Photovoltaic Industry Weekly Report: Supply-Side Reform Drives Price Rebound; Policy Tailwinds Strengthen Long-Term Outlook

Date: December 29, 2025
Sector: Power Equipment / Photovoltaics (PV)
Rating: Overweight (Positive)
Analyst: Zhang Xinyi (S1490522090001)

Executive Summary

The Chinese photovoltaic (PV) sector demonstrated robust momentum during the week of December 22–26, 2025, significantly outperforming the broader market. The Shenwan PV Equipment Index surged by 6.75%, ranking among the top performers within the Power Equipment sector, which itself rose 5.37%. This rally was underpinned by a confluence of positive factors: a broad-based recovery in main-chain product prices, strong installation data for November, and decisive policy interventions aimed at curbing disorderly competition and optimizing market structure.

Our analysis indicates that the industry is transitioning from a phase of intense, margin-compressing competition to one characterized by supply-side consolidation and value restoration. The National Development and Reform Commission (NDRC) has explicitly highlighted the need to regulate the "New Three" industries (EVs, batteries, and PV), signaling a shift towards higher industry concentration and technological leadership. Concurrently, the full-chain price increase—from polysilicon to modules—suggests that the bottom of the profitability cycle may have been reached.

We maintain an Overweight rating on the PV sector. We advise institutional investors to focus on three core investment themes:
1. Profitability Repair: Beneficiaries of supply-side reforms and improved pricing power.
2. Technological Alpha: Companies leading in next-generation efficiency technologies (e.g., HJT, BC, TOPCon advancements).
3. Demand Beta: Exposure to marginal improvements in domestic and global demand expectations.

Key risks remain, including potential volatility in raw material costs, delays in project commencement, and escalating international trade friction. However, the current policy environment and price trends provide a favorable risk-reward profile for selective exposure to market leaders and technology innovators.

Key Takeaways

1. Market Performance: Sector Outperformance and Leadership Rotation

The week ended December 26, 2025, saw significant capital inflow into the power equipment sector, reflecting renewed investor confidence in the green energy transition and specific policy support for the PV industry.

• Broad Market Context: The CSI 300 Index rose by 1.95%. Among the 31 Shenwan industry indices, 24 recorded gains, indicating a generally positive market sentiment.
• Sector Leadership: The Power Equipment Index climbed 5.37%, ranking 3rd among all sectors and outperforming the CSI 300 by 3.42 percentage points (pct).
• PV Sub-Sector Strength: Within Power Equipment, the PV Equipment Index led with a gain of 6.75%. Other sub-sectors also performed well: Wind Power Equipment (+6.73%), Other Power Equipment II (+6.36%), Motors II (+9.19%), Batteries (+4.64%), and Grid Equipment (+4.28%).

Top Performers vs. Laggards:
The divergence in individual stock performance highlights the market's preference for integrated manufacturers and equipment suppliers with strong technological moats.

Source: Wind, Guoxin Securities Research

2. Industry Chain Pricing: Broad-Based Recovery Across Main Chain

A critical development this week was the simultaneous price increase across the entire PV manufacturing chain. According to data from Datayes (as of December 24, 2025), prices for polysilicon, wafers, cells, and modules all registered week-on-week (WoW) increases. This synchronized upward movement is a strong signal that inventory levels are normalizing and that manufacturers are successfully passing on costs or reclaiming margins after a prolonged period of price wars.

Detailed Price Movements

Analytical Interpretation:
The +10.3% surge in silver paste prices is a notable outlier. While this increases production costs for standard PERC and some TOPCon lines, it further incentivizes the adoption of technologies that reduce silver consumption (such as copper plating or advanced screen printing) or enhance efficiency to offset material costs. The modest decline in PV glass prices (-0.05 Yuan/sqm) suggests that the glass sector remains competitive, but the stability prevents it from becoming a bottleneck for module assembly.

The primary narrative here is the restoration of the profit pool. For several quarters, profits were squeezed at every stage. The current price hikes, particularly in polysilicon (+5.9%) and cells (+13.3% relative to base), indicate that the most inefficient capacity is being cleared, allowing remaining players to exercise greater pricing power.

3. Policy Catalysts: Regulatory Clarity and Market Mechanism Reform

Three major policy developments this week provide a structural tailwind for the industry, addressing both supply-side discipline and demand-side flexibility.

A. NDRC on "New Three" Industries: Ending "Involutionary" Competition

On December 26, the Industrial Development Department of the National Development and Reform Commission (NDRC) published an article titled "Vigorously Promoting the Optimization and Upgrading of Traditional Industries." The key takeaways for the PV sector are profound:

• Strategic Importance: PV, along with EVs and Lithium batteries, is recognized as a key engine for high-quality foreign trade and global green leadership.
• Problem Identification: The government explicitly acknowledges issues of "disorderly market competition" and "unstable core advantages."
• "15th Five-Year Plan" Direction:
  • Combat "Involution": Comprehensive remediation of cut-throat competition.
  • Increase Concentration: Policies will aim to raise industry concentration ratios, favoring large, efficient players.
  • Fair Competition: Strict enforcement of fair competition reviews, price monitoring, and quality checks to prevent low-price dumping.
  • Supply Chain Governance: Ensuring timely payments to SMEs to foster a healthy ecosystem.
  • Capacity Exit: Using market-oriented and legal means to force the exit of backward and inefficient capacity.
  • Innovation Focus: Consolidating technical lead through R&D support.

Investment Implication: This is a clear signal that the era of "growth at all costs" is over. The policy framework now supports margin protection for leading firms. Investors should favor companies with strong balance sheets, proprietary technology, and scale, as smaller, inefficient competitors will face regulatory and market pressure to exit.

B. Electricity Market Reform: Removing Artificial Price Controls

The NDRC and National Energy Administration (NEA) issued the "Basic Rules for Medium and Long-Term Electricity Markets" (No. 1656 [2025]), effective March 1, 2026.

• Market-Determined Pricing: For entities directly participating in the market, transaction prices will be formed by market forces without third-party intervention.
• Abolition of Artificial TOU Constraints: No more artificially prescribed Time-of-Use (TOU) price levels or periods for direct market participants. This allows for more dynamic pricing that reflects real-time supply and demand.
• Grid Proxy Purchasing: For users still on grid proxy purchasing, peak/valley periods and price float ratios will be optimized based on spot market prices.
• Long-Term Stability: Promotion of multi-year Power Purchase Agreements (PPAs) to stabilize long-term consumption space for renewable energy.
• Green Power Trading: Encouragement of multi-year green electricity trading and normalized mechanisms for such trades.

Investment Implication: This reform enhances the economic viability of PV projects. By allowing prices to reflect actual scarcity and surplus, PV generators can capture higher value during peak solar hours if coupled with storage, or benefit from long-term PPAs that de-risk revenue streams. It reduces policy uncertainty regarding curtailment and pricing, making project financing more attractive.

C. Robust Installation Data: November Adds 22.02 GW

The National Energy Administration released data for January–November 2025:

• Total Installed Capacity: 3.79 billion kW (+17.1% YoY).
• Solar Capacity: 1.16 billion kW (+41.9% YoY). Solar continues to be the fastest-growing segment.
• Wind Capacity: 600 million kW (+22.4% YoY).
• November Additions: 22.02 GW of new solar installations in November alone.
• Utilization Hours: Average utilization hours for power generation equipment dropped by 289 hours YoY to 2,858 hours, reflecting the intermittent nature of increased renewable penetration and the need for grid flexibility.

Investment Implication: The addition of 22 GW in a single month underscores the resilience of domestic demand despite earlier concerns about saturation. The year-end rush is evident, but the underlying growth trajectory remains steep. The drop in utilization hours reinforces the urgency for energy storage integration and grid upgrades, creating secondary opportunities in the battery and grid equipment sectors.

D. Regional Development: Yunnan’s 2025 Batch 3 New Energy Plan

Yunnan Province approved its third batch of new energy projects for 2025, totaling 14.07 GW (7.74 GW PV, 6.34 GW Wind).

• Timeline: PV projects must start construction by June 2026; Wind projects by October 2026.
• Integration Requirement: Projects lacking immediate grid absorption capacity must link their start dates to local industrial load growth (e.g., green aluminum/silicon plants).
• Green Direct Connection: Encouragement of "green power direct connection" models and thermal-PV hybrid development.

Investment Implication: This highlights a national trend: Generation-Load Integration. Future PV growth will be increasingly tied to local industrial consumption rather than just long-distance transmission. Companies with expertise in distributed generation, microgrids, and industrial park solutions will find new avenues for growth in provinces like Yunnan.

Investment Logic and Strategy

Based on the weekly data and policy shifts, we refine our investment framework for the PV sector into three distinct pillars:

1. Supply-Side Reform & Profitability Repair (The "Beta" Play)

The NDRC’s stance on curbing "involutionary" competition is the most significant macro driver. The industry is moving from a volume-driven model to a value-driven model.
* Logic: As inefficient capacity exits and price floors are implicitly supported by policy and industry self-discipline, gross margins for mainstream products (silicon, wafers, modules) will stabilize and improve.
* Focus: Look for integrated leaders with strong cost control and balance sheets. These companies will survive the consolidation phase and capture market share from exiting rivals.
* Key Beneficiaries: Top-tier module manufacturers and polysilicon leaders who have already achieved cost parity or advantage.

2. Technological Iteration (The "Alpha" Play)

With silver paste prices surging (+10.3%) and efficiency gains becoming the primary differentiator, technology leadership is paramount.
* Logic: The margin gap between standard PERC and advanced N-type (TOPCon, HJT, BC) technologies is widening. Furthermore, technologies that reduce silver consumption or boost efficiency per watt will command a premium.
* Focus: Equipment manufacturers enabling next-gen tech and cell/module makers with high yields in N-type production.
* Key Beneficiaries:
* Equipment: Companies like Maxwell Technologies (Maiwei) and Jiecai Weichuang are critical enablers of HJT and TOPCon expansion. Their order books reflect the industry's capex shift towards advanced lines.
* Cell/MODULE: Junda Shares and Risen Energy have shown strong market reception due to their aggressive adoption of high-efficiency cell technologies.

3. Demand Margins & Market Mechanisms (The "Structural" Play)

The electricity market reforms and strong installation data confirm that demand is not only present but evolving.
* Logic: The removal of artificial TOU constraints and the push for multi-year PPAs reduce revenue volatility for PV operators. This makes downstream assets more bankable and attractive for yield-seeking investors.
* Focus: Developers with strong access to green power trading markets and those integrating storage solutions to maximize value in the new market structure.
* Key Beneficiaries: Integrated players like GCL Integration that can leverage their supply chain to offer competitive, stable power solutions.

Risks / Headwinds

While the outlook is positive, investors must remain cognizant of the following risks:

1. Raw Material Price Volatility:

   • The sharp increase in silver paste prices (+10.3%) poses a direct threat to manufacturing margins, particularly for technologies that are silver-intensive. If silver prices continue to rise without corresponding efficiency gains or substitution (e.g., copper plating), profitability could be eroded.
   • Polysilicon prices, while rising, remain sensitive to unexpected restarts of idle capacity.

2. Project Execution Risk:

   • The report notes that project start-ups must meet strict timelines (e.g., Yunnan’s June 2026 deadline). Delays in permitting, land acquisition, or grid connection approvals could push revenue recognition into later periods, affecting short-term cash flows for developers and equipment suppliers.
   • The requirement for "industrial load support" in some regions adds complexity to project development, potentially slowing down the pipeline for standalone utility-scale projects.

3. Trade Friction and Geopolitics:

   • As the "New Three" industries become central to China’s export strategy, they face heightened scrutiny in key markets (EU, US, India). Potential tariffs, anti-subsidy investigations, or local content requirements could disrupt export volumes and force costly supply chain reconfigurations.
   • The NDRC’s focus on "global technical leadership" may inadvertently trigger further protective measures from trading partners.

4. Grid Absorption and Curtailment:

   • The decline in average utilization hours (-289 hours YoY) signals growing grid congestion. Without commensurate investment in transmission and storage, curtailment rates could rise, negatively impacting the realized price for electricity generated by PV assets.

Rating / Sector Outlook

Sector Rating: Overweight (Positive)

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

Rationale:
1. Valuation Reset: The sector has undergone a significant valuation correction over the past two years, pricing in much of the negative news regarding overcapacity. Current valuations offer an attractive entry point for long-term investors.
2. Policy Put: The explicit government commitment to regulating competition and supporting high-quality development provides a "policy put" under industry margins.
3. Price Inflection: The broad-based price increases in Week 51 confirm that the worst of the price war is likely behind us.
4. Demand Resilience: Double-digit growth in installed capacity and robust monthly additions demonstrate that global and domestic demand remains strong.

Outlook:
We expect the sector to exhibit higher volatility but an upward trend in the coming quarter. The initial rally may be driven by short-covering and sentiment improvement, but sustained gains will depend on the verification of earnings recovery in Q4 2025 and Q1 2026 reports. The differentiation between leaders and laggards will accelerate.

Investment View

Strategic Allocation Recommendations

For institutional portfolios, we recommend a barbell strategy that balances exposure to established leaders with high-growth technology enablers.

1. Core Holdings: Integrated Leaders & Polysilicon Giants

• Thesis: These companies benefit most from supply-side consolidation. They have the scale to withstand temporary shocks and the financial strength to invest in R&D. As weaker competitors exit, their market share and pricing power will expand.
• Action: Accumulate on dips. Focus on companies with low debt-to-equity ratios and diversified geographic revenue streams to mitigate trade risks.

2. Growth Satellite: Technology Equipment & N-Type Specialists

• Thesis: The transition to N-type technology is irreversible. Equipment makers enjoy a "pick-and-shovel" advantage, receiving orders regardless of which module brand wins. Cell specialists with high yields in TOPCon/HJT will command premium valuations.
• Action: Overweight positions in Maxwell Technologies (Maiwei) and Jiecai Weichuang. Monitor order backlog growth and gross margin trends in equipment segments closely.

3. Tactical Trade: Module Makers with Brand Premium

• Thesis: With module prices rising to 0.71 Yuan/W, branded module makers with strong distribution networks in Europe and emerging markets can protect margins better than OEM-focused peers.
• Action: Selective buying of Risen Energy and GCL Integration, focusing on their ability to pass on silver cost increases to end customers.

Monitoring Checklist for Next Week

Investors should track the following indicators to validate the thesis:
1. Inventory Levels: Watch for data on module and cell inventory at the port and factory levels. A continued drawdown would confirm the price rally is sustainable.
2. Silver Price Trends: Monitor COMEX silver prices. A stabilization or decline would alleviate margin pressure; a further spike would require hedging strategies.
3. Policy Implementation Details: Look for specific provincial guidelines on how the NDRC’s "anti-involution" measures will be enforced (e.g., minimum price benchmarks or capacity caps).
4. Export Data: Keep an eye on customs data for PV exports in December to gauge the impact of any pre-tariff rushing or seasonal slowdowns.

Conclusion

The week of December 22–26, 2025, marked a potential turning point for the Chinese PV industry. The combination of rising prices, supportive policy rhetoric, and strong installation data suggests that the sector is emerging from the trough of its cycle. While risks such as raw material volatility and trade barriers persist, the structural shift towards higher quality, regulated competition favors established, technologically advanced players.

We advise investors to shift their focus from pure capacity expansion metrics to profitability quality, technological moats, and cash flow stability. The current environment offers a compelling opportunity to build positions in high-quality PV assets before the full realization of earnings recovery in 2026.

Disclaimer: This report is prepared by Guoxin Securities Co., Ltd. for institutional clients only. The information contained herein is believed to be reliable but is not guaranteed as to accuracy or completeness. 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.