical adjustments in power batteries.
3. Price Recovery in PV Modules: After a prolonged period of margin compression, PV module prices are showing signs of stabilization and modest recovery. TOPCon dual-glass module prices rose by approximately 3.07% week-on-week (WoW) to RMB 0.74/W in late January 2026. This price firmness is supported by anticipatory stocking ahead of the April 2026 cancellation of VAT export tax rebates for certain PV products, which is expected to drive short-term shipment volumes while facilitating long-term capacity clearance.
4. Resilient Export Performance: Despite geopolitical headwinds, Chinese PV and inverter exports demonstrated robust growth in December 2025. PV module exports reached USD 2.31 billion (+18.22% YoY), while inverter exports hit USD 839 million (+26.12% YoY). Notably, emerging markets such as Australia (inverter exports +148% YoY in Dec) and Asia are providing significant diversification beyond traditional European demand.

Investment Stance:
We maintain an "Overweight" rating on the Power Equipment sector. The convergence of policy-driven revenue visibility for storage assets and the clearing of inefficient PV capacity creates a favorable environment for industry leaders with technological moats and global distribution networks. We recommend focusing on companies with strong exposure to grid-forming storage technologies and integrated PV-storage solutions.

Top Picks: Sungrow Power Supply (300274.SZ), Chint Power (002150.SZ), Narada Power (300068.SZ), Sofar Solar (301658.SZ).
Watch List: CATL (300750.SZ), EVE Energy (300014.SZ).

Key Takeaways

1. Production Schedules: Divergence Between PV and Lithium Batteries

1.1 Photovoltaics: Short-Term Dip, Strategic Reassessment

According to data from Shanghai Metals Market (SMM), the overall production volume of PV modules in December 2025 decreased by 13.58% month-on-month. This decline reflects seasonal adjustments and inventory digestion following the year-end rush.

However, forward-looking indicators suggest a potential rebound. Data from SolarZoom indicates that domestic manufacturers have planned production increases in response to the upcoming changes in export tax rebate policies. Specifically, the cancellation of VAT export tax rebates for certain PV products, effective April 2026, is prompting manufacturers to accelerate shipments in Q1 2026 to lock in current tax benefits. While these plans are in place, actual execution remains subject to market demand and logistical constraints, warranting close monitoring in the coming weeks.

1.2 Lithium Batteries: Deep Structural Restructuring

The lithium battery sector is exhibiting clear signs of supply-side optimization. According to forecasts from the TD Institute (Dadong Times Think Tank):

• February 2026 Production Forecast:

  • China Market: Total scheduled production for power, energy storage, and consumer batteries is estimated at 188 GWh, representing a 10.5% MoM decline.
  • Global Market: Total scheduled production is estimated at 195 GWh, representing an 11.4% MoM decline.

• Structural Insights:

  • "Active Idling" of Non-Core Lines: The decline in overall production is not uniform. There is a marked divergence between high-demand and low-demand product segments. Leading enterprises report sufficient orders for large-format cells (particularly for energy storage applications), whereas production lines for less popular or older cell specifications are being "actively idled." This indicates a healthy, albeit painful, process of capacity clearing.
  • Strategic Pivot to Storage: A notable trend is the密集 (intensive) launch of new dedicated energy storage production lines by multiple major manufacturers. This capital allocation shift underscores the industry's consensus on the long-term growth trajectory of the energy storage sector, even as the electric vehicle (EV) power battery market faces saturation and intense competition.

Source: TD Institute (Dadong Times Think Tank), Aijian Securities Research

2. Price Trends: Stabilization in PV, Upside in Storage

2.1 Photovoltaic Supply Chain Prices (as of Jan 28, 2026)

The PV supply chain is showing mixed but stabilizing price signals. Upstream polysilicon prices have stabilized, while mid-stream wafer prices saw slight declines, likely due to inventory adjustments. However, downstream module and cell prices have risen, indicating improved bargaining power for manufacturers and stronger end-market demand.

• Polysilicon: Dense material prices remained flat WoW at RMB 54.00/kg. This stability suggests that the severe price wars in the upstream segment may be bottoming out.
• Silicon Wafers: The mainstream average price for 183mm N-type monocrystalline silicon wafers decreased by approximately 3.57% WoW to RMB 1.35/piece. This decline may reflect temporary oversupply or quality differentiation in the wafer segment.
• PV Cells: TOPCon battery cell prices increased by approximately 7.14% WoW to RMB 0.45/W. This significant jump highlights the premium for high-efficiency N-type technology and tight supply for advanced cells.
• PV Modules: TOPCon dual-glass module prices rose by approximately 3.07% WoW to RMB 0.74/W. This price increase is a critical positive signal for module manufacturers' gross margins, suggesting that the era of sub-cost pricing may be ending for high-quality products.

Source: InfoLink, Aijian Securities Research

2.2 Energy Storage System (ESS) Prices

The energy storage sector is experiencing a notable uptick in prices, driven by technological upgrades (grid-forming capabilities) and duration-specific demand. Data from December 2025 reveals significant variations across different system configurations.

• Overall ESS Market (Excluding C&I Cabinets):

  • Bid Range: RMB 0.4158 – 1.0761 /Wh.
  • Average Price: RMB 0.5882 /Wh, up 2.82% MoM.
  • Weighted Average Bid Price: RMB 0.5226 /Wh, up 6.39% MoM.
  • Driver: The increase in average prices was partly influenced by higher-priced grid-forming storage systems and 1-hour duration systems entering the market mix.

• 2-Hour Lithium ESS:

  • Bid Range: RMB 0.4363 – 0.9002 /Wh.
  • Average Price: RMB 0.6052 /Wh, up 10.38% MoM.
  • Weighted Average Bid Price: RMB 0.4853 /Wh, down 14.58% MoM.
  • Analysis: The divergence between the average price (up) and weighted bid price (down) suggests a bifurcated market. High-end, technologically advanced 2-hour systems are commanding premiums, while standard commoditized systems face continued price pressure.

• 4-Hour Lithium ESS:

  • Bid Range: RMB 0.5045 – 0.657 /Wh.
  • Average Price: RMB 0.5591 /Wh, up 12.22% MoM.
  • Weighted Average Bid Price: RMB 0.5648 /Wh, up 24.49% MoM.
  • Analysis: The 4-hour segment shows the strongest price momentum, with both average and weighted prices rising significantly. This reflects growing demand for longer-duration storage to support grid stability and renewable integration, where value is placed on capacity and duration rather than just lowest initial cost.

Source: CESA (China Energy Storage Alliance), Aijian Securities Research

3. Demand Dynamics: Robust Exports and Domestic Acceleration

3.1 Overseas Demand: Resilience Amidst Policy Uncertainty

Photovoltaic Module Exports:
According to the General Administration of Customs of China, PV module exports remained robust in December 2025.
* December 2025: Export value reached USD 2.314 billion, a year-on-year (YoY) increase of 18.22%, though a slight month-on-month (MoM) decrease of 4.05%.
* Full Year 2025: Cumulative export value totaled USD 28.199 billion, a YoY decrease of 7.84%. The annual decline reflects the high base effect from previous years and ongoing trade barriers in certain markets, but the recent monthly YoY growth signals a recovery in momentum.

Inverter Exports:
Inverter exports showed even stronger growth trajectories, benefiting from the global rollout of distributed generation and storage retrofitting.
* December 2025: Export value reached USD 839 million, a YoY increase of 26.12% and a MoM increase of 9.38%.
* Full Year 2025: Cumulative export value totaled USD 9.041 billion, a YoY increase of 9.41%. This positive annual growth contrasts with the module sector, highlighting the higher value-add and stickier demand for power electronics and grid-interfacing equipment.

Regional Breakdown of Inverter Exports (2025):
The geographic distribution of inverter exports reveals a strategic shift towards diversification.
1. Europe: Remains the largest market with USD 3.437 billion in exports for 2025. Despite saturation concerns in some Western European countries, demand persists for replacement and upgrade cycles.
2. Asia: The second-largest region with USD 3.123 billion. Growth in Asia is driven by industrialization and electrification initiatives in Southeast Asia and India.
3. Emerging Markets (Australia & South America): These regions are becoming critical growth engines.
* Australia: In December 2025, inverter exports to Australia surged by over 148% YoY. This exceptional growth is attributed to aggressive residential solar-plus-storage adoption rates and grid modernization efforts.
* South America: Provides diversified growth potential, although monthly fluctuations exist due to project timing.

Source: General Administration of Customs, Aijian Securities Research

3.2 Domestic Demand: Installation Surge and Record Tendering

Photovoltaic Installations:
Domestic PV installations in China continue to scale, albeit with changing growth rates as the base expands.
* November 2025: New installed capacity reached 22.02 GW, a substantial MoM increase of 74.76%, though a YoY decrease of 11.92%. The sharp MoM rise indicates a strong year-end installation rush, typical of the Chinese market dynamics.
* January-November 2025: Cumulative new installations totaled 274.89 GW, representing a YoY growth of 33.25%. This double-digit growth confirms that domestic demand remains the primary anchor for the Chinese PV industry, absorbing a significant portion of domestic production capacity.

Energy Storage Tendering:
The domestic energy storage market is witnessing unprecedented activity, particularly in integrated EPC/PC (Engineering, Procurement, Construction / Procurement & Construction) tenders that include DC-side equipment and storage systems.
* November 2025: New tender volume for EPC/PC + Storage systems reached 21.8 GW / 64 GWh.
* This represents a monthly record high for 2025.
* Capacity volume increased by 65% MoM.
* Volume decreased by only 4% YoY, indicating remarkable stability and growth in a high-base environment.
* Implication: The surge in tendering, particularly for large-scale GWh-level projects, validates the demand side of the storage equation. Coupled with the new capacity price mechanism, this creates a visible pipeline for revenue realization for storage integrators and battery suppliers in 2026.

Source: National Energy Administration, CESA, Aijian Securities Research

4. Policy Landscape: The Game-Changer for Storage Economics

The most significant development in this reporting period is the regulatory breakthrough for energy storage economics in China.

The Policy:
On January 30, 2026, the NDRC and NEA issued the "Notice on Improving the Capacity Price Mechanism for Generation-Side Projects."

Core Provisions:
1. Establishment of Grid-Side Independent Storage Capacity Price: For the first time at the national level, a capacity price mechanism is explicitly established for grid-side independent new energy storage.
2. Fair Market Entry: The policy aims to accelerate the fair entry of pumped hydro storage and new energy storage into the electricity market.
3. Revenue Model Shift: The mechanism is based on "Reliable Capacity." This means storage assets will be compensated not just for the energy they discharge (energy arbitrage) but for their availability to provide grid stability and peak shaving capacity.

Investment Implications:
* Revenue Visibility: Historically, standalone storage projects in China relied heavily on volatile spot market arbitrage and ancillary services, leading to uncertain cash flows. The capacity price provides a stable, predictable revenue stream, similar to traditional power generation assets. This significantly lowers the weighted average cost of capital (WACC) for storage projects.
* Valuation Re-rating: With improved revenue visibility, the valuation logic for storage operators and integrators shifts from pure manufacturing multiples to utility-like steady-income multiples, potentially supporting higher valuations.
* Accelerated Deployment: The de-risking of the business model is expected to unlock further investment from state-owned enterprises (SOEs) and private capital, driving the deployment of the 64 GWh tendered capacity seen in November 2025.

Risks / Headwinds

While the outlook is constructive, investors must remain cognizant of the following risks that could impact sector performance:

1. Intensified Competition and Margin Compression

• Risk Description: The PV and energy storage sectors remain highly fragmented with significant overcapacity in certain segments. Despite the "active idling" of some lines, the sheer volume of existing capacity means that price competition remains fierce.
• Impact: If demand growth fails to outpace capacity expansion, manufacturers may be forced to cut prices to maintain market share, leading to further erosion of gross margins. This is particularly relevant for standardized products like generic lithium cells and lower-tier PV modules.
• Mitigation: Focus on companies with proprietary technology (e.g., TOPCon efficiency leaders, grid-forming storage tech) and strong brand premiums that allow them to resist price wars.

2. Policy Risk and Demand Volatility

• Risk Description: The new energy sector is heavily influenced by government policies, including subsidies, grid connection rules, and electricity market reforms.
• Specific Concerns:
  • Domestic: Changes in the implementation details of the new capacity price mechanism could affect projected returns. Delays in local provincial implementations of the national guideline pose a risk.
  • International: Subsidy programs in key markets like the US (IRA) and Europe (Green Deal) are subject to political cycles. Any reduction or tightening of these incentives could dampen global demand.
• Impact: Policy uncertainty can lead to delayed project commissions and uneven demand patterns, causing revenue miss for suppliers.

3. International Trade Frictions and Geopolitics

• Risk Description: As Chinese companies expand globally, they face increasing trade barriers.
• Specific Concerns:
  • Tariffs: Potential increases in tariffs on Chinese PV modules and batteries in the US, EU, and other markets.
  • Non-Tariff Barriers: Stricter carbon footprint requirements, supply chain traceability laws (e.g., UFLPA in the US), and local content requirements.
  • Export Tax Rebate Cancellation: The removal of VAT export tax rebates in April 2026, while anticipated, may temporarily disrupt cash flows and competitiveness if not fully passed through to customers.
• Impact: Reduced export volumes, lower net prices, and increased compliance costs. Companies with heavy reliance on single export markets are more vulnerable.

4. Technological Obsolescence

• Risk Description: Rapid technological iteration in both PV (e.g., transition from PERC to TOPCon to HJT/BC) and Batteries (e.g., LFP to Sodium-ion or Solid-state) poses a risk of asset stranding.
• Impact: Companies that fail to keep pace with R&D may find their existing production lines obsolete, requiring significant write-downs and capex for upgrades.

Rating / Sector Outlook

Sector Rating: Overweight (Stronger than Market)

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

Rationale:
1. Policy Tailwinds: The introduction of the capacity price mechanism for storage is a structural positive that fundamentally improves the long-term economics of the sector. It transforms storage from a speculative arbitrage play into a stable infrastructure asset class.
2. Supply Side Discipline: The observed "active idling" of non-core battery lines and the stabilization of PV module prices suggest that the industry is moving towards a healthier supply-demand balance. The worst of the price wars may be behind us for premium products.
3. Demand Resilience: Both domestic installations (274 GW YTD) and export values (especially inverters) demonstrate robust underlying demand. The diversification into emerging markets like Australia and Asia reduces reliance on any single region.
4. Valuation Appeal: After a prolonged correction, many leading stocks in the sector are trading at attractive valuations relative to their long-term growth potential, offering a favorable risk-reward ratio for institutional investors.

Investment Themes

1. Storage Integrators with Grid-Forming Tech: Companies that can provide advanced grid-support services will benefit most from the new capacity price mechanism and the technical requirements of modern grids.
2. Global Inverter Leaders: Inverters are the "brain" of the energy system. Companies with strong global channels, service networks, and brand recognition (especially in Europe and emerging markets) will continue to capture value.
3. High-Efficiency PV Manufacturers: As the industry matures, efficiency gains translate directly to bankability. Leaders in N-type TOPCon and next-gen technologies will command pricing power.

Investment View

Based on the analysis of production schedules, price trends, demand dynamics, and policy shifts, we recommend the following investment strategy for institutional clients:

Core Recommendations

1. Sungrow Power Supply (300274.SZ)

• Logic: As a global leader in PV inverters and energy storage systems, Sungrow is uniquely positioned to benefit from both the inverter export boom and the domestic storage capacity price mechanism. Its strong presence in Europe and emerging markets (like Australia) diversifies revenue risk. The company's integrated "Light-Storage" solution offers higher stickiness and margins compared to pure hardware players.
• Catalyst: Continued growth in global storage deployments and margin expansion from higher-value grid-forming products.

2. Chint Power (002150.SZ)

• Logic: Chint has a robust domestic distribution network and a growing international footprint. Its involvement in the entire value chain, from components to EPC, allows it to capture value at multiple stages. The company is well-positioned to participate in the surge of domestic EPC/Storage tenders.
• Catalyst: Execution of large-scale domestic storage projects and recovery in residential PV demand in key export markets.

3. Narada Power (300068.SZ)

• Logic: A pure-play beneficiary of the energy storage boom. Narada has been aggressively expanding its capacity in lithium-ion and lead-carbon batteries for storage applications. The new capacity price mechanism directly enhances the viability of its downstream storage asset operations and boosts demand for its battery systems.
• Catalyst: Ramp-up of new storage-dedicated production lines and improved profitability from storage system sales.

4. Sofar Solar (301658.SZ)

• Logic: Sofar has shown exceptional growth in inverter exports, particularly in emerging markets. Its agile strategy and focus on distributed generation align well with the global trend towards decentralized energy resources. The significant YoY growth in exports to regions like Australia highlights its competitive edge.
• Catalyst: Sustained high growth in inverter exports and expansion into hybrid inverter markets.

Watch List

1. CATL (300750.SZ)

• Logic: The global dominant player in lithium batteries. While the power battery market is slowing, CATL's leadership in energy storage batteries (Tesla Megapack supplier, etc.) positions it well for the storage boom. Its scale and technology leadership provide a moat against competition.
• Monitor: Margins in the power battery segment and progress in new chemistries (condensed matter, sodium-ion).

2. EVE Energy (300014.SZ)

• Logic: A strong contender in the cylindrical and large-format prismatic battery markets. EVE is expanding its storage capacity and has secured significant overseas contracts. It offers a high-beta play on the recovery of the battery sector.
• Monitor: Utilization rates of new storage lines and customer diversification.

Strategic Allocation Advice

• Short-Term (1-3 Months): Capitalize on the pre-April 2026 export rush. Companies with high export exposure (Inverters, Modules) may see a volume spike. Monitor monthly customs data for confirmation.
• Medium-Term (6-12 Months): Focus on the implementation of the Capacity Price Mechanism. Stocks of storage integrators and operators should re-rate as revenue visibility improves. Look for companies winning large domestic tenders (21.8 GW Nov record).
• Long-Term (1-3 Years): Invest in technological leaders. The industry is shifting from "capacity expansion" to "technology leadership." Companies with superior efficiency (PV) and grid-integration capabilities (Storage) will win market share and margins.

Conclusion

The Power Equipment sector, particularly the PV and Storage nexus, is at an inflection point. The combination of policy support (Capacity Price), supply rationalization (Battery line idling), and demand resilience (Export growth) creates a compelling investment case. While risks such as trade friction and competition persist, the structural improvements in the industry's economic model favor high-quality leaders. We advise institutional investors to overweight the sector, focusing on companies with strong global distribution, technological advantages, and direct exposure to the burgeoning energy storage market.

Appendix: Detailed Data Tables

Table 1: China Inverter Export by Region (Monthly Breakdown 2024-2025)

Values in Million USD

Source: General Administration of Customs, Aijian Securities Research

Table 2: Summary of Key Price Movements (Jan 2026)

Source: InfoLink, CESA, Aijian Securities Research

Disclaimer:
This report is prepared by Aijian Securities Co., Ltd. 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 analysts as of the date of publication and are subject to change without notice. This report is for informational purposes 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 research and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.