Industry Update: Power Equipment & New Energy Storage

Date: December 08, 2025
Source: Aijian Securities Research Institute
Analyst: Zhu Pan (S0820525070001)
Contact: Lu Jiayi (S0820124120008)

Title: Diverging Trajectories in Photovoltaics and Energy Storage: PV Production Contracts Amidst Seasonal Weakness, While ESS Maintains High Prosperity

Executive Summary

The Chinese power equipment sector, specifically the photovoltaic (PV) and energy storage system (ESS) segments, is currently exhibiting a pronounced divergence in operational momentum as we approach the end of 2025. Our latest industry tracking data indicates that while the PV supply chain is undergoing a corrective contraction in production volumes due to domestic inventory buildup and weakening overseas demand, the energy storage sector—particularly lithium-ion battery cells for stationary storage—continues to demonstrate robust growth and high景气度 (prosperity).

Key Market Dynamics:
* Photovoltaics (Contraction): In November 2025, domestic PV module production decreased by 2.43% month-over-month (MoM). This decline is driven by a combination of softer-than-expected domestic installation progress in December, resistance from downstream buyers against recent price hikes, and a significant seasonal downturn in overseas markets. Consequently, module inventory levels have shifted from destocking to restocking.
* Energy Storage (Expansion): Conversely, the ESS sector remains a primary growth engine. Data from the TD Intelligence (Big Dong Era Think Tank) forecasts that global battery production (power + storage + consumer) will reach 235 GWh in December 2025, a 3.1% MoM increase. Crucially, storage battery production is outperforming power batteries, with storage cells accounting for approximately 35.3% of the total domestic production mix. The demand for long-duration storage (4-hour systems) is notably accelerating, reflected in a 23.23% MoM increase in weighted average bid prices for 4h LFP systems.
* Price Stabilization & Structural Shifts: PV upstream prices have largely stabilized, with polysilicon holding at 52.00 RMB/kg and TOPCon modules at 0.69 RMB/W. In the ESS sector, while short-duration (2h) system prices have softened slightly (-5.5% MoM), the premium for longer-duration capabilities is becoming more evident, suggesting a market shift towards higher-value, grid-stabilizing assets.
* Export Resilience in Inverters: Despite a MoM decline in PV module exports (-19.34%), inverter exports remain resilient, with cumulative Jan-Oct 2025 exports up 17.45% YoY. Notably, emerging markets such as Australia are showing explosive growth (>200% YoY in October), offering new diversification avenues for Chinese manufacturers.

Investment Stance:
We maintain an "Outperform" (Stronger than Big Market) rating on the Power Equipment sector. The structural growth story of energy storage, coupled with the consolidation phase in photovoltaics, creates a selective investment environment. We recommend focusing on companies with strong exposure to the high-growth ESS value chain and those with diversified global inverter footprints. Key recommendations 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. Photovoltaic Supply Chain: Production Adjustments and Inventory Buildup

The PV sector is currently navigating a period of adjustment characterized by reduced production schedules and shifting inventory dynamics. According to data from SMM (Shanghai Metals Market), the overall production volume of PV modules in November 2025 declined by 2.43% compared to October. This contraction is not merely a seasonal fluctuation but reflects deeper structural adjustments in both domestic and international demand curves.

Domestic Market: Expectation Gap and Price Resistance

Domestically, the terminal installation progress in December has failed to meet enterprise expectations. Typically, the fourth quarter sees a rush to complete installations to meet annual targets; however, this year’s momentum has been muted. A critical factor contributing to this slowdown is the recent uptick in component prices. Downstream developers and EPC contractors have exhibited significant resistance to procuring modules at higher price points, leading to a delay in orders.

This hesitation has directly impacted inventory levels. For several months, the industry was in a destocking phase, aiming to clear excess capacity from earlier overproduction. However, in November, domestic module inventory levels have stopped declining and begun to increase. This "stop-loss-to-build" trend suggests that supply is temporarily outpacing immediate demand, putting pressure on manufacturers to manage working capital efficiently.

Overseas Market: Seasonal Downturn and Policy Fade

Internationally, the market is entering its traditional off-season. More importantly, the stimulative effect of export tax rebate policies—which had previously boosted shipment volumes—is fading. As these policy benefits diminish, overseas demand has started to decline significantly. In response, Chinese manufacturers have synchronously revised their production schedules downward for November and December. This alignment of production cuts with demand softening is a prudent move to prevent severe price wars and margin erosion, although it signals a near-term headwind for revenue growth in the export-oriented segment of the PV industry.

2. Energy Storage Sector: Sustained High Prosperity and Structural Growth

In stark contrast to the PV sector, the energy storage industry, particularly the lithium-ion battery cell segment, continues to exhibit strong growth momentum. The divergence between power batteries (for EVs) and storage batteries is becoming increasingly distinct, with storage emerging as the key driver of incremental demand.

Production Forecasts: Storage Leading the Charge

According to forecasts by TD Intelligence (Big Dong Era Think Tank):
* December 2025 Domestic Production: The total scheduled production for power, storage, and consumer batteries in China is expected to reach 220 GWh, representing a 5.3% MoM increase.
* Storage Share: Storage battery cells are projected to account for approximately 35.3% of this total volume. This high proportion underscores the strategic shift in battery manufacturing capacity towards stationary storage applications.
* Global Context: Globally, the total scheduled production is estimated at 235 GWh for December, a 3.1% MoM increase. While power battery production faces阶段性 (phased) pressure due to saturation in certain EV markets and seasonal adjustments, storage batteries continue their high-growth trajectory.

This data confirms that the "high prosperity" status of the storage sector is not anecdotal but is backed by tangible production scheduling data. The resilience of storage demand is supported by the global transition towards renewable energy integration, where intermittent solar and wind power necessitate robust buffering capabilities provided by ESS.

Tendering Activity: Robust Volume Growth

Domestic tendering activity further validates the strong demand outlook. In October 2025, new bidding projects for Energy Storage EPC/PC (including DC-side equipment), storage systems, and storage cells totaled 12.7 GW / 38.7 GWh.
* Year-over-Year (YoY) Growth: This represents an impressive 85% increase in capacity scale compared to October 2024.
* Month-over-Month (MoM) Trend: While there was an 11.24% MoM decline, this is consistent with typical seasonal fluctuations and does not negate the strong underlying YoY growth trend. The sheer volume of tenders indicates that project development pipelines remain full, ensuring sustained demand for upstream components and系统集成 (system integration) services in the coming quarters.

3. Price Analysis: Stability in PV, Differentiation in ESS

Pricing dynamics provide critical insights into the balance of power between suppliers and buyers, as well as the profitability potential for industry participants.

Photovoltaic Prices: Stabilization at Low Levels

As of December 3, 2025, PV upstream and midstream prices have largely stabilized, showing minimal week-over-week volatility. This stability suggests that the industry has reached a temporary equilibrium after a prolonged period of price declines.

The stabilization of TOPCon module prices at 0.69 RMB/W is a crucial signal. It implies that the brutal price war seen in previous periods may be abating, allowing manufacturers to focus on cost optimization and efficiency improvements rather than purely competing on price. However, the low absolute price level means that only the most cost-efficient producers with advanced technology (like TOPCon and HJT) will maintain viable margins.

Energy Storage Prices: Duration Premium Emerges

The pricing landscape in the energy storage sector is more dynamic, revealing a clear differentiation based on system duration. Data from October 2025 bids for Lithium Iron Phosphate (LFP) battery storage systems (excluding commercial and industrial cabinets) shows:

• Overall Average Bid Price: 0.5547 RMB/Wh.
• Weighted Average Winning Bid Price: 0.5248 RMB/Wh, representing a 10% MoM increase. This overall increase is significant and suggests a tightening in supply-demand balance or a shift in the mix of projects towards higher-specification systems.

However, a deeper dive into duration-specific pricing reveals a nuanced story:

Analysis of the Divergence:
The 23.23% MoM increase in the weighted winning bid price for 4-hour systems is a pivotal development. It indicates that the market is increasingly valuing long-duration energy storage (LDES) capabilities. As renewable penetration increases, the need for storage that can cover evening peaks or multi-hour lulls in generation becomes critical. Projects requiring 4-hour discharge are likely incorporating more sophisticated battery management systems, higher safety standards, and potentially different cell chemistries or configurations, justifying the higher price point.

For investors, this suggests that companies specializing in long-duration storage solutions, integrated system design, and advanced thermal management will enjoy better pricing power and margins compared to those competing solely in the commoditized 2-hour segment. The slight decline in 2-hour system prices (-5.5%) reinforces the view that this segment is becoming a volume-driven, low-margin business, whereas the 4-hour segment offers a pathway to value-added growth.

4. Demand Analysis: Domestic Resilience and Overseas Diversification

Domestic Demand: Strong Cumulative Growth

Despite the monthly fluctuations, the cumulative domestic demand for both PV and storage remains robust.

• PV Installations: In October 2025, domestic newly installed PV capacity reached 12.6 GW.

  • MoM: +30.4% (Rebounding from September lows).
  • YoY: -38.3% (Reflecting the high base effect from previous years and potential policy normalization).
  • Cumulative (Jan-Oct 2025): 252.87 GW, a substantial 39.5% YoY increase. This cumulative figure confirms that China continues to lead global PV deployment, providing a solid baseline demand for domestic manufacturers.

• Storage Tendering: As noted earlier, the 85% YoY growth in storage tendering capacity (12.7 GW / 38.7 GWh in Oct) highlights the accelerating adoption of storage alongside PV. The coupling of PV and storage is becoming mandatory in many provinces, driving this synergistic growth.

Overseas Demand: Mixed Signals for Modules, Strength in Inverters

PV Module Exports:
Data from the General Administration of Customs reveals a cooling trend in module exports:
* October 2025 Export Value: ~$2.258 billion.
* YoY: +4.39% (Modest growth).
* MoM: -19.34% (Significant sequential decline).
* Cumulative (Jan-Oct 2025): $23.473 billion, down 4.89% YoY.
* Volume: 1.283 billion units in October (+73.14% YoY, -0.97% MoM).

The discrepancy between the slight YoY value growth and the significant MoM decline suggests that while annual demand remains stable, the immediate forward order book is weakening. The cumulative value decline (-4.89%) indicates that the average selling price (ASP) of exported modules may have decreased, or that high-value markets have contracted slightly. The fading impact of export tax rebates is likely a contributing factor to this softness.

Inverter Exports: A Bright Spot
In contrast to modules, inverter exports demonstrate greater resilience and growth:
* October 2025 Export Value: $677 million.
* YoY: +2.76%.
* MoM: -5.02%.
* Cumulative (Jan-Oct 2025): $7.435 billion, up 17.45% YoY.

The strong cumulative growth in inverter exports (+17.45%) outpaces the module sector, indicating that the replacement market, retrofitting, and standalone storage inverter demand are healthy. Inverters, being critical for grid interaction and having a shorter replacement cycle than modules, offer a more recurring revenue stream.

Regional Breakdown of Inverter Exports (Jan-Oct 2025):

Strategic Implication: The explosive growth in Australian inverter exports (>200% YoY in Oct) highlights the importance of geographic diversification. Companies with strong distribution networks in emerging markets like Australia, Southeast Asia, and parts of South America are better positioned to offset slower growth in traditional markets like Europe. This regional shift also suggests that product portfolios tailored to specific grid codes and climatic conditions in these regions will gain competitive advantage.

Risks / Headwinds

While the sector offers compelling opportunities, particularly in energy storage, investors must remain cognizant of several material risks that could impact earnings and valuation multiples.

1. Intensifying Competition and Margin Compression

• PV Sector: The photovoltaic industry continues to grapple with overcapacity in certain segments, particularly in polysilicon and wafers. Although prices have stabilized, they remain at levels that squeeze gross margins. If demand fails to pick up as expected in 2026, renewed price wars could erupt, further eroding profitability. Companies with higher cost structures or older technology nodes (e.g., PERC) face existential threats.
• ESS Sector: While storage demand is high, the barrier to entry for system integration is relatively low compared to cell manufacturing. This has led to a proliferation of integrators, intensifying competition in the EPC and system supply markets. The 5.5% MoM price drop in 2-hour systems is evidence of this pressure. Only companies with proprietary technology, strong brand recognition, and vertical integration (cell-to-system) can sustain healthy margins.

2. Policy Uncertainty and Regulatory Shifts

• Domestic Policy: The pace of renewable energy adoption in China is heavily influenced by government mandates, subsidy structures, and grid connection policies. Any delay in the issuance of new quotas, changes in feed-in tariffs, or adjustments to the mandatory storage ratio for renewable projects could dampen domestic demand. Furthermore, the ongoing reform of the electricity market, including spot market trading rules, introduces uncertainty regarding the revenue models for independent energy storage stations.
• International Policy: Global reliance on subsidies (e.g., the US Inflation Reduction Act, EU Green Deal) creates vulnerability. Changes in political leadership or fiscal priorities in key markets could lead to sudden withdrawals of support, impacting project economics and demand.

3. International Trade Frictions and Geopolitical Risks

• Tariffs and Barriers: The threat of trade protectionism remains a persistent headwind. The US, EU, and India have all implemented or considered measures to restrict imports of Chinese solar and storage products, citing unfair subsidies or national security concerns.
  • US: Continued enforcement of UFLPA (Uyghur Forced Labor Prevention Act) and potential new tariffs on batteries and inverters.
  • EU: The Carbon Border Adjustment Mechanism (CBAM) and anti-subsidy investigations could increase compliance costs and reduce the competitiveness of Chinese exports.
  • Emerging Markets: While growing, these markets can also impose local content requirements or import duties to protect nascent domestic industries.
• Supply Chain Decoupling: Efforts by Western nations to build independent supply chains for critical minerals and battery components could gradually reduce the global market share of Chinese manufacturers in the long term, forcing them to rely more on domestic and non-aligned markets.

4. Raw Material Price Volatility

• Lithium and Critical Minerals: Although lithium carbonate prices have corrected from their peaks, they remain subject to volatility based on mining output, geopolitical disruptions in resource-rich countries, and speculative trading. Sharp increases in raw material costs can quickly erase the margin gains achieved through operational efficiency, especially for integrators who do not have long-term fixed-price contracts with miners.
• Polysilicon Energy Costs: The production of polysilicon is energy-intensive. Fluctuations in electricity prices, particularly in regions reliant on coal or unstable grids, can impact production costs.

5. Technological Obsolescence

• Rapid Iteration: The PV and battery industries are characterized by rapid technological change. The shift from P-type to N-type (TOPCon, HJT) in PV, and from LFP to Sodium-ion or Solid-state batteries in storage, requires continuous heavy R&D investment. Companies that fail to keep pace with these transitions risk holding stranded assets and losing market share to more agile competitors. For instance, if solid-state batteries achieve commercial viability sooner than expected, current LFP-dominated players could face disruption.

Rating / Sector Outlook

Sector Rating: Outperform (Stronger than Big Market)

We maintain our Outperform rating on the Power Equipment sector. This rating is underpinned by the following core convictions:

1. Structural Growth of Energy Storage: The ESS sector is transitioning from a policy-driven niche to a fundamental pillar of the modern grid. The 85% YoY growth in domestic tendering and the high production scheduling for storage cells confirm that this is a multi-year growth supercycle. The differentiation in pricing between 2-hour and 4-hour systems suggests that the market is maturing and rewarding value-added solutions, which benefits leading technology providers.
2. PV Consolidation Creating Winners: While the PV sector faces near-term headwinds, the stabilization of prices and the reduction in production schedules indicate that the industry is clearing excess capacity. This consolidation phase will likely strengthen the market position of top-tier manufacturers with superior cost control and technology leadership. The long-term demand for solar energy remains intact given global decarbonization goals.
3. Resilient Export Diversification: The strong performance of inverter exports, particularly in emerging markets like Australia, demonstrates the ability of Chinese companies to adapt and find new growth engines despite saturation in traditional markets. This diversification reduces reliance on any single geographic region.

Investment Themes

1. Long-Duration Energy Storage (LDES): Focus on companies capable of delivering 4-hour+ storage systems with high safety and efficiency. The 23% price premium for 4h systems is a clear signal of value creation potential here.
2. Global Inverter Leaders: Companies with strong brand presence in Europe, Australia, and emerging markets, and those offering hybrid inverter-storage solutions.
3. Vertical Integration: Manufacturers that control key parts of the supply chain (e.g., cell production for storage, ingot/wafer for PV) are better positioned to manage cost volatility and protect margins.

Investment View

Based on the analysis of production schedules, pricing trends, and demand dynamics, we identify specific investment opportunities within the Power Equipment sector. We recommend a barbell strategy: overweighting high-growth ESS leaders while selectively investing in consolidated PV leaders with strong balance sheets.

Recommended Stocks

1. Sungrow Power Supply (300274.SZ)

• Core Logic: As a global leader in solar inverters and energy storage systems, Sungrow is uniquely positioned to benefit from both the resilience in inverter exports and the boom in storage demand.
• Catalysts:
  • Storage Growth: Sungrow’s strong presence in the global utility-scale storage market allows it to capture the high-value 4-hour system demand.
  • Geographic Diversification: Its robust sales network in Europe, Australia, and the US mitigates regional risks. The >200% growth in Australian inverter exports directly benefits Sungrow’s market share in that region.
  • Brand Premium: Sungrow commands a pricing premium due to its reliability and bankability, protecting margins amidst competition.
• Risk: Exposure to trade barriers in the US and EU.

2. Narada Power Source (300068.SZ)

• Core Logic: Narada has successfully transformed from a traditional lead-acid battery maker to a key player in lithium-ion energy storage, particularly in communication backup and large-scale stationary storage.
• Catalysts:
  • Storage Cell Capacity: With expanding LFP cell production capacity, Narada can capitalize on the 35.3% storage share in domestic battery production.
  • Cost Advantage: Vertical integration into cell manufacturing allows for better cost control in the competitive 2-hour system market, while its technology enables participation in the higher-margin 4-hour segment.
  • Domestic Tendering: Strong participation in domestic EPC and system tenders aligns with the 85% YoY growth in tendering volume.
• Risk: Intense competition in the domestic storage integration market.

3. Tongrun Equipment (002150.SZ)

• Core Logic: Through its subsidiary, Tongrun has established a significant presence in the solar inverter and energy storage inverter market, with a strong focus on overseas distribution.
• Catalysts:
  • Export Momentum: Beneficiary of the 17.45% YoY growth in cumulative inverter exports. Its agile supply chain allows it to respond quickly to demand spikes in emerging markets.
  • Distribution Network: Strong partnerships with distributors in Europe and Asia provide a stable revenue base.
• Risk: Lower brand recognition compared to top-tier peers, potentially limiting pricing power.

4. Huashengchang (002980.SZ)

• Core Logic: Specializes in test and measurement instruments, including those for PV and battery systems. As the industry scales and technology becomes more complex, the demand for high-precision testing equipment grows.
• Catalysts:
  • Quality Control Demand: With the shift to N-type PV and advanced LFP batteries, manufacturers require more sophisticated testing equipment to ensure quality and safety, driving demand for Huashengchang’s products.
  • Non-Cyclical Element: Equipment sales often precede mass production, providing a leading indicator of industry health and a somewhat defensive revenue stream during production adjustments.
• Risk: Dependence on capex cycles of major battery and PV manufacturers.

5. Shouhang New Energy (301658.SZ)

• Core Logic: A focused player in the microinverter and energy storage sector, targeting residential and commercial markets.
• Catalysts:
  • Residential Storage Boom: The growth in distributed PV and home storage, particularly in markets like Australia and Europe, drives demand for microinverters and hybrid systems.
  • High Growth Potential: As a newer listed entity, it has the potential for rapid expansion in niche markets where agility and innovation are valued.
• Risk: Smaller scale makes it more vulnerable to competition from larger conglomerates.

Strategic Allocation Advice

• Short-Term (1-3 Months): Expect volatility in PV stocks due to the November production cut and inventory buildup. Use dips to accumulate positions in high-quality ESS leaders like Sungrow and Narada, whose earnings visibility is higher due to strong tendering backlogs.
• Medium-Term (6-12 Months): Monitor the stabilization of PV module prices and the recovery of overseas demand. If prices hold at 0.69 RMB/W and inventory normalizes, PV leaders may see a valuation rerating. Continue to overweight ESS due to the structural 4-hour system premium.
• Long-Term (1-3 Years): The transition to a renewable-dominated grid is irreversible. Companies that innovate in long-duration storage, grid-forming inverters, and integrated energy management systems will deliver superior alpha. Avoid pure-play commodity manufacturers without technological moats.

Conclusion

The Power Equipment sector is at a inflection point. The photovoltaic industry is digesting excess capacity and adjusting to a new normal of lower margins but stable volumes, while the energy storage sector is entering a phase of accelerated growth and value differentiation. For institutional investors, the key is to navigate this divergence by selecting companies that are not just volume leaders, but technology and market leaders in the high-growth segments of the value chain. The recommended stocks represent a balanced portfolio exposed to the secular tailwinds of global energy transition, with specific emphasis on the robust dynamics of the energy storage market.

Appendix: Data Tables and Charts Reference

(Note: The following tables summarize the key data points referenced in the analysis, derived from the original report's charts and tables.)

Table 1: China PV Module Production & Export Trends (Nov 2025)

Table 2: Battery Production Forecast (Dec 2025)

Table 3: Key Price Indicators (Dec 2025 / Oct 2025)

Table 4: Regional Inverter Export Performance (Oct 2025 Highlight)

Disclaimer:
This report is prepared by Aijian Securities Research Institute. 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.