Photovoltaic Industry Weekly Report: Supply-Side Reform Drives Price Rebound; Policy Tailwinds Accelerate Grid Integration

Date: January 5, 2026
Sector: Power Equipment / Photovoltaics (PV)
Rating: Overweight (Positive)
Analyst: Zhang Xinyi (S1490522090001)

Executive Summary

The Chinese photovoltaic (PV) sector is exhibiting early signs of a structural turnaround, driven by a confluence of supply-side discipline, technological iteration, and robust policy support for grid infrastructure. In the final trading week of 2025 (December 29–31), while the broader market remained subdued, the PV industry demonstrated resilience in pricing dynamics across the entire value chain. Crucially, transaction prices for polysilicon, wafers, cells, and modules all recorded sequential increases, signaling a potential bottoming out of the prolonged price war that has characterized the sector in recent years.

From a policy perspective, the end of 2025 marked a significant acceleration in top-down support for renewable energy integration. Key developments include the joint issuance of guidelines by seven government departments to accelerate the green low-carbon transition in the Beijing-Tianjin-Hebei region, and the release of the "15th Five-Year Plan" suggestions by Yunnan and Gansu provinces, which emphasize large-scale renewable bases and direct green power supply projects. Furthermore, the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) issued pivotal guidance on high-quality grid development, explicitly targeting 100% renewable energy long-distance transmission pilots. These measures address the critical bottleneck of curtailment and enhance the economic viability of utility-scale projects.

We maintain an Overweight rating on the PV sector. Our investment thesis centers on three pillars: (1) Profit margin repair driven by supply-side reforms and inventory normalization; (2) Alpha opportunities arising from technological leadership (e.g., high-efficiency cell technologies); and (3) Beta expansion fueled by marginal improvements in demand expectations and grid connectivity. Investors should focus on polysilicon leaders, module integrators with strong brand channels, and equipment manufacturers enabling next-generation efficiency gains.

Key Takeaways

1. Market Performance: Sector Underperforms Broad Index Amidst Rotation

During the reporting period (December 29–31, 2025), the A-share market displayed mixed performance. The CSI 300 Index declined by 0.59%. Within the Shenwan (SW) industry classification, only 12 out of 31 sectors posted gains.

• Power Equipment Sector: The SW Power Equipment Index fell by 2.18%, ranking 29th out of 31 industries, underperforming the CSI 300 by 1.59 percentage points (pct).
• Sub-sector Divergence: Most sub-sectors within Power Equipment declined. Notably:
  • PV Equipment: Declined by 3.29%.
  • Batteries: Declined by 2.58%.
  • Grid Equipment: Declined by 2.05%.
  • Other Power Equipment II: Declined by 1.23%.
  • Wind Power Equipment: Remained flat with a slight gain of +0.05%.
  • Motors II: Outperformed significantly with a gain of +4.74%.

Company-Level Performance:
Despite the sectoral decline, individual stock performance highlighted specific investor preferences for technology leaders and niche players.
* Top Gainers: Maxwell Technologies (Maiwei Shares), Shuangliang Eco-Energy, Aerospace Hi-Tech (Hangtian Jidian), Hoymiles Microinverter, and Gaoce Shares.
* Top Losers: DKEM (Dike Shares), Risen Energy, Sowell Technology, Sineng Electric, and Canadian Solar (A-share entity).

Analyst Note: The divergence between the sector index decline and the subsequent rise in main chain prices suggests that market sentiment is still catching up to fundamental improvements. The lag in equity performance relative to commodity pricing may present a entry opportunity for institutional investors positioning for the 2026 recovery.

2. Fundamental Shift: Full-Chain Price Rebound

Data from Datayes as of December 24, 2025, indicates a broad-based price increase across the PV manufacturing value chain. This is a critical signal that the era of aggressive price cutting may be pausing, allowing manufacturers to restore gross margins.

Analysis of Price Dynamics:
* Upstream Strength: The RMB 3/kg increase in polysilicon prices is particularly noteworthy. After a prolonged period of oversupply, this uptick suggests that production cuts among tier-2 and tier-3 players are taking effect, rebalancing the supply-demand equation.
* Midstream Resilience: The increase in cell and module prices, albeit modest, indicates that downstream developers are accepting higher prices, likely due to urgency in project completion before year-end or anticipation of future policy-driven demand spikes.
* Cost Pressure: The 10.3% jump in silver paste prices poses a margin risk for cell manufacturers, particularly those utilizing high-silver-consumption technologies. This reinforces the investment case for companies leading in low-silver or copper-plating metallization technologies.

3. Policy Catalysts: Strategic Infrastructure and Regional Planning

The latter half of December 2025 witnessed a flurry of policy announcements aimed at resolving the "grid connection" bottleneck and stimulating regional renewable energy deployment. These policies shift the narrative from pure manufacturing capacity to systemic integration and consumption.

A. National Grid Strategy: Enabling 100% Renewable Transmission

On December 31, the NDRC and NEA released the "Guiding Opinions on Promoting High-Quality Development of Power Grids." This document sets a clear roadmap for the physical infrastructure required to support China’s renewable ambitions.

• 2030 Targets:

  • Completion of a new-type grid platform integrating main grids, distribution networks, and smart microgrids.
  • "West-to-East" Transmission Capacity: To exceed 420 GW.
  • Inter-provincial Mutual Aid Capacity: Increase by approximately 40 GW.
  • Renewable Energy Share: Support renewable energy accounting for ~30% of total electricity generation.
  • Distributed PV Accommodation: Capacity to accept 900 GW of distributed new energy.
  • EV Charging Infrastructure: Support over 40 million charging piles.

• Technological Breakthroughs:

  • Pilot projects for 100% renewable energy long-distance transmission from "Sand, Gobi, and Desert" (Shagehuang) bases and hydro-wind-solar integrated bases.
  • R&D focus on large-capacity flexible DC transmission, isolated island output for new energy, and low-frequency transmission technologies.
  • Promotion of grid-forming technologies and advanced equipment like large-capacity circuit breakers and ultra-long-distance AC/DC Gas Insulated Lines (GIL).

Investment Implication: This policy directly benefits companies involved in UHV (Ultra-High Voltage) transmission, flexible DC technology, and smart grid software/hardware. It also de-risks utility-scale PV projects by ensuring that generated power can be transmitted and consumed, thereby improving the internal rate of return (IRR) for project developers.

B. Regional "15th Five-Year Plan" Suggestions: Yunnan and Gansu

Provincial plans provide granular visibility into future demand centers and industrial clustering.

Yunnan Province:
* Focus: Construction of major water-wind-solar integrated bases in key river basins.
* Strategy: "Source-Grid-Load-Storage" integration.
* Infrastructure: Acceleration of major projects including the Dianzhong Water Diversion, Kunming Changshui Airport expansion, and railway networks, which will drive concurrent energy infrastructure upgrades.
* Energy Mix: Promoting multi-energy complementarity (wind, solar, hydro, thermal, storage) to ensure energy security while transitioning to green power.

Gansu Province:
* Focus: Establishing a national base for new energy and equipment manufacturing.
* Green Power Direct Supply: Planning and constructing a batch of green power direct connection projects. This allows high-energy-consuming industries (e.g., aluminum, silicon processing) to locate near renewable sources, bypassing traditional grid constraints.
* Industrial Clustering: Guiding advanced manufacturing and modern high-energy industries to aggregate in energy-rich areas.
* Zero-Carbon Initiatives: Building zero-carbon factories and parks via virtual power plants (VPPs) and microgrids.
* Transmission: Accelerating the "Longdian Outward" channel and intra-provincial transmission from Hexi to Lanbai regions.

C. Beijing-Tianjin-Hebei (Jing-Jin-Ji) Green Transition

Seven departments, including the Ministry of Ecology and Environment, issued the "Action Plan for Building a Beautiful China Pilot Zone in Jing-Jin-Ji."

• Coal Reduction: Strict control on total coal consumption; complete ban on high-polluting fuels in plain areas.
• Renewable Targets (by 2027 vs. 2020):
  • Beijing: Renewable energy consumption share to increase by ~10 percentage points.
  • Tianjin: Non-fossil energy share to increase by ~7.3 percentage points.
  • Hebei: Non-fossil energy share to increase by ~7 percentage points.
• Market Mechanisms: Advancing the Jing-Jin-Ji electricity market construction, enabling full participation of new energy in market trading, and improving green power trading mechanisms.

4. Investment Logic: Navigating the Turnaround

Our recommendation to remain Overweight is based on a tripartite logic framework:

I. Supply-Side Reform & Profit Repair (The "Beta" Play)

The sequential price increases in polysilicon, wafers, and cells indicate that the industry-wide clearance of inefficient capacity is yielding results. As prices stabilize above cash-cost levels for leading firms, we expect a sequential improvement in quarterly earnings starting from Q4 2025 into 2026.
* Key Driver: Reduced utilization rates among non-cost-competitive players have tightened supply.
* Beneficiaries: Low-cost leaders in polysilicon and wafer segments who can capture margin expansion as prices rise while maintaining cost advantages.

II. Technological Iteration (The "Alpha" Play)

The persistent premium for high-efficiency products and the rising cost of silver paste underscore the importance of technological moats.
* N-Type Transition: The continued shift from P-type to N-type (TOPCon, HJT, BC) cells drives demand for specialized equipment and materials.
* Metallization Innovation: With silver paste prices surging (+10.3% WoW), technologies that reduce silver consumption (e.g., silver-coated copper, laser transfer printing) or increase conversion efficiency become critical value drivers.
* Beneficiaries: Equipment manufacturers (e.g., Maxwell Technologies) and cell producers with proprietary high-efficiency tech.

III. Demand Visibility via Grid Integration (The "Structural" Play)

The NDRC/NEA grid guidelines and provincial plans remove the primary overhang on PV demand: curtailment risk. By committing to 420 GW of West-to-East transmission and piloting 100% renewable transmission, the government is effectively creating a guaranteed offtake mechanism for large-scale bases.
* Key Driver: Policy-mandated infrastructure build-out ensures that installed capacity translates into utilized energy.
* Beneficiaries: Integrated module providers with strong utility-scale project pipelines and companies involved in energy storage and grid-side solutions.

Risks / Headwinds

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

1. Raw Material Price Volatility:

   • While current trends are upward, excessive volatility in polysilicon or silver prices can disrupt downstream demand elasticity. If module prices rise too sharply, project IRRs may fall below hurdle rates, causing deferred installations.
   • Specifically, the 10.3% weekly spike in silver paste is a concern. If sustained, it could squeeze margins for cell manufacturers who cannot fully pass these costs to module buyers.

2. Project Execution Delays:

   • Despite policy support, the actual commencement of construction for "Shagehuang" bases and provincial projects may lag due to financing constraints, land acquisition issues, or administrative bottlenecks. If Q1 2026 project starts miss expectations, the anticipated demand surge may be delayed.

3. Geopolitical and Trade Frictions:

   • The global trade environment remains volatile. Potential escalation in trade barriers (tariffs, anti-circumvention investigations) by the US, EU, or other key markets could restrict export channels for Chinese PV manufacturers. This is particularly relevant for companies with high overseas revenue exposure.

4. Technology Disruption Risk:

   • Rapid shifts in technology (e.g., unexpected breakthroughs in perovskite or alternative metallization) could render existing capex obsolete. Companies heavily invested in current-generation TOPCon lines face execution risk if the market pivots faster than anticipated to next-gen technologies.

Rating / Sector Outlook

Sector Rating: Overweight (Positive)

We define "Overweight" as expecting the industry index to outperform the market benchmark by more than 5% over the next 6 months.

Rationale for Rating:
1. Valuation Reset: The PV sector has undergone a significant valuation compression over the past two years. Current multiples reflect pessimistic assumptions regarding perpetual oversupply. The recent price stabilization offers a catalyst for multiple expansion.
2. Policy Put Option: The explicit government commitment to grid infrastructure and renewable consumption targets provides a floor for long-term demand.
3. Cyclical Bottom: The simultaneous rise in upstream and midstream prices is a classic indicator of cyclical bottoming. We anticipate that earnings reports in early 2026 will confirm the trough in profitability.

Investment Horizon:
* Short-Term (1-3 Months): Focus on trading opportunities driven by price momentum and policy announcements. Watch for confirmation of sustained price hikes in January 2026.
* Long-Term (6-12 Months): Position for structural winners who benefit from industry consolidation and technological leadership.

Investment View

Based on the analysis of market performance, price trends, and policy drivers, we recommend a barbell strategy focusing on Supply Chain Leaders and Technology Innovators.

1. Core Holdings: Polysilicon and Module Leaders

• Logic: These companies benefit most from the stabilization of prices and the clearing of smaller competitors. Their scale allows them to withstand short-term volatility while capturing market share.
• Focus Areas:
  • Polysilicon: Look for companies with the lowest all-in cash costs and high purity output. The RMB 54/kg price level is still modest compared to historical peaks, offering room for upside if demand accelerates.
  • Modules: Integrated giants with strong bankability and global distribution networks. They are best positioned to capitalize on the "Green Power Direct Supply" initiatives in provinces like Gansu and Yunnan.

2. Growth Engines: Technology and Equipment Providers

• Logic: As the industry moves towards higher efficiency, the "pick-and-shovel" providers of advanced equipment and materials will see sustained demand regardless of minor fluctuations in module pricing.
• Focus Areas:
  • Equipment: Companies specializing in HJT/TOPCon line equipment and metallization solutions. The recent outperformance of Maxwell Technologies reflects this sentiment.
  • Inverters/Microinverters: With the emphasis on distributed PV (900 GW accommodation target) and smart microgrids, inverter manufacturers with strong grid-forming capabilities and overseas exposure are attractive. Hoymiles recent strength highlights this trend.

3. Thematic Opportunities: Grid Integration and Storage

• Logic: The NDRC/NEA guidelines explicitly highlight the need for "Source-Grid-Load-Storage" integration.
• Focus Areas:
  • Companies involved in energy storage systems (ESS) coupled with PV projects.
  • Providers of smart grid solutions, virtual power plant (VPP) software, and flexible DC transmission components.

Specific Stock Watchlist (Based on Weekly Movers & Fundamentals)

(Note: Specific buy/sell ratings for individual stocks are not provided in this weekly sector report; investors should conduct further due diligence.)

Conclusion

The week ending December 31, 2025, marks a potentially pivotal moment for the Chinese PV industry. The convergence of rising product prices, aggressive grid infrastructure policy, and regional renewable energy planning creates a favorable backdrop for a sectoral recovery. While short-term market volatility persists, the fundamental trajectory is improving. Institutional investors should use any near-term weakness to accumulate positions in high-quality leaders, focusing on those with superior cost structures, technological edges, and exposure to the burgeoning domestic grid-integration market.

We advise close monitoring of January 2026 transaction prices to confirm the sustainability of the current rebound, as well as the pace of project tenders in Gansu and Yunnan as early indicators of real-world demand activation.

Disclaimer:
This report is prepared by Guoxin Securities Co., Ltd. for institutional clients only. The information contained herein is based on sources believed to be reliable, but Guoxin Securities does not guarantee its accuracy or completeness. The views expressed are those of the analyst and do not constitute an offer or solicitation to buy or sell any securities. Investors should make their own independent assessment of the information and consider their specific investment objectives, financial situation, and needs. Past performance is not indicative of future results. Guoxin Securities and its affiliates may hold positions in the securities mentioned and may engage in transactions inconsistent with the views expressed herein.