Photovoltaic Industry Weekly Report: Policy Tailwinds Stabilize Pricing; Strategic Focus on N-Type & HJT Leaders

Date: October 14, 2025
Sector: Power Equipment / Photovoltaics (PV)
Rating: Overweight (Positive)
Analyst: Zhang Xinyi (S1490522090001)

Executive Summary

The Chinese photovoltaic (PV) sector demonstrated resilience during the reporting week (September 29 – October 10, 2025), with the Shenwan PV Equipment Index rising marginally by +0.04%. While this underperformed the broader Power Equipment Index (+2.19%) and the CSI 300 Index (+1.47%), the stabilization of key supply chain prices and significant regulatory interventions suggest that the industry may have bottomed out. The primary narrative for the coming quarter shifts from pure capacity expansion to quality-driven consolidation, supported by government measures to curb destructive price wars.

Our analysis indicates that the PV sector has entered a critical valuation bottoming phase. The recent policy announcement by the National Development and Reform Commission (NDRC) and the State Administration for Market Regulation (SAMR) targeting "disorderly price competition" serves as a pivotal catalyst for margin recovery. Concurrently, technological differentiation is accelerating, with N-type products and Heterojunction (HJT) technologies gaining traction in high-value international markets, exemplified by Hongjun New Energy’s landmark 6GW project in Saudi Arabia.

We maintain an Overweight rating on the sector. Investors are advised to pivot towards companies with high proportions of N-type product shipments and those leading in next-generation technologies such as perovskite and HJT. The era of homogeneous competition is waning; future alpha will be generated by firms possessing technological moats and robust overseas deployment capabilities.

Key Takeaways

1. Market Performance: Relative Stability Amidst Sector Rotation

During the week of September 29 to October 10, 2025, the A-share market exhibited a generally positive sentiment, with 26 out of 31 Shenwan industry indices recording gains. The power equipment sector, a key constituent of the green energy transition theme, outperformed the broader market.

• Broad Market Context: The CSI 300 Index increased by +1.47%.
• Sector Comparison: The Shenwan Power Equipment Index rose by +2.19%, ranking 11th among all industries and outperforming the CSI 300 by 0.72 percentage points (pct).
• Sub-Sector Divergence: Within the power equipment secondary industries, performance was mixed but largely positive:
  • Grid Equipment: +7.08% (Strongest performer, driven by infrastructure investment expectations).
  • Wind Power Equipment: +5.40%.
  • Other Power Equipment II: +5.01%.
  • Battery: +0.81%.
  • PV Equipment: +0.04% (Lagging sub-sectors, indicating cautious capital allocation despite policy support).
  • Motor II: -0.31%.

Company-Level Highlights:
Investor preference within the PV equipment space is increasingly bifurcated based on technological leadership and niche market positioning.
* Top Performers: Gaoce Shares, Yicheng New Energy, Maxwell Technologies (Maiwei Shares), DKEM (Dike Shares), and GoodWe. These companies are largely associated with auxiliary materials, specialized equipment, or inverter segments that have maintained better pricing power.
* Underperformers: Jingsheng Electromechanical, Sungrow Power Supply, Tongling Shares, Mubang High-Tech, and Juhe Materials. The decline in larger integrated players or specific material suppliers suggests ongoing concerns regarding inventory levels and margin compression in mainstream segments.

2. Supply Chain Price Analysis: Stabilization Signals Bottoming

Data from Datayes as of September 24, 2025, indicates that the severe price erosion characterizing the previous quarters has halted. Most main-chain products recorded flat week-on-week (WoW) changes, signaling a balance between supply and demand at current low price levels. This stabilization is crucial for restoring manufacturer confidence and halting further impairment charges.

Analytical Insight:
The stability in polysilicon, wafers, cells, and modules suggests that the market has reached a "policy bottom" and a "cost bottom." Manufacturers are no longer willing to sell below cash costs, and involuntary production cuts have tightened supply. However, the 6% surge in silver paste prices presents a nuanced challenge. As the industry transitions to N-type TOPCon and HJT technologies, silver consumption per watt increases. This cost inflation could squeeze margins for cell manufacturers who cannot fully pass these costs downstream, highlighting the importance of silver-free metallization technologies (such as copper plating) as a long-term competitive advantage.

3. Policy Catalyst: Regulatory Intervention to Curb Disorderly Competition

The most significant development this week is the joint announcement by the National Development and Reform Commission (NDRC) and the State Administration for Market Regulation (SAMR) on October 9, 2025, titled "Announcement on Governing Disorderly Price Competition and Maintaining Good Market Price Order."

This policy marks a decisive shift from passive market clearing to active regulatory guidance, aiming to rectify the "involution" (race to the bottom) that has plagued the PV industry.

Key Policy Mechanisms:

1. Cost-Based Pricing Guidance:

   • The authorities will guide industry associations to survey and assess the average industry costs for key sectors facing severe price disorder.
   • This establishes a reference baseline for "reasonable pricing," effectively setting a soft floor for bids and transactions. This prevents predatory pricing where companies sell below cost to gain market share.

2. Strengthened Industry Self-Discipline:

   • Industry associations are mandated to strictly adhere to the Price Law and Anti-Monopoly Law.
   • They are tasked with fostering self-discipline mechanisms to guide operators in maintaining fair competition orders. This legitimizes collective actions to stabilize prices, provided they do not violate anti-trust regulations regarding collusion.

3. Proactive Warning and Enforcement:

   • Pre-emptive Warnings: Operators suspected of engaging in disorderly price competition will receive formal warnings and admonitions to normalize their pricing behavior.
   • Targeted Investigations: For entities that fail to correct their behavior post-warning, regulators will initiate cost investigations and price supervision checks.
   • Legal Penalties: Confirmed violations will face strict legal查处 (investigation and punishment).
   • Credit System Integration: Violations will be recorded in the national credit system, implementing joint disciplinary actions against dishonest enterprises. This raises the reputational and operational cost of non-compliance.

4. Tendering Compliance:

   • Strict enforcement of the Bidding Law and its implementation regulations. This targets the common practice in utility-scale projects where abnormally low bids are accepted, often leading to project delays or quality compromises.

Investment Implication:
This regulatory framework is highly bullish for the medium-term health of the PV sector. By eliminating irrational price competition, it allows leading companies with superior cost structures and technology to restore profitability. It reduces the risk of "bad money driving out good money," thereby protecting the R&D budgets necessary for next-generation technology iteration. We expect this to lead to a gradual improvement in gross margins for module and cell manufacturers in Q4 2025 and beyond.

4. International Expansion: Technology Export to the Middle East

On September 24, 2025, Hongjun New Energy signed a cooperation agreement with Saudi partners during the "Beijing-Saudi Advanced Manufacturing Consultation Meeting" to build a 6GW high-efficiency Heterojunction (HJT) module production base in Saudi Arabia.

Strategic Significance:

• Technology Validation: The choice of HJT technology for this mega-project underscores the global recognition of Chinese advancements in next-gen PV. HJT modules offer lower temperature coefficients and higher bifaciality, making them ideally suited for the high-temperature, high-irradiance environment of the Middle East and North Africa (MENA) region.
• Localization Trend: This project aligns with Saudi Arabia’s Vision 2030 and local content requirements. It represents a shift from simple product export to industrial chain localization, including manufacturing, application, and technology iteration within the host country.
• Market Access: By establishing local production, Hongjun New Energy mitigates potential trade barriers and tariffs while securing access to the rapidly growing MENA clean energy market.
• Competitive Moat: The success of this deal highlights Hongjun’s core competitiveness in HJT technology. It serves as a case study for other Chinese PV firms: competing solely on price in domestic markets is less viable than exporting high-value, differentiated technology to emerging growth markets.

5. Regulatory Framework: Standardization of Energy Planning

On September 30, 2025, the NDRC and the National Energy Administration (NEA) issued the "Measures for the Administration of Energy Planning."

• Scope: Applies to the research, drafting, consultation, argumentation, approval, release, implementation, and evaluation of various energy plans.
• Impact: While less directly impactful on daily stock prices than price controls, this measure enhances the predictability and scientific rigor of national energy infrastructure development. It ensures that PV installation targets are aligned with grid absorption capabilities and broader energy security goals, reducing the risk of abrupt policy shifts or curtailment issues in the long run.

Risks / Headwinds

While the outlook is improving, institutional investors must remain cognizant of the following structural and cyclical risks:

1. Raw Material Price Volatility

• Silver Paste Surge: The 6% weekly increase in silver paste prices highlights exposure to precious metal markets. Since N-type and HJT technologies are more silver-intensive than traditional PERC, sustained high silver prices could erode the cost advantage of these high-efficiency technologies if metallization innovations (like silver-coated copper or pure copper plating) are not scaled rapidly.
• Polysilicon Fluctuations: Although currently stable, any unexpected restart of idle capacity or changes in energy costs could disrupt the fragile price equilibrium.

2. Project Execution and Demand Risks

• Construction Delays: Despite favorable pricing, actual project commencement may lag due to financing constraints, land acquisition issues, or grid connection bottlenecks. If downstream installation rates do not meet expectations in Q4 2025, inventory buildup could resume.
• Global Macro Uncertainty: High interest rates in major economies (US, Europe) continue to impact the internal rate of return (IRR) for utility-scale PV projects, potentially dampening demand elasticity.

3. Geopolitical and Trade Frictions

• Trade Barriers: The trend towards protectionism persists. The US, EU, and India continue to explore or implement tariffs, local content requirements, and supply chain decoupling strategies.
• Retaliatory Measures: As Chinese firms expand overseas manufacturing (e.g., in Saudi Arabia, Southeast Asia), they may face new regulatory scrutiny or tariff adjustments aimed at preventing "transshipment" or circumvention of existing trade remedies.
• Policy Divergence: Differences in carbon border adjustment mechanisms (CBAM) and green subsidy criteria across regions create a complex compliance landscape for multinational PV operators.

4. Technological Obsolescence Risk

• The rapid iteration from P-type to N-type (TOPCon, HJT) and potentially Perovskite tandem cells means that capital invested in older production lines faces accelerated depreciation. Companies failing to keep pace with technological upgrades risk asset stranding.

Rating / Sector Outlook

Sector Rating: Overweight (Positive)

We reaffirm our Overweight rating on the Photovoltaic sector. The combination of policy-induced price stabilization, technological maturation, and resilient long-term global demand creates a favorable risk-reward profile at current valuations.

Outlook Drivers:
1. Policy Bottom Confirmed: The NDRC/SAMR intervention effectively puts a floor under prices, ending the destructive deflationary spiral.
2. Valuation Attractiveness: After a prolonged correction, many leading PV stocks are trading at historical low Price-to-Earnings (P/E) and Price-to-Book (P/B) multiples, pricing in significant pessimism that is now being reversed.
3. Technological Alpha: The market is beginning to reward companies with genuine technological leadership (N-type, HJT, BC, Perovskite) rather than just scale.

Investment Horizon: 6 Months
Expected Relative Performance: >5% outperformance vs. Market Index.

Investment View

Based on the current market dynamics, policy shifts, and technological trends, we propose the following strategic investment framework for institutional portfolios:

1. Core Strategy: Focus on N-Type Leaders

The transition to N-type technology is no longer a future trend but a present reality. Companies with high proportions of N-type (TOPCon/HJT) product shipments are capturing the premium segment of the market.
* Rationale: N-type modules offer higher efficiency and lower degradation, commanding better pricing power and margins compared to legacy P-type products. As older capacities are phased out, N-type leaders will enjoy improved utilization rates and profitability.
* Action: Overweight manufacturers with established N-type capacity and strong brand recognition in international markets.

2. Satellite Strategy: Bet on Next-Gen Technology (HJT & Perovskite)

Innovation remains the primary driver of long-term value creation in the PV sector.
* Heterojunction (HJT): As demonstrated by the Hongjun-Saudi deal, HJT is gaining traction in specific high-value applications. Companies with leading HJT production efficiency and cost reduction roadmaps (e.g., thinning wafers, lowering silver consumption) are poised for outsized growth.
* Perovskite: While still in the early commercialization stage, companies with advanced pilot lines and credible pathways to tandem cell efficiency records offer high-optionality value.
* Action: Allocate capital to equipment makers and cell manufacturers with proven R&D capabilities in these areas. Look for partnerships with sovereign wealth funds or international energy giants as validation signals.

3. Selective Opportunities in Auxiliary Materials

Not all segments are created equal. Some auxiliary material providers have better pricing power or are benefiting from technological shifts.
* Silver Paste & Metallization: Given the rise in silver prices, companies that offer innovative metallization solutions (e.g., low-silver pastes, copper plating equipment) will be critical enablers for cost reduction.
* Inverters & Storage Integration: Companies like GoodWe (noted as a top performer) that integrate PV with energy storage solutions are benefiting from the global trend towards hybrid systems, offering higher margins than pure module manufacturing.

4. Avoid/Underweight: Homogeneous Capacity

Companies heavily reliant on outdated P-type PERC capacity without a clear transition plan, or those lacking distinct cost advantages, remain vulnerable. Even with policy support, these assets face structural obsolescence. The "rising tide lifts all boats" phase is over; stock selection must be discerning.

Conclusion

The Photovoltaic industry stands at an inflection point. The aggressive price wars of the past two years have cleared out inefficient capacity and forced a technological reset. The recent regulatory intervention by Chinese authorities provides the necessary stability for margins to recover, while international expansion into markets like Saudi Arabia offers new growth vectors.

For institutional investors, the current environment offers a compelling entry point. The key to generating alpha lies in distinguishing between volume growers and value creators. We recommend focusing on companies that leverage N-type technology leadership, innovative cost structures, and strategic global partnerships. The sector’s fundamentals are strengthening, and the risk-reward ratio favors a constructive stance.

Appendix: Data Sources & Methodology

• Market Data: Source: Wind Information, Shenwan Hongyuan Index Series. Data as of October 10, 2025.
• Price Data: Source: Datayes, Solarzoom. Prices reflect transaction averages as of September 24, 2025.
• Policy Documents: Official announcements from the National Development and Reform Commission (NDRC) and State Administration for Market Regulation (SAMR), dated October 9, 2025.
• Corporate Announcements: Public disclosures from Hongjun New Energy and relevant industry press releases.

Disclaimer

This report is prepared by Guoxin Securities Co., Ltd. for institutional clients only. The information contained herein is derived from sources believed to be reliable, but Guoxin Securities does not guarantee its accuracy or completeness. The views expressed are those of the analyst and do not constitute an offer or solicitation to buy or sell any securities. Investors should conduct their own independent assessment and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.