Industry Update: Power Equipment & New Energy

Date: December 02, 2025
Sector: Power Equipment / Photovoltaics (PV) & Energy Storage
Rating: Outperform (Stronger than Market)

Executive Summary

The Chinese photovoltaic (PV) and energy storage sectors are exhibiting a divergent yet structurally robust trajectory as we approach the end of 2025. Our analysis of October 2025 data and forward-looking production schedules for November and December reveals a complex landscape characterized by domestic PV installation resilience, stabilizing supply chains, and an explosive growth in energy storage demand.

Key Thesis: While the global PV module export market faces short-term headwinds with month-on-month declines, the domestic Chinese market remains a critical anchor, with October installations rising 30.4% sequentially. More importantly, the energy storage sector is emerging as the primary growth engine, with battery production schedules hitting record highs and tender volumes surging 85% year-over-year. The stabilization of upstream material prices, particularly in polysilicon and lithium cells, suggests that margin compression may be bottoming out, offering a potential inflection point for profitability among leading manufacturers.

We maintain an Outperform rating on the Power Equipment sector. The investment narrative is shifting from pure capacity expansion to quality-driven growth, where companies with strong overseas channels (particularly in emerging markets like Australia and Asia) and integrated energy storage solutions are poised to outperform. We recommend focusing on industry leaders with robust balance sheets and technological moats, specifically highlighting Sungrow Power Supply, Narada Power Source, Tongrun Equipment, Huashengchang, and Sofar Solar.

This report provides a comprehensive deep-dive into the supply-demand dynamics, pricing trends, and regional export shifts that define the current investment landscape. We analyze the decoupling of PV and storage cycles, the impact of inventory corrections on module production, and the structural drivers behind the sustained high growth in energy storage battery排产 (production scheduling).

Key Takeaways

1. Supply Side: Divergence Between PV Module and Battery Production Schedules

The supply side dynamics in October and November 2025 highlight a significant divergence between the photovoltaic module sector and the lithium battery sector.

Photovoltaic Modules: Inventory Correction and Stabilization
According to data from Shanghai Metals Market (SMM), the production schedule for PV modules has entered a phase of adjustment. Since the second half of 2025, overall module production has remained relatively stable, but November 2025 shows a mixed picture among manufacturers.
* Headline Producers vs. Laggards: Leading tier-1 manufacturers have slightly increased their production schedules, leveraging their cost advantages and order books. However, the majority of smaller and mid-tier enterprises are reducing output to clear existing inventory.
* Volume Outlook: SMM estimates that the domestic PV module production schedule for November 2025 will fall below 44.5 GW, representing a month-on-month decline compared to October.
* Profitability Link: This reduction in output is a strategic response to previous price wars. There is a growing expectation that as prices stabilize and potentially rebound, corporate profit margins will recover, which could incentivize a subsequent increase in production in late Q4 or early 2026. The current "cutting production to stabilize prices" strategy indicates a maturing industry discipline.

Lithium Batteries: Storage Drives Record Highs
In stark contrast to the cautious stance in PV modules, the lithium battery sector is operating at near-full capacity, driven overwhelmingly by energy storage demand. Data from TD Insight (Big Dong Era Think Tank) provides a bullish outlook for December 2025:
* Total Production Schedule: The combined production schedule for the Chinese market (Power + Storage + Consumer batteries) is forecast to reach 220 GWh in December 2025, a 5.3% month-on-month increase.
* Global Context: Globally, the total production schedule is expected to hit 235 GWh in December, up 3.1% month-on-month.
* Structural Shift: Energy storage battery production now accounts for approximately 35.3% of the total Chinese production mix. This is a critical structural shift. While power batteries (for EVs) are facing阶段性 (phased) pressure due to seasonal automotive demand fluctuations and high base effects, energy storage batteries are maintaining a high-growth trajectory. This underscores the transition of the battery industry from being solely EV-dependent to a dual-engine model powered by grid-scale and commercial storage applications.

2. Pricing Dynamics: Stabilization in PV, Rebound in Storage

Price trends in November 2025 indicate that the brutal deflationary cycle in the PV supply chain is pausing, while the energy storage sector is witnessing a notable price recovery, particularly for longer-duration systems.

Photovoltaic Supply Chain: Bottoming Out
As of November 26, 2025, prices across the main PV supply chain segments have largely stabilized, with minor fluctuations in specific niches:
* Polysilicon: The price of dense-grade polysilicon remained flat week-on-week at 52.00 RMB/kg. This stability is crucial as polysilicon is the foundational cost driver for the entire chain. The lack of further decline suggests that cash-cost support levels have been reached for most producers.
* Silicon Wafers: The average mainstream price for 183mm N-type monocrystalline silicon wafers decreased slightly by 0.08 RMB/wafer to 1.20 RMB/wafer. This marginal dip reflects ongoing efficiency improvements and competitive pressure in the wafer segment, but the magnitude of the drop is diminishing.
* Cells: The average price for 210mm N-type battery cells held steady at 0.29 RMB/W. Stability here is a positive signal for module assemblers, allowing for better cost predictability.
* Modules: The price for TOPCon double-glass modules remained unchanged at 0.69 RMB/W. This price level is critically important; it is approaching the cash cost line for many inefficient producers, effectively putting a floor under further price erosion. For investors, this implies that gross margins for module makers may have bottomed, setting the stage for margin expansion if demand holds.

Energy Storage Systems: Significant Price Recovery
The energy storage sector saw a marked increase in bidding prices in October 2025, signaling improved bargaining power for suppliers and potentially healthier margins.
* Overall System Prices: For Lithium Iron Phosphate (LFP) energy storage systems (excluding commercial and industrial cabinets), the winning bid weighted average price was 0.5248 RMB/Wh, representing a substantial 10% month-on-month increase. The range of shortlisted bids was concentrated between 0.43 and 0.7487 RMB/Wh, with an average quote of 0.5547 RMB/Wh.
* Duration Differentiation:
* 2-Hour Systems: The weighted average winning bid price was 0.5531 RMB/Wh, a 5.5% month-on-month decrease. This segment remains highly competitive, likely due to standardization and intense competition in the short-duration frequency regulation and peak-shaving markets.
* 4-Hour Systems: In contrast, the weighted average winning bid price for 4-hour systems surged to 0.5089 RMB/Wh, a remarkable 23.23% month-on-month increase. The shortlisted bids ranged from 0.43 to 0.65 RMB/Wh, with an average quote of 0.5192 RMB/Wh.

Interpretation: The sharp rise in 4-hour system prices is a pivotal development. It suggests that the market is beginning to value the complexity, safety, and integration capabilities required for longer-duration storage. As renewable penetration increases, the grid's need for 4-hour+ displacement grows, shifting the competitive landscape from pure commodity pricing to value-added engineering. This trend favors integrated players with strong R&D and system integration capabilities over pure cell assemblers.

3. Demand Analysis: Domestic Resilience and Overseas Diversification

Demand patterns in October 2025 reveal a resilient domestic market and a shifting geographic profile for exports, with emerging markets compensating for softness in traditional Western hubs.

Domestic Market: PV Installations Surge, Storage Tenders Boom
* PV Installations: In October 2025, China’s newly installed PV capacity reached 12.6 GW. This represents a robust 30.4% month-on-month growth, demonstrating strong end-of-year installation momentum. Although this figure is 38.3% lower year-on-year (likely due to a high base effect from policy-driven rushes in the prior year or grid connection bottlenecks), the sequential growth is a positive indicator for Q4 performance.
* Cumulative Performance: From January to October 2025, cumulative new PV installations in China totaled 252.87 GW, a solid 39.5% year-on-year increase. This confirms that despite monthly volatility, the long-term growth trajectory of the Chinese domestic PV market remains intact, supported by national renewable energy targets and distributed generation policies.
* Storage Tenders: The energy storage sector is experiencing exponential growth in project initiation. In October 2025, new tenders for Energy Storage EPC/PC (including DC-side equipment), storage systems, and cells totaled 12.7 GW / 38.7 GWh.
* YoY Growth: This volume represents an impressive 85% year-on-year increase in capacity scale.
* MoM Trend: While there was an 11.24% month-on-month decline, this is typical seasonal fluctuation. The sheer magnitude of the YoY growth underscores the accelerating adoption of storage as a mandatory or economically viable component of new renewable projects.

Overseas Market: Export Value Mixed, Volume Stable, Regional Shifts
Data from the General Administration of Customs highlights a nuanced picture for exports. While total export values faced headwinds, unit volumes remained resilient, and regional diversification is accelerating.

• PV Module Exports:

  • Value: October 2025 export value was approximately $2.258 billion, up 4.39% YoY but down 19.34% MoM.
  • Volume: Export volume was roughly 1.283 billion units, up 73.14% YoY but down 0.97% MoM.
  • Cumulative: Jan-Oct cumulative export value stood at $23.473 billion, down 4.89% YoY.
  • Analysis: The divergence between rising YoY volume (+73%) and falling/stagnant value suggests that average selling prices (ASPs) for modules continue to be under pressure globally. However, the massive volume growth indicates that demand elasticity is high; lower prices are stimulating significant volume uptake in price-sensitive markets.

• Inverter Exports:

  • Value: October 2025 export value was $677 million, up 2.76% YoY and down 5.02% MoM.
  • Cumulative: Jan-Oct cumulative export value reached $7.435 billion, up 17.45% YoY.
  • Regional Breakdown (Jan-Oct 2025):
    1. Europe: $2.91 billion (Top market, though growth has slowed compared to the 2023-2024 boom).
    2. Asia: $2.583 billion (Second largest, showing steady growth).
    3. Emerging Markets: South America and other regions provide diversified growth potential.
  • Spotlight on Australia: A standout trend is the surge in exports to Australia. In October 2025, inverter exports to Australia grew by over 200% YoY. This highlights Australia as a new high-growth frontier, driven by its aggressive rooftop solar adoption and increasing need for grid-forming inverters to manage network stability.

Note: Table data derived from Chart 13 in the source report, summarizing Jan-Oct cumulative totals.

4. Investment Implications and Strategic Focus

The data presented above supports a constructive view on the sector, with a clear preference for companies exposed to the high-growth storage segment and those with successful diversification into non-traditional export markets.

Why We Remain Bullish:
1. Margin Inflection: The stabilization of PV module prices at ~0.69 RMB/W and the 10% rebound in storage system prices suggest that the worst of the price war is behind us. As input costs (polysilicon, lithium carbonate) stabilize, the spread for mid-stream manufacturers should widen.
2. Storage as a Alpha Generator: With storage battery production accounting for >35% of total output and tender volumes up 85% YoY, companies with strong storage portfolios will outgrow pure-play PV firms. The 23% price increase in 4-hour systems specifically benefits technologically advanced integrators.
3. Geographic Arbitrage: The >200% growth in Australian inverter exports and strong Asian demand provide a hedge against potential saturation or trade friction in Europe and North America. Companies with established channels in these high-growth regions will capture disproportionate market share.

Recommended Stocks:
Based on these dynamics, we recommend the following equities:
* Sungrow Power Supply (300274.SZ): A global leader in both inverters and energy storage systems. Its strong presence in Europe and emerging markets, coupled with its integrated storage solutions, positions it to benefit from both the inverter export resilience and the storage boom.
* Narada Power Source (300068.SZ): A key player in the energy storage battery and system integration space. Given the 85% YoY growth in storage tenders and the price recovery in 4-hour systems, Narada is well-placed to see revenue and margin expansion.
* Tongrun Equipment (002150.SZ): Benefiting from the broader power equipment upgrade cycle and its involvement in energy storage infrastructure.
* Huashengchang (002980.SZ): Specialized in testing and measurement instruments, essential for the quality control and R&D of both PV and storage systems. As the industry shifts towards higher efficiency and safety standards, demand for precision testing equipment rises.
* Sofar Solar (301658.SZ): A fast-growing inverter manufacturer with a strong focus on distributed generation and emerging markets. Its agility allows it to capitalize on niche growth opportunities like the Australian market surge.

Risks / Headwinds

While the outlook is positive, institutional investors must remain cognizant of several structural and cyclical risks that could impede performance.

1. Intensified Competition and Margin Compression

• Risk Description: Despite recent signs of stabilization, the PV and energy storage sectors remain characterized by excess capacity. If demand fails to keep pace with the aggressive expansion plans of tier-1 and tier-2 manufacturers, price wars could reignite.
• Impact: A resurgence in price competition would directly erode gross margins, particularly for module assemblers and system integrators who lack vertical integration. The current "profit recovery" thesis relies on disciplined production cuts; any breach of this discipline by major players seeking market share could invalidate the margin improvement narrative.
• Monitoring Indicator: Watch for changes in the utilization rates of top-tier manufacturers and any unexpected drops in module or cell prices below the current support levels (0.69 RMB/W for modules).

2. Policy Uncertainty and Demand Volatility

• Risk Description: The new energy sector is heavily influenced by government policies, including subsidies, grid connection quotas, electricity market reforms, and tax incentives.
• Specific Concerns:
  • Domestic: Changes in China’s renewable energy subsidy disbursement or grid curtailment policies could slow down domestic installation rates.
  • International: The European Union’s evolving regulatory framework (e.g., carbon border adjustments, local content requirements) and the US Inflation Reduction Act (IRA) implementation details can create unpredictable demand cliffs or spikes.
  • Electricity Markets: The profitability of energy storage assets is increasingly tied to electricity spot market prices. If market designs do not adequately value flexibility and ancillary services, the economic case for standalone storage could weaken, impacting long-term demand.
• Impact: Policy shifts can lead to sudden cancellations or delays in projects, causing revenue miss-es for suppliers and EPC contractors.

3. International Trade Frictions and Geopolitical Barriers

• Risk Description: As Chinese new energy companies expand globally, they face increasing protectionist measures.
• Specific Threats:
  • Tariffs: Potential increases in import tariffs by the US, EU, or India on Chinese PV modules, batteries, and inverters.
  • Non-Tariff Barriers: Stricter sustainability criteria, supply chain traceability requirements (e.g., regarding labor practices or raw material sourcing), and security reviews for grid-connected equipment.
  • Local Content Requirements: Policies mandating a certain percentage of local manufacturing could force Chinese firms to build costly overseas factories, diluting ROIC in the short term.
• Impact: Trade barriers can restrict access to high-margin markets (like the US and Europe), forcing companies to rely more on lower-margin emerging markets. This could compress overall profitability and increase operational complexity.
• Mitigation: Companies with diversified manufacturing footprints (e.g., factories in Southeast Asia, Hungary, or the US) are better insulated but face higher capital expenditure burdens.

4. Raw Material Price Volatility

• Risk Description: While currently stable, prices for key inputs like polysilicon, lithium carbonate, and copper are subject to supply shocks.
• Impact: A sudden spike in raw material costs, if not passable to customers due to fixed-price contracts, would squeeze margins. Conversely, a rapid decline in lithium prices could lead to inventory write-downs for battery manufacturers holding high-cost stock.

Rating / Sector Outlook

Sector Rating: Outperform (Stronger than Market)

We reaffirm our Outperform rating for the Power Equipment sector, specifically the Photovoltaic and Energy Storage sub-sectors. This rating is based on a 6-month horizon relative to the CSI 300 Index.

Rationale for Rating:
1. Valuation Attractiveness: After a prolonged period of correction, valuations in the PV and storage sectors have compressed to historically low levels, pricing in much of the negative sentiment regarding overcapacity and trade risks. The current P/E ratios for leading firms offer an attractive entry point for long-term investors, given the secular growth trends.
2. Fundamental Improvement: The data from October 2025 provides tangible evidence of fundamental stabilization. The 30.4% MoM rise in domestic PV installations and the 85% YoY surge in storage tenders demonstrate that underlying demand remains robust. The 10% increase in storage system prices is a leading indicator of improving profitability.
3. Structural Growth Drivers: The global energy transition is irreversible. The shift from intermittent renewable generation to firm, dispatchable power via energy storage is a multi-year super-cycle. China’s dominance in the supply chain, combined with its technological leadership in LFP batteries and TOPCon cells, ensures that Chinese firms will remain central to this transition, even amidst geopolitical headwinds.
4. Differentiation Opportunities: The market is moving from a "tide lifts all boats" phase to a "stock picker’s market." Leaders with superior technology, cost control, and global channel diversity (like Sungrow and Narada) are decoupling from the broader sector’s struggles, offering alpha opportunities.

Comparison with Benchmark:
We expect the Power Equipment index to outperform the CSI 300 over the next 6 months, driven by earnings surprises from the storage segment and a re-rating of PV leaders as margin bottoms are confirmed.

Investment View

1. Strategic Allocation: Overweight Energy Storage, Neutral PV

Investors should adjust their portfolio weights to reflect the diverging growth trajectories within the sector.

• Overweight Energy Storage: This is the highest conviction theme. The combination of volume growth (85% YoY in tenders) and price recovery (10-23% in systems) creates a favorable "volume x price" expansion scenario. Focus on companies with integrated capabilities (cell + PCS + EMS) rather than pure component suppliers. The 4-hour system price surge specifically highlights the value of technical integration.
• Neutral/Selective PV: The PV module sector is in a consolidation phase. While volumes are high, margin recovery is fragile. Investors should focus on tier-1 module makers with strong brand recognition and vertical integration, which allows them to survive the shakeout and gain market share from exiting smaller players. Avoid pure-play downstream assemblers with no differentiation.
• Overweight Inverters with Emerging Market Exposure: The >200% growth in Australian exports and steady Asian demand suggest that inverters with strong distribution networks in non-European markets offer better growth visibility. Inverters are also less susceptible to trade barriers than modules due to their lower absolute value and higher technical stickiness.

2. Key Metrics to Monitor

To validate the investment thesis, institutional investors should track the following high-frequency data points in the coming quarters:

1. Module Production Utilization Rates: Specifically, the utilization rates of tier-1 vs. tier-2 manufacturers. A widening gap indicates healthy industry consolidation.
2. Storage Tender Prices: Continue to monitor the weighted average bid prices for 2-hour and 4-hour systems. Sustained prices above 0.50 RMB/Wh for 4-hour systems are critical for margin expansion.
3. Export Regional Mix: Track the monthly export data for inverters and modules to Australia, Asia, and the Middle East. A continued shift away from reliance on Europe towards these high-growth regions will de-risk the revenue stream.
4. Inventory Levels: Watch for reports on channel inventory in Europe and the US. A normalization of inventory levels is a prerequisite for a sustainable recovery in export orders.
5. Policy Announcements: Keep a close watch on China’s National Energy Administration (NEA) guidelines for grid connection and the EU’s finalization of any new trade defense instruments.

3. Company-Specific Insights

Sungrow Power Supply (300274.SZ)
* Investment Logic: Sungrow is the quintessential beneficiary of the storage boom. As a global leader in both PV inverters and energy storage systems, it enjoys economies of scale and brand premium. Its strong presence in Europe provides a stable cash flow, while its aggressive expansion in Asia and Australia captures high-growth opportunities. The company’s ability to integrate its own batteries and PCS gives it a cost advantage and quality control edge.
* Catalyst: Continued market share gains in the global utility-scale storage market; margin expansion from higher-value integrated solutions.

Narada Power Source (300068.SZ)
* Investment Logic: Narada has successfully pivoted from traditional lead-acid batteries to becoming a major player in lithium-ion energy storage. With the domestic storage tender market growing 85% YoY, Narada’s order book is likely to swell. The company’s focus on communication base station backup and grid-side storage provides diverse revenue streams. The recent price increase in storage systems directly boosts its top-line and bottom-line potential.
* Catalyst: Large-scale contract wins in domestic EPC tenders; expansion of overseas storage projects.

Tongrun Equipment (002150.SZ)
* Investment Logic: Tongrun benefits from the broader electrification and grid modernization trend. Its products are essential for the safe and efficient operation of both PV and storage systems. As the installed base grows, the aftermarket and replacement demand also increases, providing a recurring revenue stream.
* Catalyst: Growth in domestic grid investment; penetration into high-voltage DC applications.

Huashengchang (002980.SZ)
* Investment Logic: As a provider of test and measurement instruments, Huashengchang operates in a niche but critical segment. The increasing complexity of PV modules (TOPCon, HJT) and battery packs requires more sophisticated testing equipment. This company offers a "pick-and-shovel" play on the industry’s technological upgrade, with less exposure to direct commodity price volatility.
* Catalyst: Adoption of new testing standards; expansion into battery testing lines.

Sofar Solar (301658.SZ)
* Investment Logic: Sofar Solar is a agile player in the inverter market, with a strong focus on residential and commercial & industrial (C&I) segments. Its rapid growth in emerging markets, particularly Australia and Latin America, positions it well to capture the diversification trend. The company’s lightweight asset model allows for quick adaptation to market changes.
* Catalyst: Success in penetrating the Australian residential market; launch of new hybrid inverter models.

4. Long-Term Structural View

Beyond the immediate 6-12 month horizon, the structural drivers for the Power Equipment sector remain compelling:

• Grid Parity and Beyond: PV and wind are now the cheapest sources of new electricity generation in most parts of the world. The challenge has shifted from generation cost to integration cost. This makes energy storage not just an optional add-on, but a critical infrastructure component. The "Storage +" model will become the standard for new renewable projects.
• Technological Iteration: The industry is moving towards higher efficiency (N-type cells, large-format modules) and longer duration storage (flow batteries, compressed air, advanced LFP). Companies that invest in R&D today will define the competitive landscape of tomorrow.
• Global Electrification: The electrification of transport, heating, and industry will continue to drive electricity demand growth, necessitating massive expansions in generation and grid infrastructure. China’s supply chain is uniquely positioned to meet this global demand efficiently.

Conclusion

The October 2025 data serves as a confirmation of the sector’s resilience and evolving dynamics. The narrative of "overcapacity leading to inevitable collapse" is being replaced by a more nuanced view of "consolidation, stabilization, and structural growth in storage."

For institutional investors, the current environment offers a favorable risk-reward profile. The downside is limited by the cash-cost support of prices and the strategic importance of the sector, while the upside is driven by the unexpected strength in energy storage demand and the emergence of new geographic markets. We advise investors to accumulate positions in high-quality leaders with strong storage exposure and diversified global footprints, while remaining vigilant about trade policy developments and inventory levels in key export markets.

The shift from a pure PV-driven cycle to a dual-engine PV-Storage cycle marks a new chapter for the Chinese new energy industry. Those who adapt to this shift, focusing on system integration, grid services, and emerging market penetration, will deliver superior returns in the coming years.

Appendix: Data Sources and Methodology

• Production Data: Sourced from Shanghai Metals Market (SMM) for PV modules and TD Insight (Big Dong Era Think Tank) for lithium batteries. These are industry-standard proxies for supply side activity.
• Price Data: Sourced from InfoLink Consulting for PV supply chain components and China Energy Storage Alliance (CESA) for storage system bids. These reflect actual transaction and bidding trends.
• Demand Data: Domestic installation data from the National Energy Administration (NEA); Export data from the General Administration of Customs of China. These are official government statistics, ensuring high reliability.
• Financial Data: Company-specific financials and valuations are based on public filings and consensus estimates as of the report date.

Disclaimer:
This report is prepared by Ajian 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. 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.