Photovoltaic Industry Weekly Report: Policy Tailwinds and Supply-Side Reform Drive Sector Recovery

Date: March 23, 2026
Sector: Power Equipment / Photovoltaics (PV)
Rating: Overweight (Positive)
Analyst: Zhang Xinyi (S1490522090001)
Source: Guoxin Securities Market Research Department

Executive Summary

The Chinese photovoltaic (PV) sector is currently navigating a critical inflection point characterized by policy-driven supply-side consolidation and stabilizing demand fundamentals. For the week ended March 20, 2026, the PV equipment index (Shenwan) demonstrated relative resilience, declining only 0.16% compared to a broader market correction where the CSI 300 fell 2.19%. This outperformance underscores the market’s growing confidence in the sector’s structural recovery, supported by explicit government interventions aimed at curbing irrational competition and promoting high-quality development.

Our analysis highlights three primary drivers for maintaining an Overweight rating on the sector:
1. Supply-Side Discipline: The National Development and Reform Commission (NDRC) has explicitly identified the need to halt price declines in key materials like polysilicon and wafers, signaling a shift from volume-centric growth to value-centric stability.
2. Fiscal & Regulatory Support: The Ministry of Finance’s commitment to "more active fiscal policies" in 2026, specifically targeting renewable energy infrastructure, alongside new efficiency standards for grid-connected transformers, creates a favorable macro environment.
3. Profitability Restoration: As upstream prices stabilize and inefficient capacity is cleared, leading enterprises are positioned to benefit from margin expansion. We advise investors to focus on polysilicon leaders, module integrators with strong brand equity, and companies pioneering next-generation technologies.

While short-term volatility persists due to raw material price fluctuations and potential trade friction, the long-term investment thesis remains robust, driven by the global energy transition and China’s strategic imperative to lead in green technology.

Key Takeaways

1. Market Performance: Relative Resilience Amidst Broad Correction

During the reporting period (March 16–20, 2026), the broader A-share market experienced a downturn, with the CSI 300 Index decreasing by 2.19%. Within the Shenwan industry classification, only two out of 31 sectors posted gains. The Power Equipment Index fell by 3.06%, ranking 10th among all sectors and underperforming the CSI 300 by 0.87 percentage points (pct).

However, a deeper dive into the secondary industries within Power Equipment reveals a divergent trend favoring photovoltaics:

Data Source: Wind, Guoxin Securities

The PV equipment sector’s minimal decline (-0.16%) amidst significant drops in wind (-7.29%) and grid equipment (-7.54%) suggests that capital is rotating into PV assets perceived as having clearer near-term catalysts.

Top Performers (Weekly Gainers):
* Ginlong Technologies (Jinlang Technology)
* Mubang High-Tech
* Sineng Electric
* YN Energy (Yuneng Technology)
* Hoymiles Power

Laggards (Weekly Decliners):
* Shuangliang Eco-Energy
* Lianhong New Materials
* Gaoce Shares
* DR Laser
* Hengdian Group DMEGC Magnetics

The outperformance of inverter and module-related stocks (e.g., Ginlong, Sineng, Hoymiles) indicates investor preference for segments with quicker cash flow conversion and exposure to distributed generation markets, whereas material-heavy or equipment-intensive firms faced greater pressure.

2. Upstream Price Dynamics: Stabilization Signals Emerge

Price trends in the PV supply chain are showing early signs of bottoming out, a crucial prerequisite for margin recovery across the value chain. According to data from Datayes as of March 18, 2026:

Polysilicon & Wafer Segment

• Polysilicon: The transaction price stood at CNY 43/kg, a decrease of CNY 3/kg week-on-week. While still declining, the rate of decrease is moderating. This segment remains the focal point of regulatory attention regarding "involutionary" (cut-throat) competition.
• Silicon Wafers: The transaction price remained flat at CNY 1.15/piece. The stabilization of wafer prices, despite the drop in polysilicon costs, suggests that wafer manufacturers are beginning to retain some margin improvement rather than passing all cost savings downstream immediately. This is a positive indicator for wafer producers' profitability.

Cell & Module Segment

• Solar Cells: The transaction price was CNY 0.41/W, down by CNY 0.01/W week-on-week. The marginal decline indicates that cell makers are facing slight pressure but are largely holding pricing power relative to upstream cost drops.
• Modules: The transaction price held steady at CNY 0.84/W. The stability in module pricing is significant. It implies that downstream demand is absorbing supply without forcing drastic price cuts, allowing module integrators to potentially expand gross margins as input costs (polysilicon/cells) soften or stabilize.

Auxiliary Materials

• Photovoltaic Glass: Prices for 3.2mm and 2mm glass remained unchanged at CNY 17/sqm and CNY 10/sqm, respectively. Stable glass prices reflect a balanced supply-demand dynamic in this auxiliary segment.
• Silver Paste: The price dropped significantly by 15.1% to CNY 18,920/kg. This substantial decline is a major tailwind for cell and module manufacturers, as silver paste constitutes a significant portion of non-silicon costs. A 15% reduction in silver paste costs directly enhances the net profit per watt for downstream producers, assuming module prices remain stable.

Analytical Insight:
The divergence between falling raw material costs (polysilicon, silver paste) and stable finished goods prices (wafers, modules) creates a "Scissors Difference" effect. This dynamic is historically bullish for mid-to-downstream manufacturers’ margins. The key risk remains whether polysilicon prices will stabilize completely; if they continue to plummet, it may signal persistent oversupply, but the current flattening in wafers and modules suggests the market is finding an equilibrium.

3. Policy Catalysts: A Multi-Pronged Support Framework

The week witnessed significant policy announcements from three major governmental bodies—the Ministry of Industry and Information Technology (MIIT), the Ministry of Finance (MOF), and the NDRC. These policies collectively address efficiency, fiscal support, and market order.

A. MIIT & Four Departments: Enhancing Grid Compatibility and Efficiency

On March 20, the MIIT, National Development and Reform Commission (NDRC), State-owned Assets Supervision and Administration Commission (SASAC), and National Energy Administration (NEA) jointly issued the "Implementation Plan for High-Quality Development of Energy-Saving Equipment (2026–2028)."

Key Provisions:
* Target: By 2028, key materials and components for energy-saving equipment will achieve breakthroughs. The market share of energy-saving equipment will increase significantly.
* Transformer Efficiency: The plan mandates that energy efficiency levels for motors and transformers reach international leadership standards. Specifically, it promotes the R&D and application of:
* Ultra-high-efficiency transformer silicon steel sheets and amorphous alloy strips.
* High-conductivity materials and high-performance insulation.
* Advanced transformer types: Efficient silicon steel立体卷铁心 (three-dimensional wound core) transformers, large-capacity amorphous alloy transformers, eco-friendly insulated oil transformers, and solid-state/flexible DC transformers.
* Renewable Integration: A specific clause calls for improving the energy efficiency and system adaptability of transformers in wind, PV, hydrogen, and new energy storage sectors.
* Adoption Targets: By 2028, new energy-saving transformers must account for over 75% of additions, and the proportion of in-service energy-saving transformers should reach 15%.

Investment Implication:
This policy directly benefits manufacturers of high-end magnetic materials (silicon steel, amorphous alloys) and advanced transformer OEMs. For the PV sector, it reduces grid curtailment risks by improving the technical compatibility of renewable energy inputs with the grid. Companies specializing in high-efficiency power electronics and grid-forming inverters may see increased demand as grid operators upgrade infrastructure to meet these new standards.

B. Ministry of Finance: Aggressive Fiscal Support for Green Transition

On March 17, the MOF released the "Report on the Execution of China’s Fiscal Policy in 2025," outlining the strategy for 2026.

Key Provisions:
* Fiscal Stance: Continuation of "more active fiscal policies" with enhanced precision and effectiveness. The goal is to support the "15th Five-Year Plan" opening.
* Five Pillars of Action:
1. Expand fiscal expenditure to ensure necessary spending intensity.
2. Optimize government bond instruments to maximize efficacy.
3. Improve the efficiency of transfer payments to enhance local fiscal autonomy.
4. Optimize expenditure structure, prioritizing key areas.
5. Strengthen fiscal-financial coordination to stimulate micro-entity vitality.
* Green Focus: The report explicitly mentions accelerating comprehensive green transformation. Measures include:
* Supporting renewable energy development and accelerating the construction of a new energy system.
* Utilizing fiscal funds and green government procurement to drive low-carbon transitions.
* Continuing the issuance of Green Sovereign Bonds to attract international capital for domestic green development.

Investment Implication:
The explicit mention of "supporting renewable energy" and "Green Sovereign Bonds" provides a clear funding runway for large-scale PV and storage projects. This reduces the financing cost burden for project developers and ensures that government-backed projects will continue to drive demand. The emphasis on "precision" suggests that subsidies or support may be more targeted towards high-efficiency, technologically advanced projects rather than blanket capacity expansion.

C. NDRC: Curbing "Involutionary" Competition

In its report on the 2025 National Economic and Social Development Plan, the NDRC highlighted the success of measures taken to resolve structural contradictions in key industries.

Key Provisions:
* Anti-Involution Measures: The government has intensified efforts to rectify "disorderly and irrational competition" in new energy vehicles, photovoltaics, and power/energy storage batteries.
* Price Stabilization: Policies aim to regulate payment orders and strengthen product quality supervision, explicitly aiming to stop the decline and promote the rebound of prices for polysilicon, silicon wafers, and lithium carbonate.
* Capacity Control: Similar to the steel and petrochemical sectors, the PV industry is seeing a shift towards quality over quantity. The report notes that manufacturing profits rose by 5.0% in 2025, partly due to these corrective measures.

Investment Implication:
This is arguably the most critical signal for the PV sector. The NDRC’s acknowledgment of "involutionary" competition and its active role in stabilizing prices marks a regime change from laissez-faire expansion to managed consolidation. Investors should interpret this as a floor being placed under asset prices. Leading companies with superior cost structures and quality standards will benefit from the exit of inefficient, sub-scale competitors who can no longer survive in a regulated, price-stabilized environment.

Investment Logic & Strategy

Based on the convergence of market performance, price stabilization, and robust policy support, we maintain an Overweight rating on the Photovoltaic sector. Our investment framework focuses on three dimensions: Alpha from Technology, Beta from Demand/Policy, and Value from Consolidation.

1. Core Investment Thesis

A. Profitability Repair Driven by Supply-Side Reform

The era of unchecked capacity expansion is ending. The NDRC’s intervention to stop price declines in polysilicon and wafers, combined with the natural exit of high-cost producers, will restore healthy industry margins.
* Logic: As prices stabilize at rational levels, companies with lower all-in costs will see immediate earnings leverage. The stabilization of module prices (CNY 0.84/W) while input costs (silver paste, polysilicon) adjust downwards creates a temporary margin widening opportunity.
* Focus: Polysilicon leaders with lowest cash costs and integrated module manufacturers with strong balance sheets.

B. Alpha Opportunities from Technological Iteration

The MIIT’s push for higher efficiency and the market’s natural selection for higher yield technologies favor innovators.
* Logic: The transition to N-type cells (TOPCon, HJT, BC) continues. Companies that can deliver higher efficiency modules and better grid adaptability (as per the new transformer/inverter standards) will command premium pricing and market share.
* Focus: Enterprises with leading R&D in high-efficiency cells, advanced inverter technologies (especially those compatible with flexible DC grids), and specialized equipment manufacturers.

C. Beta Rally from Marginal Demand Changes

The Ministry of Finance’s commitment to active fiscal policy and green bonds ensures that demand visibility remains high.
* Logic: Government-backed projects, rural revitalization PV initiatives, and large-scale base projects will continue to absorb supply. The "Green Sovereign Bonds" may also open up new avenues for international project financing, boosting exports for Chinese PV firms.
* Focus: Component suppliers with strong overseas channels and domestic EPC (Engineering, Procurement, and Construction) leaders.

2. Strategic Recommendations

We recommend a barbell strategy:
1. Defensive Core: Allocate to Polysilicon and Module Leaders. These companies have survived the price war, have strong cash flows, and will benefit most from the consolidation of market share as smaller players exit. Their valuations are currently attractive relative to their normalized earnings power.
2. Offensive Growth: Allocate to Technology Leaders. Focus on companies involved in:
* Advanced Inverters: Benefiting from grid modernization and the MIIT’s transformer/efficiency mandates.
* High-Efficiency Cell Tech: Companies leading in TOPCon/HJT mass production yields.
* Auxiliary Material Innovators: Particularly those benefiting from the silver paste price dynamics or offering cost-reduction solutions.

3. Valuation Perspective

While specific P/E multiples were not provided in the source text, the sector’s recent underperformance relative to the broader market correction suggests that valuations have compressed. With the policy floor established by the NDRC and fiscal support confirmed by the MOF, the risk-reward ratio favors long-term accumulation. The stabilization of module prices at CNY 0.84/W provides a predictable revenue baseline for earnings modeling in 2026.

Risks / Headwinds

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

1. Raw Material Price Volatility

• Risk: While polysilicon prices have stabilized recently, any renewed oversupply or unexpected production ramp-ups could trigger another round of price wars. Conversely, a sharp rise in silver or copper prices could erode the margin benefits gained from stable module pricing.
• Impact: High volatility makes earnings forecasting difficult and may delay capital expenditure decisions by downstream developers.

2. Project Commencement Delays

• Risk: The report notes "project start-up below expectations" as a risk. Despite fiscal support, local government debt constraints or administrative bottlenecks could delay the actual construction and grid connection of planned PV farms.
• Impact: Delayed projects push revenue recognition into future periods, affecting short-term cash flows for equipment and module suppliers.

3. Intensifying Trade Frictions

• Risk: Global trade protectionism remains a significant threat. Potential tariffs or non-tariff barriers in key export markets (Europe, US, India) could disrupt the export channels of Chinese PV manufacturers.
• Impact: Given that many Chinese PV firms rely heavily on overseas markets for higher-margin sales, trade barriers could force them to compete more fiercely in the domestic market, reigniting price competition.

4. Policy Implementation Lag

• Risk: While the NDRC and MIIT have issued strong guidelines, the actual enforcement of capacity controls and efficiency standards may take time. There is a risk that local protections for inefficient factories could slow down the intended supply-side clearing.
• Impact: Prolonged presence of zombie capacity would delay the anticipated margin recovery for industry leaders.

Rating / Sector Outlook

Sector Rating: Overweight (Positive)

• Definition: Expected to outperform the market index by more than 5% in the next 6 months.
• Rationale: The combination of policy-driven supply discipline, stabilizing upstream prices, and continued fiscal support creates a conducive environment for sector recovery. The PV sector has demonstrated relative strength during recent market corrections, indicating institutional accumulation.

Outlook for Next 6 Months:
We expect the sector to transition from a "bottoming-out" phase to a "moderate recovery" phase. The first half of 2026 will likely be characterized by the gradual exit of inefficient capacity and the stabilization of prices. The second half may see accelerated earnings growth as the benefits of supply-side reform fully materialize in financial statements. Investors should monitor monthly installation data and polysilicon inventory levels as key leading indicators.

Investment View

The photovoltaic industry in March 2026 stands at a pivotal juncture. The narrative has shifted from one of "overcapacity crisis" to "structured recovery." The weekly performance data, showing PV equipment outperforming the broader market and other power sub-sectors, validates this shift in sentiment.

Why We Are Bullish:
1. Policy Put Option: The NDRC’s explicit intervention to stop price declines acts as a "put option" on industry profitability. It signals that the government views the health of the PV sector as strategically vital and will not allow destructive deflation to persist indefinitely.
2. Margin Expansion Mechanics: The current price structure—stable modules/cells vs. declining polysilicon/silver paste—is mechanically positive for downstream margins. This is a tangible, quantifiable driver for earnings upgrades in the coming quarters.
3. Technological Moat: The MIIT’s focus on efficiency and grid compatibility raises the barrier to entry. Companies that have invested in R&D for high-efficiency products and smart grid integration are now better positioned to capture value, while laggards face obsolescence.

Actionable Advice for Institutional Investors:
* Accumulate on Weakness: Use any short-term market dips to build positions in top-tier polysilicon and module manufacturers. These are the primary beneficiaries of consolidation.
* Monitor Silver Paste Trends: The 15% drop in silver paste prices is a significant cost tailwind. Look for companies that can quickly adjust their pricing strategies to capture this margin upside without losing market share.
* Diversify into Grid Tech: Consider exposure to companies involved in high-efficiency transformers and inverters, as they are direct beneficiaries of the MIIT’s 2026-2028 implementation plan. This offers a hedge against pure PV manufacturing cyclicality.

Conclusion:
The photovoltaic sector is no longer a speculative growth play but a maturing industry undergoing necessary structural cleansing. With strong policy backing and improving fundamentals, the risk-reward profile is favorable for long-oriented institutional capital. We recommend maintaining an Overweight position, focusing on quality leaders and technological innovators who are best equipped to thrive in the new, more disciplined market environment.

Disclaimer: This report is based on the "Photovoltaic Industry Weekly Report (20260316-20260320)" issued by Guoxin Securities Market Research Department on March 23, 2026. The information contained herein 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.