Photovoltaic Industry Weekly Report: Policy Tailwinds Strengthen as Prices Stabilize at Bottom

Date: October 20, 2025
Source: Guoxin Securities Market Research Department
Analyst: Zhang Xinyi (S1490522090001)
Rating: Overweight (Sector Outlook)

Executive Summary

The Chinese photovoltaic (PV) sector demonstrated resilience amidst broader market volatility during the week of October 13–17, 2025. While the broader Power Equipment index underperformed the CSI 300, the PV equipment sub-sector showed relative stability, with main chain prices holding firm across silicon, wafers, cells, and modules. This price stabilization, combined with significant policy developments from the National Energy Administration (NEA) and the National Development and Reform Commission (NDRC), suggests that the industry may have reached a cyclical bottom.

Key regulatory updates this week emphasize the deepening market-oriented reform of electricity pricing and the introduction of mandatory non-electric renewable energy consumption targets. These measures are designed to enhance the absorption capacity of renewable energy and create a more sustainable pricing mechanism for new projects, particularly in provinces like Hubei.

From an investment perspective, we maintain an Overweight rating on the PV sector. We believe the recent correction has priced in most near-term risks, creating an attractive entry point for institutional investors. Our strategy favors companies with high proportions of N-type product capacity and those leading in next-generation technologies such as perovskite. However, investors should remain vigilant regarding raw material price fluctuations, potential delays in project commencements, and escalating trade friction.

Key Takeaways

1. Market Performance: Relative Resilience Amidst Sector-Wide Correction

During the reporting period (October 13–17, 2025), the Chinese equity markets experienced a general downturn, with the benchmark CSI 300 Index declining by 2.22%. Among the 31 Shenwan industry indices, only four registered gains, indicating a risk-off sentiment among investors.

The Power Equipment Index (Shenwan) fell by 5.30%, ranking 24th out of 31 industries and underperforming the CSI 300 by 3.08 percentage points (pct). This underperformance was broad-based across secondary industries within the power equipment sector:

Analysis:
Notably, while the broader power equipment sector suffered heavy losses, the Photovoltaic Equipment index declined by only 2.05%, effectively outperforming the broader market index (CSI 300) by a marginal but significant 0.17 pct. This relative strength suggests that capital is beginning to differentiate within the sector, potentially recognizing the stabilizing fundamentals in the PV supply chain compared to other sub-sectors like wind and batteries, which faced steeper declines.

Individual Stock Performance:
* Top Performers: Tongwei Co., Ltd., Shuangliang Eco-Energy Systems Co., Ltd., LONGi Green Energy Technology Co., Ltd., Yubang New Material, and JA Solar Technology Co., Ltd. led the gains. The outperformance of integrated giants like LONGi and Tongwei, along with key material suppliers, indicates a preference for market leaders with strong balance sheets and technological moats.
* Laggards: GoodWe, Micro-Nano, Autowell, Ginlong Technologies, and Polymer Materials experienced the sharpest declines. The weakness in inverter and equipment-specific stocks may reflect concerns over short-term order visibility or profit margin compression in specific niches.

2. Supply Chain Dynamics: Price Stability Signals Market Bottoming

According to data from Datayes and Solarzoom, the main PV supply chain prices remained stable as of October 15, 2025. This horizontal price movement after a prolonged period of decline is a critical signal for industry health, suggesting that the intense price wars may be subsiding and that supply and demand are finding a new equilibrium.

Main Chain Price Analysis

Strategic Insight:
The stability in polysilicon, wafer, cell, and module prices is a positive development for earnings visibility. It allows manufacturers to plan production and manage inventory with greater confidence. However, the 15.4% surge in silver paste prices is a notable headwind. Silver constitutes a significant portion of non-silicon costs in cell production. This spike will likely accelerate industry adoption of:
1. Low-silver pastes: Optimizing paste formulation to reduce silver loading.
2. Copper plating technologies: A longer-term solution to eliminate silver dependency, benefiting equipment makers specializing in metallization tech.
3. N-type Efficiency Premiums: Higher efficiency cells (TOPCon/HJT) can amortize the higher silver cost over greater power output, reinforcing the competitive advantage of N-type products.

3. Policy Catalysts: Structural Reforms to Boost Demand and Absorption

This week witnessed three major policy announcements that fundamentally alter the demand landscape and revenue models for renewable energy in China. These policies shift the focus from pure capacity addition to consumption accountability and market-based pricing.

A. National Energy Administration (NEA): Full Market Integration for Renewable Energy

The NEA released a response to Proposal No. 05014 of the 14th National Committee of the Chinese People's Political Consultative Conference, outlining a clear roadmap for electricity market reforms.

• Core Directive: Promote the full entry of coal power and new energy (renewable) grid-connected electricity into the market. This marks a decisive move away from fixed feed-in tariffs towards market-determined prices.
• Market Construction: Accelerate the construction of medium-to-long term, spot, and ancillary service markets. Establish normalized cross-grid trading mechanisms.
• System Responsibility: Guide all market entities to fairly bear the responsibility of system regulation. This implies that renewable energy generators may need to pay for or provide grid stability services, impacting their net revenue but enhancing grid reliability.
• Standardization: Implement the "Action Plan for Improving Standards for Carbon Peaking and Carbon Neutrality in Energy" to strengthen the standard system for new power systems.

Investment Implication:
While market integration introduces price volatility for generators, it also removes the ceiling on revenue during peak demand periods. Companies with advanced forecasting capabilities, energy storage integration, and flexible generation assets will be better positioned to capture value in spot markets. This favors integrated players who can optimize across generation, storage, and trading.

B. National Development and Reform Commission (NDRC): Mandatory Non-Electric Renewable Consumption Targets

On October 13, the NDRC published the "Implementation Measures for Minimum Renewable Energy Consumption Ratio Targets and Renewable Energy Power Consumption Responsibility Weight System (Draft for Comments)." This is a landmark policy expanding the scope of renewable energy mandates beyond electricity.

Key Features of the New Framework:

1. Dual Target System:

   • Renewable Electricity Consumption Minimum Ratio: Applies to all renewable power generation types.
   • Non-Electric Renewable Consumption Minimum Ratio: A novel target covering renewable heating/cooling, hydrogen/ammonia/alcohol production from renewables, and biofuels.

2. Implementation Mechanism:

   • Annual Targets: Set by the State Council’s energy department and implemented by provincial authorities.
   • Compliance Pathways (Electricity): Self-generation, green power direct connection, and Green Certificate (GEC) trading.
   • Compliance Pathways (Non-Electric): Renewable heating/cooling projects, green hydrogen/ammonia/alcohol utilization, and biomass non-electric use.

3. Accountability and Penalties:

   • For Enterprises: Key energy-consuming industries failing to meet targets must supplement compliance via GEC trading within three months. Failure results in interviews, public notices, and inclusion in credit violation records.
   • For Provinces: Provincial administrations failing to meet consumption responsibility weights must supplement via GEC trading. Persistent failure leads to regulatory scrutiny. Weights cannot be carried over in the final year of the Five-Year Plan.

Investment Implication:
This policy creates a structural, policy-driven demand floor for renewable energy.
* Green Certificates (GECs): The explicit reliance on GECs for compliance will likely increase the liquidity and value of green certificates, providing an additional revenue stream for renewable generators.
* Green Hydrogen & Heating: The inclusion of non-electric consumption opens a massive new addressable market for renewable energy. Companies involved in green hydrogen production, electrolyzer manufacturing, and industrial heating electrification stand to benefit significantly. This diversifies the growth drivers beyond traditional solar farms.
* Industrial Demand: Heavy industries (steel, chemicals, cement) will be forced to procure renewable energy, supporting long-term Power Purchase Agreement (PPA) volumes.

C. Hubei Province: Sustainable Pricing Mechanism for New Energy

On October 17, the Hubei Provincial Development and Reform Commission issued the "Hubei Province New Energy Sustainable Development Price Settlement Mechanism Bidding Scheme."

• Scope: Applies to wind (including distributed) and centralized PV projects that achieve full capacity after June 1, 2025, or are scheduled to do so by December 31 of the following year, and have not previously been included in such mechanisms.
• Mechanism: Competitive bidding to determine the settlement price, aiming to balance investor returns with grid affordability.

Investment Implication:
Hubei’s scheme serves as a pilot for other provinces. It provides clarity on revenue expectations for new projects, reducing regulatory uncertainty. A transparent bidding mechanism allows developers to calculate internal rates of return (IRR) more accurately, potentially accelerating project approvals and construction starts in the region.

Risks / Headwinds

While the outlook is constructive, institutional investors must account for the following risks:

1. Raw Material Price Volatility:

   • Silver Paste Surge: The recent 15.4% weekly increase in silver paste prices directly impacts cell manufacturing costs. If silver prices continue to rise due to macroeconomic factors or industrial demand, margins for cell manufacturers could compress unless passed through to module prices or offset by technological efficiencies.
   • Polysilicon Instability: While currently stable, any unexpected supply disruptions or demand spikes could reignite price volatility, disrupting cost structures downstream.

2. Project Commencement Delays:

   • Despite policy support, actual project start-ups may lag due to financing constraints, land acquisition issues, or grid connection bottlenecks. If installation rates in Q4 2025 fall short of expectations, the anticipated demand recovery may be delayed, affecting equipment orders and revenue recognition for upstream suppliers.

3. Escalating Trade Friction:

   • Global trade tensions remain a significant overhang. Potential new tariffs or non-tariff barriers from the US, EU, or other key markets could restrict export volumes for Chinese PV manufacturers. Given the heavy reliance of some Chinese firms on overseas markets for higher-margin sales, any deterioration in trade relations could impact profitability and force a redirection of supply to the already competitive domestic market.

4. Market Pricing Risk:

   • The shift towards full market participation for renewable energy (as mandated by the NEA) introduces price volatility. During periods of low demand or high renewable output, spot prices could drop significantly, potentially hurting the revenues of generators without adequate hedging or storage capabilities.

Rating / Sector Outlook

Sector Rating: Overweight (Positive)

Rationale:
We maintain an Overweight rating on the Photovoltaic sector based on the convergence of three factors:
1. Valuation Bottom: The sector has undergone a significant correction, with valuations reflecting pessimistic assumptions about oversupply and margin compression. Current price stability suggests the bottom is in.
2. Policy Support: The NDRC’s new consumption targets and the NEA’s market reforms provide a robust policy framework that supports long-term demand and creates new revenue streams (GECs, non-electric applications).
3. Technological Leadership: Chinese PV companies continue to lead globally in N-type technology and cost efficiency. As the industry consolidates, leaders with superior technology and balance sheets will gain market share.

Definition of Rating:
* Overweight (Positive): Expected sector index performance to outperform the market index by more than 5% in the next 6 months.

Investment View

Strategic Allocation Recommendations

In light of the current market dynamics and policy environment, we recommend a differentiated investment strategy focusing on quality, technology, and new growth vectors.

1. Focus on N-Type Technology Leaders

The industry is rapidly transitioning from P-type (PERC) to N-type (TOPCon, HJT, BC) technologies. N-type cells offer higher efficiency and better temperature coefficients, commanding a premium in the market.
* Investment Logic: Companies with high proportions of N-type capacity will enjoy better margins and stronger demand. The stability in module prices allows these efficiency premiums to translate directly into profitability.
* Key Beneficiaries:
* LONGi Green Energy: As a top performer this week, LONGi’s strong brand and extensive N-type layout position it well. Its vertical integration helps mitigate supply chain risks.
* JA Solar & Tongwei: Both companies have aggressively expanded N-type capacity. Tongwei’s dominance in polysilicon provides a cost advantage, while JA Solar’s strong global distribution network supports sales volume.

2. Exposure to Next-Generation Technologies (Perovskite & Equipment)

Long-term growth will be driven by breakthroughs in efficiency limits. Perovskite tandem cells represent the next frontier.
* Investment Logic: Early movers in perovskite R&D and commercialization will capture significant value as the technology matures. Additionally, equipment manufacturers enabling these new processes (e.g., coating, laser patterning) will see order growth.
* Key Beneficiaries:
* Micro-Nano (Autowell/Micro-nano): Although stock performance was mixed, companies with proprietary equipment for HJT and perovskite lines are critical enablers of the next tech cycle.
* Shuangliang Eco-Energy: Recognized as a top gainer, its involvement in both polysilicon reduction equipment and new energy projects positions it favorably.

3. Beneficiaries of Non-Electric Renewable Policies

The NDRC’s inclusion of non-electric consumption targets creates a new thematic opportunity.
* Investment Logic: Look for companies involved in green hydrogen, industrial heating, and biomass. These sectors will receive policy-driven demand boosts.
* Key Areas:
* Electrolyzer Manufacturers: For green hydrogen production.
* Heat Pump & Industrial Heating Providers: For renewable heating/cooling mandates.

4. Resilient Integrated Players

In a market where pricing is becoming more volatile and trade barriers are rising, integrated companies with strong balance sheets and global diversification are safer bets.
* Investment Logic: Vertical integration allows for better cost control and supply security. Global presence mitigates reliance on any single market.
* Key Beneficiaries: Tongwei, LONGi, JA Solar. Their strong performance this week relative to peers underscores investor preference for safety and scale.

Conclusion

The week of October 13–17, 2025, marked a pivotal moment for the Chinese PV industry. The combination of price stabilization in the main supply chain and transformative policy announcements from the NEA and NDRC provides a solid foundation for a sector recovery. While risks such as silver price volatility and trade friction persist, the downside appears limited given the current valuation levels.

Institutional investors should view the current dip as a strategic buying opportunity, focusing on high-quality N-type manufacturers and technology innovators. The shift towards market-based pricing and mandatory renewable consumption targets will reward companies that are not just capacity leaders, but also technologically advanced and operationally flexible. We recommend increasing exposure to the PV sector, with a selective focus on the aforementioned themes.

Disclaimer: This report is prepared by Guoxin Securities Market Research Department for institutional clients only. The information contained herein is based on sources believed to be reliable, but Guoxin Securities does not guarantee its accuracy or completeness. 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 assessment and consult with their investment advisors before making any investment decisions.