Photovoltaic Industry Weekly Report: Policy Catalysts and Supply-Side Discipline Drive Positive Expectation Gap

Date: November 8, 2025
Sector: Renewable Energy / Photovoltaics (PV)
Rating: Overweight (Maintained)
Analyst: Yang Shuaibo (SAC No. S1340524070002)
Source: China Post Securities Research Institute

Executive Summary

The Chinese photovoltaic (PV) sector is currently navigating a pivotal transition phase characterized by a widening expectation gap between supply-side constraints and emerging demand catalysts. We maintain an Overweight rating on the industry, driven by two primary structural shifts: the intensifying implementation of "anti-involution" (supply-side discipline) policies and the formal submission of China’s Updated Nationally Determined Contributions (NDC 3.0) for 2035.

While short-term installation data reflects a post-surge correction following the May 31st deadline associated with Document No. 136, the long-term trajectory remains robust. Year-to-date (YTD) installations through September 2025 reached 240.3 GW, representing a year-on-year increase of 49.3%, with a high utilization rate of 95%. We project full-year 2025 installations to reach approximately 300 GW, supported by the gradual optimization of mechanism-based electricity pricing models. Furthermore, the share of wind and solar power in total generation is expected to exceed 20% for the full year, underscoring China’s decisive role as an action-oriented leader in global energy transition.

From a valuation perspective, integrated module manufacturers are positioned to benefit most from the anticipated improvement in demand visibility and supply rationalization. We recommend investors focus on leading integrated players such as LONGi Green Energy and JinkoSolar, whose market positions are strengthened by technological leadership and scale advantages amidst industry consolidation.

Key Takeaways

1. Macro-Policy Catalyst: China’s NDC 3.0 Submission Signals Accelerated Demand

On November 3, 2025, China formally submitted its updated 2035 Nationally Determined Contributions (NDC 3.0). This move is not merely procedural but signifies a concrete commitment to accelerating the energy transition. As a proactive actor in global climate governance, China’s policy stance serves as a strong signal to domestic and international markets that renewable energy deployment will remain a top priority.

• Implication: The submission reduces policy uncertainty and provides a clear long-term roadmap for capacity expansion. It suggests that demand improvements may arrive earlier than previously consensus-expected, creating a positive expectation gap in the market.
• Strategic Shift: The government’s emphasis on "action" rather than just targets implies stronger enforcement of green energy mandates and potentially accelerated grid infrastructure investments to accommodate higher renewable penetration.

2. Supply-Side Discipline: The "Anti-Involution" Framework Takes Shape

The industry has been plagued by excessive competition ("involution"), leading to price wars and margin compression across the value chain. Recent policy directives aimed at curbing this trend are gaining traction.

• Policy Mechanism: Discussions regarding storage and procurement policies to stabilize prices are ongoing. While specific implementation details are still being finalized, the directional intent is clear: to prevent irrational low-price bidding and encourage healthy profit margins for sustainable R&D and manufacturing.
• Market Impact: Although the immediate impact on silicon material prices has been limited due to downstream resistance, the medium-term effect is expected to be a stabilization of prices and a reduction in inefficient capacity. This supply-side clearing is crucial for restoring profitability across the产业链 (industry chain).

3. Installation Dynamics: Post-Surge Normalization and Full-Year Outlook

Installation data for 2025 exhibits a typical "front-loaded" pattern, influenced by regulatory deadlines.

• YTD Performance: From January to September 2025, cumulative new installed capacity reached 240.3 GW, a significant 49.3% year-on-year growth. The utilization rate remained high at 95%, indicating that the grid is effectively absorbing the added capacity.
• Monthly Volatility: The rush to install before the May 31st deadline (mandated by Document No. 136) led to a spike in April-May installations. Consequently, September installations dropped to 9.7 GW, a 53.8% year-on-year decline. This drop is largely technical and seasonal, reflecting the pull-forward of demand rather than a fundamental weakening.
• Full-Year Forecast: Despite the September dip, we maintain our forecast for 300 GW of new installations in 2025. The adaptation to mechanism-based electricity pricing is progressing, which should support steady additions in Q4.

4. Price Trends: Stabilization Amidst Cost Support and Weak Downstream Power

Prices across the PV value chain show mixed signals, with upstream costs providing a floor while downstream demand limits upward mobility.

• Polysilicon: Prices remain under discussion regarding storage policies. Actual transaction prices have seen limited rebound strength as downstream manufacturers are unable to absorb higher costs. The consensus is for prices to remain stable in the short term, with significant upside unlikely until demand visibly accelerates.
• Wafers: Transaction prices are showing signs of loosening and differentiation, with actual deals trending toward the lower end of the range. However, cost support from polysilicon prevents a freefall. Stability is expected in the near term.
• Cells: Average prices for 183N, 210RN, and 210N cells are RMB 0.305/W, RMB 0.28/W, and RMB 0.30/W respectively. We expect these to stabilize as demand picks up.
• Modules: Overall module prices are stable. Notably, recent centralized procurement projects have shown demand for 700W+ high-power modules, with quotes ranging from RMB 0.72-0.75/W. We expect Q4 module prices to remain generally stable.

5. Profitability Analysis: Margin Pressure Persists but Differentiates by Technology

An analysis of gross margins reveals the intense pressure on manufacturers, particularly in the wafer segment, while module margins remain thin but positive for efficient technologies.

• Insight: The wafer segment is currently experiencing significant losses, which may accelerate capacity exit or utilization cuts among smaller players. TOPCon modules maintain a slight positive margin, demonstrating their current cost-effectiveness dominance. HJT modules are currently facing margin challenges, likely due to higher non-silicon costs and lower scale economies compared to TOPCon.

Detailed Market Analysis

1. Sector Performance and Valuation Context

The PV sector has demonstrated resilience in recent trading sessions, with core beneficiaries of the policy narrative outperforming. The week ending November 8, 2025, saw broad-based gains across the supply chain, reflecting investor optimism surrounding the NDC 3.0 submission and supply-side reforms.

Weekly Performance Highlights (Nov 1 - Nov 8, 2025)

Data Source: iFind, China Post Securities Research Institute

The outperformance in the inverter and module segments suggests that investors are favoring companies with stronger brand equity, global distribution networks, and exposure to higher-margin overseas markets or integrated solutions. The significant rise in TBEA warrants further monitoring for company-specific drivers, but the broader sector trend is one of cautious optimism.

2. Supply Chain Price Dynamics: A Deep Dive

The pricing environment remains the critical variable for earnings recovery. Our analysis of the latest data from InfoLink and Solarzoom indicates a market in equilibrium, albeit at low profitability levels.

Polysilicon: The Bottleneck of Rationalization

• Current State: Polysilicon prices are hovering around RMB 52/kg (dense material). The market is actively discussing "anti-involution" storage policies. However, the actual implementation details are pending.
• Constraint: Downstream wafer and cell makers are operating on thin or negative margins, limiting their ability to accept higher silicon prices. This creates a ceiling on potential price rebounds.
• Outlook: We expect prices to remain stable in the short term. A significant uptick requires either a substantial cut in upstream production capacity or a surge in downstream demand that absorbs existing inventory.

Wafers: Fragmentation and Cost Support

• Price Trend: N-type wafer prices are showing divergence. While listed prices may appear stable, actual transaction prices are drifting toward the lower end of the band. For instance, 210mm N-type wafers saw a slight decline of 1.2% to RMB 1.68/piece.
• Cost Floor: The cost of polysilicon provides a hard floor for wafer prices. Manufacturers cannot sustain prices below cash cost for extended periods.
• Outlook: Stability is the base case. The negative gross margins (-18% for 210R wafers) are unsustainable and will likely force smaller, less efficient producers to reduce utilization rates, thereby supporting prices indirectly.

Cells: N-Type Dominance and Price Stabilization

• Technology Mix: TOPCon continues to dominate the mainstream market. HJT is gaining traction but faces cost hurdles.
• Pricing:
  • TOPCon 182mm: ~RMB 0.305/W
  • TOPCon 210mm: ~RMB 0.30/W
  • HJT 210mm: ~RMB 0.39/W (Cell level)
• Margin Profile: TOPCon cells are currently generating slight negative gross profits (-RMB 0.047/W), while HJT cells are marginally positive (+RMB 0.011/W). This inversion highlights the maturity of the TOPCon supply chain and the premium still commanded by HJT efficiency, though HJT module assembly costs remain high.
• Outlook: Cell prices are expected to stabilize as demand recovers in Q4. The spread between TOPCon and HJT may narrow as HJT scales up and reduces non-silicon costs.

Modules: The End-Market Reality

• Standard Products: TOPCon dual-glass modules are trading around RMB 0.693/W (average). Distributed project modules command a slight premium at RMB 0.70/W.
• High-Power Premium: There is a distinct trend towards 700W+ high-power modules in centralized procurement. Quotes for these advanced products range from RMB 0.72-0.75/W. This indicates that the market is willing to pay for efficiency and lower balance-of-system (BOS) costs, favoring technologically advanced manufacturers.
• BC Technology: Back Contact (BC) modules are priced significantly higher (RMB 0.76-0.80/W), targeting niche high-efficiency segments.
• Outlook: Q4 prices are expected to remain stable. The lack of aggressive price cuts suggests that manufacturers are prioritizing margin preservation over market share expansion, aligning with the "anti-involution" policy spirit.

3. Installation and Grid Integration: Beyond the Headlines

The headline number of 240.3 GW installed in the first nine months of 2025 is impressive, but the context is crucial for understanding future growth.

The "Document No. 136" Effect

The surge in installations in April and May was driven by the deadline set by Document No. 136 (May 31st cutoff). This regulatory artifact created a temporary distortion in the monthly data.
* September Correction: The 53.8% year-on-year drop in September installations to 9.7 GW is a direct consequence of this pull-forward. It does not indicate a collapse in demand but rather a normalization after an exceptional peak.
* Q4 Outlook: With the regulatory deadline passed, installation rhythms are returning to a more organic pattern. The adaptation to mechanism-based electricity pricing (market-oriented pricing rather than fixed feed-in tariffs) is a key driver for Q4. As developers and utilities become more adept at navigating this new pricing regime, project economics are stabilizing, supporting continued deployment.

Grid Absorption and Utilization

A critical metric for the sustainability of PV growth is the utilization rate (curtailment rate inverse).
* Current Rate: The national PV utilization rate stands at 95%. This is a healthy figure, indicating that only 5% of generated power is curtailed.
* Implication: The grid is successfully integrating high volumes of renewable energy. This alleviates concerns about severe curtailment risks that often plague rapid expansion phases. Continued investment in grid infrastructure, energy storage, and flexible dispatch capabilities will be essential to maintain this rate as the share of renewables grows.

Share of Wind and Solar in Total Generation

• Projection: The combined share of wind and solar power in China’s total electricity generation is projected to exceed 20% in 2025.
• Significance: Crossing the 20% threshold is a symbolic and practical milestone. It marks the transition of renewables from a supplementary source to a pillar of the national energy mix. This structural shift reinforces the long-term demand for PV equipment and services, independent of short-term policy fluctuations.

Investment Logic and Recommendations

Our investment thesis is built on the convergence of supply-side discipline and demand-side certainty.

1. The Expectation Gap

The market has largely priced in the pain of overcapacity and price wars. However, it has not fully accounted for the speed and effectiveness of the "anti-involution" policies nor the bullish implication of China’s NDC 3.0 submission.
* Supply Side: The push to eliminate inefficient capacity and stop predatory pricing is reducing the downside risk for earnings.
* Demand Side: NDC 3.0 provides a multi-year visibility window, de-risking long-term revenue projections for leading manufacturers.

2. Preferred Strategy: Focus on Integrated Leaders

In a consolidating market, scale, technology, and vertical integration are key defensive and offensive moats.
* Integrated Module Makers: Companies that control multiple stages of the value chain (from ingot/wafer to module) can better manage costs and capture margins at the most profitable nodes. They are also better positioned to navigate trade barriers and meet diverse global customer requirements.
* Technological Leadership: Leaders in N-type TOPCon and emerging BC/HJT technologies will command premiums in high-efficiency segments.

3. Top Picks

LONGi Green Energy (601012.SH)

• Rating: Unrated (Consensus Estimate)
• Market Cap: RMB 170.0 Billion
• Current Price: RMB 22.4
• Investment Thesis: As the global leader in monocrystalline silicon and modules, LONGi benefits from immense scale and brand recognition. Its aggressive rollout of HPBC (Hybrid Passivated Back Contact) technology positions it well for the high-efficiency premium segment. The company’s strong balance sheet allows it to weather the current margin compression better than smaller peers.
• Valuation: 2025E EPS is estimated at -RMB 0.5, turning positive to RMB 0.4 in 2026E. The stock is trading at a forward P/E of ~52x based on 2026 estimates, reflecting expectations of a strong earnings recovery.

JinkoSolar (688223.SH)

• Rating: Unrated (Consensus Estimate)
• Market Cap: RMB 63.1 Billion
• Current Price: RMB 6.3
• Investment Thesis: JinkoSolar has been a first-mover in N-type TOPCon mass production, giving it a cost and efficiency advantage. Its global distribution network is robust, allowing it to capture higher-margin opportunities in overseas markets. The company’s consistent shipment growth and technological edge make it a top pick for exposure to the module segment’s recovery.
• Valuation: 2025E EPS is estimated at -RMB 0.2, improving to RMB 0.2 in 2026E. Forward P/E of ~29x (2026E) offers a reasonable entry point for a growth leader.

Other Notable Mentions:

• Trina Solar (688599.SH): Strong in utility-scale projects and vertex module technology.
• JA Solar (002459.SZ): Vertically integrated player with solid execution capabilities.
• Sungrow Power (300274.SZ): While not a module maker, its dominance in inverters and energy storage systems makes it a critical beneficiary of overall PV installation growth, with higher visibility on margins.

4. Valuation Table: Key Peers

Note: Earnings forecasts are based on iFinD consensus estimates. NA denotes not applicable due to negative earnings.

Risks / Headwinds

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

1. Policy Volatility (Domestic and International)

• Domestic: Changes in subsidy mechanisms, grid connection rules, or land use policies could impact project economics.
• International: Trade barriers, tariffs (e.g., from the US, EU, or India), and local content requirements pose significant risks to export-oriented manufacturers. Geopolitical tensions could disrupt supply chains or market access.

2. Demand Miss

• Macroeconomic Factors: A global economic slowdown could reduce capital expenditure on renewable energy projects.
• Interest Rates: High interest rates increase the cost of financing for solar projects, potentially delaying or canceling developments.
• Grid Constraints: If grid infrastructure upgrades lag behind installation rates, curtailment rates could rise, negatively impacting project returns and future demand.

3. Technological Disruption

• Route Uncertainty: The rapid evolution of PV technology (e.g., TOPCon vs. HJT vs. BC vs. Perovskite) carries execution risk. Companies that bet on the wrong technology or fail to scale new innovations efficiently may lose market share.
• Efficiency Gains: Slower-than-expected improvements in cell efficiency could delay the replacement cycle for older modules.

4. Supply Chain Price Volatility

• Raw Materials: Fluctuations in the prices of polysilicon, silver paste, glass, and other materials can squeeze margins. While current trends are stable, unexpected supply shocks (e.g., energy shortages in producing regions) could disrupt this balance.
• Inventory Write-downs: Rapid price declines can lead to significant inventory write-downs for manufacturers holding high-cost stock.

5. Intensified Competition

• New Entrants: Despite "anti-involution" policies, the allure of the energy transition may attract new capital and competitors, particularly in emerging technology segments.
• Price Wars: If supply-side discipline fails to hold, manufacturers may revert to aggressive pricing to maintain cash flow, eroding industry-wide profitability.

Rating / Sector Outlook

Sector Rating: Overweight (Maintained)

We believe the PV sector is at an inflection point. The combination of policy-driven supply rationalization and robust long-term demand fundamentals (anchored by NDC 3.0) creates a favorable risk-reward profile. The recent market correction and low valuations provide an attractive entry point for long-term investors.

Investment View

1. Short-Term (1-3 Months): Expect volatility as the market digests Q3 earnings and the initial impact of September’s installation dip. However, policy announcements regarding "anti-involution" measures could provide tactical trading opportunities.
2. Medium-Term (6-12 Months): As the effects of supply-side clearing become evident and Q4 installation data confirms the resilience of demand, we anticipate a re-rating of leading stocks. Margin recovery in the module and inverter segments should drive earnings beats.
3. Long-Term (1-3 Years): The structural growth story remains intact. China’s commitment to carbon neutrality and the global energy transition will drive sustained demand. Companies with technological leadership, global diversification, and strong balance sheets will emerge as clear winners, capturing disproportionate market share and profitability.

Strategic Allocation Advice

• Core Holdings: Allocate to integrated module leaders (LONGi, JinkoSolar) and inverter giants (Sungrow) for stable exposure to sector growth.
• Satellite Positions: Consider selective exposure to high-growth niches such as HJT equipment suppliers or energy storage integrators for higher beta returns.
• Avoid: Smaller, pure-play manufacturers with high debt levels and no distinct technological advantage, as they are most vulnerable to consolidation and margin pressure.

Appendix: Data Sources and Methodology

• Installation Data: National Energy Administration (NEA) of China.
• Price Data: InfoLink Consulting, Solarzoom.
• Financial Estimates: iFinD Consensus Estimates.
• Policy Documents: China’s Updated Nationally Determined Contributions (NDC 3.0), Document No. 136.
• Market Data: iFind, China Post Securities Research Institute.

Analyst Certification

The analyst(s) responsible for this report certifies that all views expressed herein accurately reflect their personal views about the subject securities or issuers. No part of the analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

Disclaimer

This report is prepared by China Post Securities Co., Ltd. for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. The information contained herein is derived from sources believed to be reliable, but China Post Securities does not guarantee its accuracy or completeness. Investors should conduct their own independent research and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.

Deep Dive: Structural Changes in the PV Industry Landscape

To provide a more comprehensive understanding for institutional investors, we delve deeper into the structural changes reshaping the industry, moving beyond the weekly data points.

1. The Evolution of "Anti-Involution" Policies

The term "involution" (neijuan) in the Chinese PV context refers to a state of intense, often destructive, competition where companies compete primarily on price rather than innovation or quality, leading to diminished returns for all participants. The government’s intervention is not a return to central planning but a regulatory framework to ensure market health.

• Mechanism: The proposed "storage and procurement" policies aim to create a buffer against price crashes. By encouraging or mandating the storage of excess production during periods of oversupply, the policy seeks to smooth out price volatility.
• Industry Self-Discipline: Leading industry associations are also playing a role, setting guidelines for minimum bidding prices and ethical competition standards. This collective action is crucial for restoring investor confidence.
• Impact on CapEx: We expect to see a slowdown in new capacity announcements, particularly from second-tier players. Capital expenditure will likely shift from expansion to technological upgrading and efficiency improvements.

2. The Role of NDC 3.0 in Global Context

China’s submission of NDC 3.0 is a significant geopolitical and economic signal.

• Global Leadership: At a time when some developed nations are facing political headwinds on climate policy, China’s steadfast commitment reinforces its position as a leader in the green economy. This enhances the soft power of Chinese PV technology globally.
• Domestic Mandate: The NDC targets will be translated into provincial and local government quotas. This creates a bottom-up demand driver that is less susceptible to short-term economic cycles. Local governments will be incentivized to approve and facilitate PV projects to meet their contribution targets.
• Integration with Other Policies: NDC 3.0 aligns with the "Dual Carbon" goals (Peak Carbon by 2030, Carbon Neutrality by 2060). It also complements policies promoting electric vehicles (EVs) and green hydrogen, creating a synergistic ecosystem for renewable energy consumption.

3. Technological Trajectory: The N-Type Transition

The industry is in the midst of a definitive shift from P-type (PERC) to N-type technologies (TOPCon, HJT, BC).

• TOPCon as the Workhorse: TOPCon has emerged as the dominant mainstream technology due to its compatibility with existing PERC production lines (lower retrofitting costs) and superior efficiency. Its market share is expected to continue growing in 2025 and 2026.
• HJT’s Niche Potential: HJT offers higher efficiency potential and lower temperature coefficients, making it ideal for hot climates and space-constrained installations. However, its higher capital expenditure and silver paste consumption remain hurdles. Innovations in copper plating and thin-film deposition are critical for HJT’s cost competitiveness.
• BC Technology: Back Contact technology, championed by LONGi and others, eliminates front-side busbars, maximizing light absorption. It is particularly suited for the distributed residential and commercial markets where aesthetics and high efficiency are valued.
• Investment Implication: Investors should favor companies with a balanced portfolio of technologies or a clear leadership position in one specific high-growth segment. Diversification reduces the risk of technological obsolescence.

4. Grid Integration and the Rise of Storage

The high utilization rate of 95% is a testament to the grid’s current capacity, but this will be tested as the 20% generation share threshold is crossed and exceeded.

• Mandatory Storage: Many provinces are implementing policies requiring new PV projects to include a certain percentage of energy storage capacity (e.g., 10-20% of capacity for 2-4 hours). This drives demand for battery systems and integrates the PV and storage sectors.
• Virtual Power Plants (VPPs): The development of VPPs allows aggregated distributed PV and storage resources to participate in grid balancing and electricity markets. This creates new revenue streams for asset owners and enhances grid stability.
• Market-Oriented Pricing: The shift to mechanism-based electricity pricing means that PV generators will increasingly be exposed to real-time spot prices. This favors assets paired with storage, which can arbitrage price differences by storing energy when prices are low (or negative) and discharging when prices are high.

5. Global Supply Chain Resilience

The PV supply chain is highly concentrated in China, which poses both efficiency advantages and geopolitical risks.

• Diversification Efforts: Chinese manufacturers are expanding production capacity in Southeast Asia, the Middle East, and even the US and Europe to mitigate trade risks and serve local markets. This "global local" strategy is becoming a key differentiator.
• Supply Chain Security: Ensuring the security of raw materials like polysilicon and quartz sand is critical. Vertical integration helps companies control these inputs and reduce vulnerability to external shocks.

Conclusion

The Chinese photovoltaic industry is emerging from a period of intense adjustment into a phase of structured growth. The convergence of supply-side discipline and robust policy support via NDC 3.0 creates a compelling investment case. While short-term data may show volatility, the long-term fundamentals are stronger than ever.

Investors should look beyond the headline installation numbers and focus on the quality of earnings, technological leadership, and global market positioning. Integrated leaders like LONGi Green Energy and JinkoSolar are well-positioned to capitalize on this next phase of industry evolution. We maintain our Overweight rating and encourage investors to accumulate positions on dips, viewing the current environment as a strategic entry point for long-term exposure to the global energy transition.

End of Report