Photovoltaic Industry Weekly Report: Policy Tailwinds Strengthen as Valuation Bottoms Out

Date: December 8, 2025
Analyst: Zhang Xinyi (S1490522090001)
Sector Rating: Overweight (Positive)
Source: Guoxin Securities Market Research Department

Executive Summary

The Chinese photovoltaic (PV) sector exhibited mixed performance during the week of December 1–5, 2025, underperforming the broader market amidst a backdrop of stabilizing supply chain prices and significant policy developments. While the Shenwan Photovoltaic Equipment Index declined by 1.65%, lagging the CSI 300’s 1.28% gain, we maintain an Overweight rating on the sector. Our conviction is driven by three converging factors: (1) evidence that the sector has reached a valuation bottom following prior corrections; (2) robust policy support at both national and provincial levels, specifically regarding Infrastructure REITs for clean energy and regional "15th Five-Year Plan" directives; and (3) technological differentiation opportunities in N-type cells and perovskite innovations.

Price stability across the main PV value chain—particularly in polysilicon, cells, and modules—suggests that the intense price wars of previous quarters may be abating, allowing margins to stabilize. However, investors should remain cognizant of rising silver paste costs and persistent risks related to raw material volatility and international trade friction. We recommend a strategic focus on enterprises with high proportions of N-type product capacity and those leading in next-generation technology deployment, such as perovskite tandem cells.

Key Takeaways

1. Market Performance: Sector Underperformance Amidst Broader Rally

During the reporting week (December 1–5, 2025), the A-share market demonstrated resilience, with 17 out of 31 Shenwan industry indices posting gains. The benchmark CSI 300 Index rose by 1.28%. In contrast, the Shenwan Power Equipment Index increased by only 0.22%, ranking 15th among all industries and underperforming the CSI 300 by 106 basis points (bps).

Within the Power Equipment secondary industries, performance was divergent:
* Outperformers: Wind Power Equipment (+3.53%), Grid Equipment (+2.35%), and Batteries (+0.12%).
* Underperformers: Photovoltaic Equipment (-1.65%), Other Power Equipment II (-1.54%), and Motors II (+0.18%).

The relative weakness in the PV sector reflects ongoing investor caution regarding near-term profitability despite long-term structural growth trends. However, the divergence within the sector highlights stock-specific alpha opportunities rather than purely beta-driven returns.

Table 1: Weekly Performance of Power Equipment Sub-Sectors (Dec 1–5, 2025)

Source: Wind, Guoxin Securities

Company-Level Divergence

Individual stock performance within the PV equipment sector was highly fragmented, indicating that market sentiment is shifting from sector-wide speculation to fundamental scrutiny.

• Top Gainers: Aerospace M&E (Hangtian Jidian), Topray Solar, Gaoce Shares, Yubang New Material, and Deye Shares led the advances. These companies likely benefited from specific catalysts such as order announcements, technological breakthroughs, or exposure to resilient sub-segments like inverters (Deye) and cutting equipment (Gaoce).
• Top Decliners: Canadian Solar (Artes), Junda Shares, Oujing Technology, Shichuang Energy, and Mingguan New Material faced selling pressure. The decline in module manufacturers and auxiliary material providers suggests continued concern over margin compression in highly competitive segments.

2. Supply Chain Price Analysis: Stabilization with Mixed Signals

Data from Datayes as of December 3, 2025, indicates that the PV supply chain is experiencing a period of price stabilization, which is a critical precursor to margin recovery for manufacturers. The era of precipitous price declines appears to have paused, providing a more predictable environment for Q4 2025 and Q1 2026 planning.

Main Chain Prices Hold Steady

• Polysilicon: The transaction price remained flat at CNY 51/kg. This stability is crucial for upstream producers who have faced severe margin erosion. It suggests that inventory levels are balanced and that production cuts by major players are effectively supporting prices.
• Solar Cells: Prices held steady at CNY 0.28/W. Stability in cell prices indicates that demand for high-efficiency cells remains robust enough to absorb supply, preventing further downward pressure.
• Modules: Module prices remained unchanged at CNY 0.69/W. This is a positive signal for project developers, as price certainty facilitates final investment decisions (FID) for utility-scale projects. It also implies that module manufacturers are no longer engaging in aggressive price-cutting to clear inventory, signaling a potential floor in module pricing.

Minor Adjustments in Wafers and Glass

• Wafers: The transaction price decreased slightly by CNY 0.05/piece to CNY 1.20/piece. This minor adjustment may reflect slight oversupply in the wafer segment or adjustments in silicon rod utilization rates. However, the magnitude of the drop is negligible compared to historical volatility, suggesting limited downside risk.
• PV Glass: Prices for both 3.2mm and 2mm glass declined by CNY 0.5/sqm, settling at CNY 19.5/sqm and CNY 12.0/sqm, respectively. The softness in glass prices could be attributed to increased production capacity coming online or slower-than-expected installation pacing in certain regions. Investors should monitor glass inventories closely, as sustained price weakness could impact the profitability of pure-play glass manufacturers.

Significant Cost Pressure: Silver Paste

• Silver Paste: The price surged by 11.4% week-on-week to CNY 13,958/kg. This is a notable headwind for cell manufacturers, particularly those producing TOPCon and HJT cells which have higher silver consumption than traditional PERC cells.
  • Implication: The sharp rise in silver prices underscores the urgency for manufacturers to accelerate the adoption of silver-reduction technologies, such as copper plating, silver-coated copper, or 0BB (Zero Busbar) technologies. Companies with superior metallization efficiency will enjoy a distinct cost advantage in this environment.

Table 2: PV Supply Chain Price Trends (Week of Dec 1–5, 2025)

Source: Datayes, Solarzoom, Guoxin Securities

3. Policy Catalysts: Structural Support for Long-Term Growth

The week featured three significant policy developments that reinforce the long-term investment thesis for the renewable energy sector in China. These policies address financing, regional planning, and grid integration, tackling key bottlenecks that have historically constrained sector growth.

A. National Level: Infrastructure REITs Expansion

On December 1, the National Development and Reform Commission (NDRC) issued the "List of Industry Scope for Infrastructure Real Estate Investment Trusts (REITs) Projects (2025 Edition)."

• Key Provision: The list explicitly includes wind power, solar power, hydropower, natural gas power, biomass power, and nuclear power projects as eligible assets for REITs issuance.
• Strategic Implication: This is a transformative development for the PV sector. Historically, renewable energy projects are capital-intensive with long payback periods. By enabling these assets to be securitized via REITs, the policy provides a vital exit channel for developers and independent power producers (IPPs).
  • Capital Recycling: Developers can recycle capital from operational assets to fund new construction, accelerating the pace of deployment without excessively leveraging balance sheets.
  • Valuation Re-rating: Listed PV operators with large operational portfolios may see their valuations re-rate as the market assigns higher multiples to stable, yield-generating assets backed by REIT structures.
  • Quality Focus: The NDRC emphasized "selecting the best of the best," implying that only high-quality, compliant projects will qualify. This favors large, state-owned, or leading private enterprises with strong operational track records.

B. Provincial Level: Zhejiang’s "15th Five-Year Plan" Suggestions

The Communist Party of China Zhejiang Provincial Committee released suggestions for the province’s 15th Five-Year Plan (2026–2030), outlining ambitious targets for green energy transition.

• Key Targets:
  • Achieve carbon peak goals on schedule.
  • Significantly increase the proportion of new energy supply.
  • Accelerate the construction of modern energy infrastructure, including power sources, grids, and storage.
• Specific Actions for PV:
  • "Increase PV Development Efforts": The plan explicitly calls for intensified PV development, complementing offshore wind and nuclear power.
  • System Integration: Emphasis on coordinating power sources, grids, and storage. This signals a shift from standalone PV installations to integrated systems, benefiting companies involved in energy storage solutions and smart grid technologies.
  • Green Transformation: The plan aims to optimize industrial, energy, and transportation structures, promoting electrification and green logistics. This creates downstream demand for distributed PV in industrial parks and logistics centers.
• Investment Insight: Zhejiang, being an economically advanced province with high electricity demand, serves as a bellwether for national trends. The explicit mention of PV in the 15th Five-Year Plan suggestions provides visibility on demand through 2030, reducing policy uncertainty for investors.

C. Municipal Level: Shenzhen’s Virtual Power Plant (VPP) Initiative

On December 1, the Shenzhen Municipal Development and Reform Commission solicited opinions on extending measures to support the rapid development of Virtual Power Plants (VPPs).

• Key Provision: Accelerate the integration of distributed PV projects into the city’s VPP management platform and facilitate their participation in electricity market trading.
• Mechanism:
  • Encourage resource aggregators to build platforms that enhance response speed and precision.
  • Enable distributed resources to participate in energy markets and ancillary services.
  • Implement precise response mechanisms for intra-day and real-time power supply shortages, with subsidies aligned with Guangdong’s market-based demand response standards.
• Strategic Implication: This policy addresses the intermittency challenge of distributed PV. By aggregating scattered rooftop solar assets into a VPP, Shenzhen can treat them as a dispatchable resource.
  • Revenue Diversification: Distributed PV owners can now earn revenue not just from self-consumption or feed-in tariffs, but also from grid services and market trading. This improves the internal rate of return (IRR) for distributed PV projects.
  • Technology Demand: This drives demand for smart inverters, energy management systems (EMS), and IoT connectivity solutions, benefiting technology providers in the digital energy space.

Risks / Headwinds

While the outlook is constructive, institutional investors must carefully weigh the following risks:

1. Raw Material Price Volatility

• Silver Paste Surge: The 11.4% weekly increase in silver paste prices poses a direct threat to cell manufacturing margins. If silver prices remain elevated or continue to rise due to macroeconomic factors or industrial demand (e.g., from the EV sector), manufacturers unable to pass these costs downstream or reduce silver loadings will face margin compression.
• Polysilicon Instability: While currently stable, the polysilicon market remains sensitive to production restarts. If prices rise too sharply, it could dampen downstream demand; if they fall again, it could signal renewed oversupply.

2. Project Execution Risks

• Construction Delays: Despite policy support, actual project commencement may lag due to land acquisition issues, grid connection bottlenecks, or financing delays. The "project start-up below expectations" risk remains pertinent, particularly for large-scale utility projects in regions with complex regulatory environments.
• Grid Curtailment: As PV penetration increases, grid curtailment rates may rise in certain provinces, affecting the realized revenue of power generators. Although VPPs and storage help mitigate this, the infrastructure rollout may not keep pace with generation capacity additions.

3. Geopolitical and Trade Frictions

• Trade Barriers: The global trade environment for Chinese PV products remains fraught with tension. Potential tariffs, anti-dumping investigations, or supply chain decoupling efforts by the US, EU, or other markets could restrict export volumes and compress margins for internationally exposed companies.
• Supply Chain Restrictions: Restrictions on the export of certain technologies or materials could disrupt global supply chains, affecting companies with significant overseas manufacturing or sales footprints.

4. Technological Obsolescence

• Rapid Iteration: The PV industry is characterized by rapid technological change. Companies heavily invested in older technologies (e.g., PERC) face the risk of asset stranding if they fail to transition efficiently to N-type (TOPCon/HJT) or perovskite technologies. The capital expenditure required for this transition is substantial and may strain cash flows.

Rating / Sector Outlook

Rating: Overweight (Positive)

We maintain an Overweight rating on the Photovoltaic Equipment sector. Our definition of "Overweight" implies that we expect the industry index to outperform the market benchmark by more than 5% over the next six months.

Rationale for Rating:
1. Valuation Bottom: The sector has undergone a significant correction, pricing in much of the negative sentiment regarding overcapacity and margin compression. Current valuations offer an attractive entry point for long-term investors.
2. Policy Put: The convergence of national REITs policies, provincial five-year plans, and municipal grid integration initiatives provides a strong policy floor. These measures not only stimulate demand but also improve the financial viability of PV projects.
3. Price Stabilization: The stabilization of main chain prices (polysilicon, cells, modules) indicates that the supply-demand imbalance is correcting. This reduces earnings visibility risk for Q4 2025 and Q1 2026.
4. Technological Alpha: The shift towards N-type and perovskite technologies creates a bifurcation in the sector. Leaders in these technologies will capture disproportionate market share and margins, offering clear alpha opportunities.

Sector Outlook:
We anticipate a gradual recovery in sector profitability through 2026. The immediate focus will be on inventory normalization and the monetization of policy benefits (e.g., REITs issuances). Medium-term growth will be driven by the global energy transition, with China remaining the dominant manufacturing and innovation hub. The integration of PV with storage and grid services (VPPs) will emerge as a key growth vector, transforming PV from a simple generation asset to a critical component of grid stability.

Investment View

Based on the current market dynamics, policy landscape, and technological trends, we propose the following investment strategy for institutional clients:

1. Core Strategy: Focus on N-Type Leaders

The industry is in the midst of a definitive technology shift from P-type (PERC) to N-type (TOPCon, HJT, BC). Investors should prioritize companies with:
* High N-Type Production Ratios: Companies that have successfully ramped up N-type capacity and achieved high yield rates will enjoy premium pricing and better margins.
* Cost Leadership: Look for firms with superior non-silicon cost control, particularly in managing silver paste consumption through advanced metallization techniques.
* Recommended Focus: Manufacturers with proven track records in TOPCon mass production and those pioneering HJT commercialization.

2. Satellite Strategy: Bet on Next-Gen Technology (Perovskite)

Perovskite solar cells represent the next frontier in PV efficiency, with the potential to surpass the theoretical limits of crystalline silicon.
* Investment Thesis: Early movers in perovskite R&D and pilot line construction are positioned for significant valuation upside as the technology approaches commercial viability.
* Risk/Reward: This is a higher-risk, higher-reward segment. Investors should allocate a smaller portion of the portfolio to companies with strong intellectual property portfolios and partnerships in the perovskite space.
* Key Indicators: Monitor progress in stability testing, large-area module efficiency records, and pilot line throughput.

3. Thematic Play: Grid Integration and Digital Energy

The Shenzhen VPP policy highlights the growing importance of grid interaction.
* Investment Thesis: Companies that provide the hardware (smart inverters, sensors) and software (EMS, AI-driven dispatch algorithms) for VPPs and distributed energy resource management will benefit from the increasing complexity of the grid.
* Recommended Focus: Inverter manufacturers with strong grid-forming capabilities and software platforms for energy management.

4. Avoid/Underweight: Legacy Capacity and High-Cost Producers

• Caution: Companies with significant stranded assets in older PERC technology and those lacking the financial strength to upgrade capacity may face prolonged margin pressure or bankruptcy risks.
• Glass Sector: Given the recent price weakness in PV glass, exercise caution with pure-play glass manufacturers until inventory levels normalize and demand picks up. Prefer integrated players with diversified revenue streams.

Conclusion

The photovoltaic sector stands at an inflection point. The combination of stabilized prices, supportive policies, and technological evolution creates a favorable risk-reward profile for selective investors. By focusing on leaders in N-type technology, innovators in perovskite, and enablers of grid integration, investors can navigate the short-term volatility and capture the long-term structural growth of the global energy transition.

Disclaimer:
Zhang Xinyi hereby declares that he/she holds the securities investment consulting practice qualification granted by the Securities Association of China and is registered as a securities analyst. This report is issued independently and objectively with a diligent professional attitude. The report clearly reflects the author's research views. The author has not, does not, and will not receive any form of compensation directly or indirectly due to the specific recommendations or views in this report. Guoxin Securities Co., Ltd. (which has obtained the securities investment consulting business qualification approved by the China Securities Regulatory Commission) has fulfilled disclosure obligations in accordance with relevant laws and regulations within the scope of knowledge.

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