Industry Update: Power Equipment & New Energy

Date: January 13, 2026
Sector: Power Equipment / Photovoltaics (PV) & Energy Storage
Rating: Outperform (Stronger than Market)

Executive Summary

The Chinese photovoltaic (PV) and energy storage sectors are currently navigating a complex transitional phase characterized by divergent supply-demand dynamics, policy-induced structural shifts, and evolving global trade landscapes. This report analyzes the industry performance through November 2025 and provides an outlook for early 2026, focusing on production schedules, pricing mechanisms, domestic and overseas demand trends, and the implications of recent fiscal policy changes.

Key Narrative: While domestic PV installation volumes remain robust, showing year-on-year growth despite seasonal fluctuations, the export landscape is undergoing a significant recalibration due to the impending cancellation of VAT export rebates effective April 1, 2026. This policy shift is already influencing production planning and inventory strategies. Concurrently, the energy storage sector demonstrates resilience, with bidding volumes hitting record highs in late 2025, driven by strong domestic infrastructure deployment. Although battery production schedules have seen a slight monthly correction, the structural demand for storage systems remains a primary growth engine.

We maintain an Outperform rating on the Power Equipment sector. The investment thesis is anchored by three pillars:
1. Policy-Driven Consolidation: The removal of export tax rebats will likely accelerate industry consolidation, favoring leading enterprises with superior cost control and global distribution networks, while squeezing out marginal players.
2. Storage Momentum: The surge in EPC/PC and storage system tenders indicates a sustained boom in the domestic energy storage market, offering a hedge against PV module margin compression.
3. Export Diversification: Despite headwinds in traditional markets, emerging regions (particularly Australia and parts of Asia) are showing explosive growth in inverter exports, providing new revenue streams.

Investors are advised to focus on companies with integrated capabilities in both PV and storage, particularly those with strong overseas channel presence and technological moats in high-efficiency modules and battery systems. Recommended tickers include Sungrow Power Supply (300274.SZ), Narada Power Source (300068.SZ), Tongrun Equipment (002150.SZ), Huashengchang (002980.SZ), and Shouhang New Energy (301658.SZ).

Key Takeaways

1. Production Schedules: Seasonal Adjustment and Policy Anticipation

Production data for November 2025 and forecasts for January 2026 reveal a cautious stance among manufacturers, driven by a combination of seasonal淡季 (off-season) effects, inventory buildup, and anticipation of policy changes.

Photovoltaic Modules

According to data from Shanghai Metals Market (SMM), the overall production volume of PV modules in November 2025 decreased by 2.43% month-on-month (MoM). This decline reflects a confluence of domestic and international factors:
* Domestic Market: Terminal installation progress in December failed to meet corporate expectations. Furthermore, rising module prices triggered resistance from downstream buyers, leading to a reversal in inventory trends—from destocking to restocking. This inventory buildup has compelled manufacturers to temper production rates.
* Overseas Market: The entry into the traditional off-season in key overseas markets, coupled with the diminishing impact of previous export incentives and the looming cancellation of export tax rebates, has led to a significant drop in overseas demand. Consequently, enterprises have revised their production schedules downward.

Lithium Batteries (Power, Storage, and Consumer)

Data from TD Insight (Dadong Shidai Zhiku) highlights a nuanced picture for the battery sector. The forecast for January 2026 indicates a general contraction in total output, but with significant divergence between sub-segments.

• China Market (Jan 2026 Forecast):
  • Total Output: The combined production schedule for power, energy storage, and consumer batteries is projected at 210 GWh, representing a MoM decline of 4.55%.
  • Segment Performance: The primary driver of this decline is the power battery segment, where second-tier enterprises have significantly reduced output. In contrast, energy storage battery production schedules remain at high levels, even showing slight increases, underscoring the relative strength of the storage demand curve.
• Global Market (Jan 2026 Forecast):
  • Total Output: Global combined production is estimated at 220 GWh, a MoM decrease of 6.38%. This global contraction aligns with seasonal trends and inventory adjustments across major manufacturing hubs.

Source: SMM, TD Insight, Aijian Securities Research Institute

2. Price Dynamics: Upstream Resilience vs. Downstream Pressure

Price trends in January 2026 indicate a bifurcation between upstream raw materials, which are showing signs of stabilization or slight recovery, and downstream systems, which continue to face competitive pricing pressures, particularly in the storage sector.

Photovoltaic Supply Chain

As of January 7, 2026, the PV supply chain exhibited mixed price movements compared to late December 2025:
* Polysilicon: The price of dense-grade polysilicon rose by 3.85% to 54.00 RMB/kg. This uptick suggests that upstream producers are successfully managing supply to support prices, potentially benefiting from reduced operating rates among smaller players.
* Silicon Wafers: The mainstream average price for 183mm N-type monocrystalline silicon wafers increased by 12.00% to 1.40 RMB/wafer. This significant jump may reflect improved utilization rates in wafer manufacturing or a temporary supply tightness following production cuts.
* Modules: The price of TOPCon double-glass modules remained flat at 0.70 RMB/W. The stability in module prices, despite rising upstream costs, indicates that module manufacturers are absorbing some cost pressure to maintain market share, or that the pass-through mechanism is lagging.

Energy Storage Systems

The pricing environment for energy storage systems in November 2025 remained highly competitive, with notable differences between 2-hour and 4-hour duration systems.

• Overall Market: For domestic lithium-ion battery energy storage systems (excluding commercial and industrial cabinets), quotes were concentrated in the range of 0.4452–0.6828 RMB/Wh.
  • Average Quote: 0.5721 RMB/Wh.
  • Weighted Average Bid Price: 0.4912 RMB/Wh, representing a MoM decline of 6.4%. This continued downward trend in bid prices highlights intense competition among system integrators.
• 2-Hour Systems:
  • Quote Range: 0.5466–0.588 RMB/Wh.
  • Average Quote: 0.5631 RMB/Wh.
  • Weighted Average Bid Price: 0.569 RMB/Wh, a MoM increase of 2.88%. The slight price increase in 2-hour systems may be attributed to specific project requirements or higher quality standards demanded in recent tenders.
• 4-Hour Systems:
  • Quote Range: 0.4452–0.54 RMB/Wh.
  • Average Quote: 0.4983 RMB/Wh.
  • Weighted Average Bid Price: 0.4537 RMB/Wh, a MoM decrease of 10.86%. The sharp decline in 4-hour system prices suggests aggressive bidding strategies to secure large-scale utility projects, potentially squeezing margins for integrators relying on standard commodity cells.

Source: InfoLink, CESA, Aijian Securities Research Institute

3. Demand Analysis: Domestic Strength and Overseas Resilience

Demand metrics present a compelling case for the sector's underlying health, with domestic installations growing and export values increasing despite volume constraints and policy headwinds.

Domestic Demand

• PV Installations: In November 2025, China’s newly installed PV capacity reached 22.02 GW.
  • MoM Growth: +74.76%, reflecting a strong end-of-year rush to complete projects.
  • YoY Change: -11.92%. While the monthly figure dipped year-on-year, the cumulative performance remains strong.
  • Cumulative (Jan-Nov 2025): Total new installations reached 274.89 GW, a robust 33.25% year-on-year increase. This confirms that the domestic market remains the primary anchor for PV demand.
• Energy Storage Tenders: The momentum in energy storage is accelerating. In November 2025, the newly tendered scale for EPC/PC (including DC-side equipment) and storage systems reached 21.8 GW / 64 GWh.
  • Significance: This represents a monthly record high for 2025.
  • Growth: Capacity scale surged 65% MoM, although it was slightly down 4% YoY. The massive MoM jump indicates a strong pipeline of projects moving into the procurement phase, setting the stage for robust revenue recognition in 2026.

Overseas Demand

Export data from the General Administration of Customs reveals resilient value growth, driven by price stability or increases in certain segments, and diversification into new markets.

• PV Modules:
  • November 2025 Export Value: ~$2.412 billion.
  • Growth: +34.08% YoY and +6.84% MoM.
  • Cumulative (Jan-Nov 2025): $25.885 billion, up 4.89% YoY. The strong value growth despite potential volume constraints suggests that exporters are maintaining pricing power or shifting towards higher-value products/markets.
• Inverters:
  • November 2025 Export Value: $767 million.
  • Growth: +25.91% YoY and +13.29% MoM.
  • Cumulative (Jan-Nov 2025): $8.202 billion, up 29.57% YoY. Inverters continue to outperform modules in terms of growth rate, highlighting the critical role of balance-of-system components in the global energy transition.
• Regional Breakdown (Inverters):
  • Europe: Remains the largest market with $3.13 billion in exports (Jan-Nov), though growth has moderated.
  • Asia: Second largest with $2.866 billion, showing steady demand.
  • Emerging Markets: South America and other emerging regions provide diversified growth potential.
  • Australia Spotlight: In November 2025, inverter exports to Australia surged by over 177% YoY. This exceptional growth highlights Australia as a new, high-potential growth engine, likely driven by aggressive renewable targets and grid modernization efforts.

Source: General Administration of Customs, Aijian Securities Research Institute

4. Policy Impact: The End of Export Tax Rebates

A pivotal development for the industry is the announcement by the Ministry of Finance regarding the adjustment of export tax rebate policies for PV and other products.
* Policy Detail: Effective April 1, 2026, the VAT export rebate for PV products will be cancelled.
* Implications:
1. Cost Structure: For exporters, this effectively increases the cost base by approximately 13% (the standard VAT rate), unless prices can be raised to offset the loss. This will put immediate pressure on gross margins for companies heavily reliant on exports.
2. Industry Consolidation: Smaller players with thin margins and limited pricing power may be forced out of the export market or face significant profitability challenges. Leading enterprises with strong brand equity, vertical integration, and cost advantages are better positioned to absorb or pass on these costs.
3. Front-Loading: We anticipate a potential "front-loading" of exports in Q1 2026 as companies attempt to ship goods before the April deadline, which may temporarily boost Q1 revenues but could lead to a sharper decline in Q2.
4. Long-term Competitiveness: This policy aligns with the broader national strategy to move up the value chain and reduce reliance on low-margin, high-volume exports. It encourages manufacturers to focus on high-efficiency, differentiated products and localised production in key overseas markets to bypass trade barriers and tax implications.

Risks / Headwinds

While the sector outlook is positive, investors must remain cognizant of several material risks that could impact performance and valuation.

1. Intensified Competition and Margin Compression

The PV and energy storage sectors are characterized by low barriers to entry in certain assembly stages and significant overcapacity in upstream materials.
* Price Wars: As evidenced by the 10.86% MoM drop in 4-hour storage system bid prices, competition remains fierce. Companies may engage in predatory pricing to maintain market share, eroding gross margins.
* Technology Obsolescence: Rapid advancements in technology (e.g., transition from PERC to TOPCon to HJT/BC) require continuous capital expenditure. Companies failing to keep pace risk stranded assets and loss of competitiveness.
* Impact: Sustained margin compression could lead to earnings misses, particularly for second-tier manufacturers lacking scale or vertical integration.

2. Policy Uncertainty and Demand Volatility

The new energy sector is highly sensitive to government policies, both domestically and internationally.
* Domestic Policy: Changes in subsidy structures, grid connection rules, or electricity market reforms in China could alter the economics of PV and storage projects, potentially delaying investments.
* International Policy: The cancellation of export tax rebates is just one example. Other countries may introduce similar fiscal measures or alter renewable energy targets based on political cycles.
* Intermittency and Grid Constraints: As penetration of renewables increases, grid stability becomes a concern. Without adequate grid infrastructure upgrades or flexible resource allocation, curtailment risks rise, potentially dampening future demand for new installations.

3. International Trade Frictions and Geopolitical Risks

Global trade tensions pose a persistent threat to the export-oriented nature of the Chinese PV and storage industry.
* Tariffs and Barriers: The US, EU, and India have historically imposed tariffs or anti-dumping duties on Chinese solar and battery products. Further escalation of trade barriers, such as the EU’s Carbon Border Adjustment Mechanism (CBAM) or potential US Section 301 tariff expansions, could restrict market access.
* Supply Chain Decoupling: Efforts by Western nations to build domestic supply chains ("friend-shoring") could reduce long-term demand for Chinese exports, forcing Chinese companies to invest heavily in overseas manufacturing facilities, thereby increasing capital intensity and operational complexity.
* Geopolitical Instability: Conflicts or diplomatic strains in key markets (e.g., Middle East, Eastern Europe) could disrupt project execution and payment flows.

Rating / Sector Outlook

Sector Rating: Outperform (Stronger than Market)

We maintain our Outperform rating for the Power Equipment sector. Despite the near-term headwinds from production adjustments and policy changes, the fundamental drivers of the energy transition remain intact. The sector is transitioning from a phase of unchecked expansion to one of quality-driven growth and consolidation.

Investment Logic

1. Structural Growth Trajectory: The global commitment to decarbonization ensures long-term demand for PV and energy storage. China’s domestic installation growth of 33.25% YoY (Jan-Nov 2025) demonstrates the resilience of the home market.
2. Storage as a Key Alpha Generator: The energy storage segment is outpacing pure PV in terms of growth momentum. The record-high tender volumes in November 2025 (64 GWh) signal a robust order book for 2026. Storage systems offer higher value-add and stickier customer relationships compared to commoditized modules.
3. Policy-Induced Quality Shift: The cancellation of export tax rebates will act as a catalyst for industry consolidation. Leading companies with strong balance sheets, advanced technology, and global brand recognition will gain market share at the expense of weaker competitors. This improves the long-term competitive landscape and profitability potential for top-tier firms.
4. Diversification Success: The explosive growth in inverter exports to Australia (+177% YoY) and strong performance in Asia demonstrate that Chinese companies are successfully diversifying their geographic footprint, reducing reliance on any single market.

Valuation Perspective

While specific P/E multiples are not provided in the source text, the sector’s valuation should be viewed in the context of its earnings growth potential. Companies with exposed to high-growth segments (storage, inverters) and those with successful overseas expansion strategies deserve a premium. The current market pricing may not fully reflect the benefits of industry consolidation and the long-term stickiness of storage recurring revenue models.

Investment View

Based on the analysis of production, pricing, demand, and policy trends, we recommend a selective approach to the Power Equipment sector. Investors should prioritize companies with:
* Integrated Business Models: Firms that span both PV and Energy Storage, allowing for cross-selling and optimized supply chain management.
* Global Channel Depth: Companies with established distribution networks in high-growth emerging markets (e.g., Australia, Southeast Asia, Latin America) and the ability to navigate complex trade environments.
* Technological Leadership: Leaders in N-type cell technology (TOPCon, HJT) and advanced battery chemistries/system integration.
* Financial Resilience: Strong cash flow and balance sheets to withstand margin pressure during the transition period post-tax rebate cancellation.

Recommended Stocks

We highlight the following companies as top picks within the sector:

1. Sungrow Power Supply (300274.SZ)

• Rationale: As a global leader in solar inverters and energy storage systems, Sungrow is well-positioned to benefit from the strong growth in inverter exports (+29.57% YoY cumulative) and the booming storage tender market. Its diversified global footprint mitigates regional policy risks, and its brand strength allows for better pricing power amidst the export tax rebate cancellation.
• Key Catalyst: Continued dominance in the global storage market and expansion in high-margin overseas segments.

2. Narada Power Source (300068.SZ)

• Rationale: Narada has successfully transformed into a leading energy storage solution provider. With storage battery production schedules remaining high and tender volumes surging, Narada is poised to capture significant market share. Its focus on lithium-ion technology aligns with the industry’s shift towards longer-duration and higher-efficiency storage solutions.
• Key Catalyst: Execution of large-scale storage projects and improvement in system margins through vertical integration.

3. Tongrun Equipment (002150.SZ)

• Rationale: Specializing in PV inverters and energy storage integration, Tongrun benefits from the same tailwinds as Sungrow but with a potentially higher elasticity due to its smaller base. The company’s strong presence in distributed generation and residential storage markets positions it well for growth in diverse global regions.
• Key Catalyst: Expansion in European and Australian residential storage markets.

4. Huashengchang (002980.SZ)

• Rationale: A key player in digital multimeters and testing equipment, Huashengchang also has exposure to new energy testing and monitoring solutions. As the complexity of PV and storage systems increases, the demand for precise monitoring and maintenance tools grows. This provides a defensive, high-margin niche within the broader sector.
• Key Catalyst: Growth in after-sales service and monitoring software subscriptions.

5. Shouhang New Energy (301658.SZ)

• Rationale: Focused on energy storage and new energy applications, Shouhang is well-aligned with the domestic storage boom. The company’s agility allows it to respond quickly to changing tender requirements and technological shifts. Its recent listing provides capital for expansion into new markets.
• Key Catalyst: Securing large EPC contracts and expanding into commercial and industrial (C&I) storage segments.

Strategic Allocation Advice

• Overweight Energy Storage: Given the record tender volumes and resilient production schedules, allocate a larger portion of the portfolio to pure-play storage or integrated storage leaders.
• Selective PV Exposure: Within PV, favor module makers with strong overseas branding and vertical integration. Avoid pure-play upstream material suppliers unless they have distinct cost advantages, as they face the brunt of price volatility and policy changes.
• Monitor Q1 2026 Data: Closely watch export data for January-March 2026 for signs of front-loading ahead of the April tax rebate deadline. A spike in Q1 followed by a dip in Q2 would be consistent with our expectations.
• Hedge Against Trade Risks: Consider diversifying across companies with different geographic exposures. For instance, balancing companies with heavy European exposure against those with growing presence in Asia and Australia.

Detailed Data Analysis & Contextual Expansion

(Note: The following section provides deeper contextual analysis and elaboration on the data points presented above, ensuring a comprehensive understanding for institutional investors.)

The Nuance of "Off-Season" in a Growing Market

Traditionally, the fourth quarter and first quarter see fluctuations in PV installations due to weather conditions and fiscal year-end dynamics. However, the 74.76% MoM increase in November domestic installations suggests that the "rush to install" before year-end remains a powerful driver. This behavior is often influenced by the need to secure subsidies, meet annual corporate targets, or capitalize on favorable financing conditions before year-end credit tightening. The subsequent decline in December expectations, as noted in the production schedule, indicates that this rush was front-loaded, leaving a softer start to 2026. Investors should not interpret the December/January slowdown as a structural demand failure but rather as a normal cyclical adjustment.

The Export Tax Rebate Cancellation: A Deep Dive

The cancellation of the 13% VAT export rebate is a monumental shift. Historically, this rebate served as a subsidy to keep Chinese PV products competitive globally. Its removal serves multiple state objectives:
1. Fiscal Prudence: Reducing government expenditures.
2. Environmental Accountability: Aligning with global trends where carbon-intensive production (polysilicon refining is energy-intensive) is no longer implicitly subsidized for export.
3. Industrial Upgrading: Forcing the industry to compete on technology and brand rather than just price.

For investors, this means that cost leadership becomes even more critical. Companies that can reduce non-material costs, improve yield rates, and optimize logistics will survive. Furthermore, this policy may accelerate the trend of "Global Local Manufacturing," where Chinese firms build factories in Europe, the US, or the Middle East to serve local markets, thereby avoiding export taxes and trade barriers. Companies with existing overseas manufacturing footprints (or plans to build them) will have a strategic advantage.

Energy Storage: The Next Frontier

The divergence between power battery (declining) and storage battery (stable/rising) production schedules is a critical signal. The EV market is maturing, and growth rates are normalizing. In contrast, the energy storage market is in its early innings of exponential growth, driven by:
* Grid Stability Needs: As renewable penetration exceeds 20-30%, grid inertia drops, necessitating fast-response storage.
* Arbitrage Opportunities: Widening peak-valley electricity price spreads in many Chinese provinces make storage economically viable without subsidies.
* Policy Mandates: Many provinces now require new renewable projects to include a certain percentage of storage capacity.

The price decline in 4-hour systems (-10.86%) is concerning for margins but beneficial for adoption. Lower prices make long-duration storage more accessible, potentially unlocking new use cases. Investors should monitor whether this price drop is sustainable or if it leads to a shakeout of weaker integrators. The slight price increase in 2-hour systems (+2.88%) suggests that this segment may be reaching a equilibrium where quality and reliability are valued over rock-bottom pricing.

Regional Diversification: The Australia Case Study

The 177% YoY growth in inverter exports to Australia is not an anomaly but a trend. Australia has one of the highest per-capita rooftop PV installations in the world. The next phase of its energy transition involves grid-scale storage and virtual power plants (VPPs), both of which require sophisticated inverters and control systems. Chinese companies, having dominated the residential rooftop market, are now well-positioned to supply the next wave of infrastructure. This success story can be replicated in other markets with high solar penetration and aging grid infrastructure, such as parts of the Middle East and Latin America.

Conclusion

The Power Equipment sector stands at a inflection point. The era of easy growth driven by subsidies and unlimited demand is over. The new era is defined by technological superiority, cost efficiency, and global adaptability. The cancellation of export tax rebates is a short-term pain but a long-term gain for the industry’s health. By focusing on leaders in energy storage and globally diversified PV/inverter giants, investors can navigate the near-term volatility and capture the long-term value creation in the global energy transition.

Appendix: Data Tables Reference

Table 1: China Inverter Export by Region (Jan-Nov 2025)

(Values in Million USD)

Source: General Administration of Customs, Aijian Securities Research Institute

Table 2: Key Price Indicators (Jan 2026 vs Dec 2025)

Note: Previous prices are derived from the reported percentage changes.

Disclaimer:
This report is prepared by Aijian Securities Co., Ltd. for institutional clients only. The information contained herein is based on 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 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.