Summary of China Solar Industry Conference Call Industry Overview - The conference call focused on the China solar industry, particularly the dynamics of solar cell pricing and profitability trends in January 2026 [1][5][6]. Key Highlights - **Cell Price and Silver Cost Increase**: - There was a significant increase in silver paste prices for solar cells, with increases of 112% for Back-side, 34% for Front-side Busbar, and 46% for Front-side Finger in January 2026. This follows an average increase of 54% in Q4 2025 [5]. - The increase in silver costs has raised production costs for cells/modules by approximately Rmb0.03/W month-over-month, with silver now accounting for about 20% of total module production costs, up from 7% in Q3 2025 and 11% in Q4 2025 [5]. - **Solar Installation Performance**: - China’s solar installations in December 2025 were reported at 40GW, reflecting an 82% month-over-month increase but a 43% year-over-year decrease. The total for FY25 reached 315GW, which is a 14% year-over-year increase, exceeding Goldman Sachs' estimate of 283GW [5][6]. - **Market Demand and Supply Dynamics**: - The supply/demand ratio improved to 129% in January from 139% in December, indicating a slight tightening in the market despite weak transaction volumes and a 20% month-over-month decline in cell production [5][10]. - Producer-side inventory days increased to 62 days in January from 58 days in December, suggesting a buildup of inventory amid weaker demand [5][13]. Pricing Trends - **Price Forecasts**: - For Q1 2026, prices for cells and modules are expected to increase by 31% and 5% respectively, driven by higher silver costs and an export rush ahead of tax rebate removals starting April 1, 2026. However, a retreat of 24% and 8% is anticipated in Q2 2026 due to Tier 1 adoption of cost reduction technologies [6]. - Upstream prices for Poly and Wafer are projected to decline by 11% quarter-over-quarter in Q1 and Q2 2026 due to anti-monopoly measures and seasonal low electricity costs [6]. Sector Outlook - **Regulatory Environment**: - The ongoing "anti-monopoly" regulations and "anti-involution" campaigns are expected to influence industry pricing, aligning with Tier 1 cost reduction progress amid demand weakness in 2026 [6]. - **Investment Recommendations**: - The report suggests a cautious approach towards certain segments, recommending a "Buy" on high-efficiency Tier 1 module players like Longi and a "Neutral" stance on low-cost Tier 1 Poly players like GCL Tech. Conversely, a "Sell" rating is advised for Rod Poly (Daqo ADR/A, Tongwei), Wafer (TZE), Equipment (Shenzhen S.C., Maxwell), and Glass (Flat A/H, Xinyi Solar) [6]. Additional Insights - **Profitability Metrics**: - Cash profitability for cells/modules improved in January, while it deteriorated for glass/film segments. The average cash gross profit margin (GPM) for Tier 1 Poly was reported at 38%, with a notable increase in profitability metrics across various segments [7][9]. - **Market Sentiment**: - The overall sentiment in the solar market remains cautious, with a focus on company-specific cost reduction strategies and the impact of rising silver prices on the industry cost curve [6]. This summary encapsulates the key points discussed during the conference call, providing insights into the current state and future outlook of the China solar industry.

26 January 2026 | 11:00AM CST Equity Research China Solar: Quick thoughts on potential Space-based Solar Power demand uplift What's new? Share prices for our Solar coverage have rallied by 8%-20% on Jan 23 (vs. largely flat performance of CSI300 and HSI at -0.4%/+0.4%) due to upbeat market expectation of Space-based Solar Power (SBSP) demand that was sparked by the Davos Debut where Elon Musk stated that SpaceX and Tesla each will build 100GW of solar panel capacity in the US in the next three years. Implic ...

Summary of Conference Call Notes on China Solar Industry Industry Overview - The conference call focuses on the China solar industry, particularly the pricing dynamics and financial outlook for key players in the sector, including Poly and Module manufacturers [1][2][3]. Key Points and Arguments 1. **Market Sentiment and Pricing Trends** - Share prices for covered stocks have risen by an average of 40% since July 1, compared to +15% for CSI300 and +10% for HSI [1]. - Upstream price hikes, particularly a ~40% increase in Poly prices during July-August, are attributed to the ongoing Anti-involution campaign aimed at curbing excessive pricing competition [1]. 2. **Demand Forecast and Pricing Adjustments** - The demand outlook for China’s Module market is weak, with a forecasted decline of 40-45% year-over-year in 2H25E-1H26E [1]. - A bottom-up analysis suggests a likely 20% decline in Poly prices to Rmb42/kg and stable Module prices at Rmb0.67/W due to high-efficiency upgrades [2]. 3. **Cost Reduction and Market Dynamics** - Rapid cost reductions by Tier 1 players are expected to continue, with a projected 10% cash cost reduction to Rmb25/kg by 2Q25-2026E [1][2]. - The need for Tier 1 players to cut prices alongside cost reductions to maintain market share amid softening demand is emphasized [2][22]. 4. **Revised Pricing Models and Forecasts** - The pricing model has shifted to a cost-based approach, leading to an average 4% increase in Poly prices for 2025E-2027E and a 12% decrease in downstream prices for 2025E-2030E [3][37]. - The revised forecasts imply a ~20% downside for upstream segments (Poly/Wafer) and ~3% for downstream segments (Cell/Module) [3]. 5. **Capital Expenditure Adjustments** - Solar capex is raised by 15% for 2025E-2026E but cut by an average of 20% for 2027E-2030E due to higher Topcon upgrade capex and stricter investment standards [7][44]. 6. **Earnings Revisions and Target Prices** - EBITDA forecasts for Poly players are raised by an average of 28% for 2025E-2027E, while downstream players see a 15% cut due to lower shipments [8]. - Target prices for coverage stocks are revised down by 11% to 26%, with GCL Tech's target price raised by 26% due to improved volume and profitability outlook [8]. 7. **Downgrades of Specific Companies** - Daqo A and Shenzhen S.C. are downgraded to Sell due to overly optimistic market valuations and weaker order outlooks amid the anti-involution campaign [9][10]. 8. **Investment Preferences** - Preference is given to Film (Buy on Hangzhou First), High-efficiency Module (Buy on Longi), and Granular Poly (Neutral on GCL Tech) over Glass and Rod Poly due to better cost dynamics and product-level supply/demand [11]. Additional Important Insights - The ongoing anti-involution campaign is expected to have a long-term impact on pricing and demand, with a focus on maintaining fair competition and preventing below-cost pricing [1][36]. - The market may be underestimating the rapid cost reduction potential of Tier 1 players, which could lead to significant shifts in market dynamics and profitability [53][67]. - Historical trends indicate that cost reduction, rather than price hikes, has been the primary driver for margin expansion in the solar industry [67]. This summary encapsulates the critical insights and forecasts regarding the China solar industry, highlighting the interplay between pricing, demand, and cost dynamics.

Summary of China Solar Conference Call Industry Overview - The conference focused on the solar industry in China, particularly the polysilicon segment, in light of recent government policies aimed at regulating competition and addressing overcapacity [1][2][3]. Key Points and Arguments 1. **Market Reaction to Policy Changes**: Following the Central Commission for Financial and Economic Affairs meeting on July 1, share prices for polysilicon companies (Tongwei, GCL, Daqo) increased by an average of 32%, indicating positive market sentiment towards potential regulatory changes [1]. 2. **Price Increases**: Polysilicon asking prices rose from Rmb35 per kg to Rmb49 per kg, a 40% increase within two weeks, reflecting expectations of improved pricing power in the industry [1][14]. 3. **Anti-Involution Campaign**: The campaign aims to discourage local protectionism and excessive competition, with a focus on establishing a legal framework to ensure fair competition and prevent below-cost pricing [12][13]. 4. **Potential Capacity Buyout Fund**: Discussions are ongoing regarding a tail polysilicon capacity buyout fund, which could involve Rmb40-80 billion to acquire excess capacity, with preliminary government support noted [13][15]. 5. **Profitability Outlook**: While there is optimism about price recovery, normalized profitability is expected to remain low due to a slowdown in demand growth in China [3][24]. Implementation Details 1. **Regulatory Framework**: The revised Anti-Unfair Competition Law is set to take effect on October 15, 2025, enhancing enforcement against below-cost competition [12]. 2. **Production Control**: Future policies will focus on controlling production and preventing new capacity expansion, with specific details still under discussion [19]. 3. **Demand-Side Policies**: The introduction of demand-side policies is crucial to ensure a stable demand outlook, which remains uncertain [19][20]. Beneficiaries of Anti-Involution 1. **Liquidity-Constrained Companies**: Companies like GCL Tech, Tongwei, and Xinyi Solar are expected to benefit from improved cash flows due to regulatory changes [11][38]. 2. **Upstream Integrated Players**: Tier 1 module manufacturers, such as Tongwei and Longi, are likely to see significant benefits from a steeper industry cost curve [11][38]. 3. **High-Efficiency Module Producers**: Companies producing high-efficiency modules may benefit from price hikes in mainstream products [11][38]. Risks and Challenges 1. **Execution Challenges**: The ability to pass through module price hikes to downstream operators is uncertain, especially given the current oversupply situation [20]. 2. **Dependence on Policy Enforcement**: The success of the Anti-Unfair Competition Law and its impact on profitability will depend on effective enforcement and potential penalties for violations [24]. Conclusion - The solar industry in China is at a critical juncture with the potential for significant regulatory changes aimed at stabilizing prices and improving profitability. However, the successful implementation of these policies and their impact on market dynamics remain to be seen [3][15].

Investment Rating - The report maintains a cautious outlook on the solar industry, expecting significant capacity cuts and a decline in profitability across the value chain, particularly in the upstream segments [3][5]. Core Insights - The report indicates a potential rush in installations in May 2025, driven by a policy cutoff, but anticipates a deeper demand pullback in the second half of 2025, with global module demand expected to decline by 40% year-over-year [4][5]. - The pricing dynamics across the solar value chain show a decline in spot prices for most segments, with glass experiencing the most significant drop of 10% month-to-date [19][20]. - The upstream profitability is expected to deteriorate further, while downstream segments are projected to remain more resilient [7][19]. Summary by Sections Sector Overview - Anticipated capacity cuts of 17% across the main value chain in 2025-2026 due to cash burn and market access issues [3]. - A forecasted decline in solar capital expenditure by 55% year-over-year in 2025, with average capacity utilization rates dropping to 59% from 2025 to 2030 [5]. Pricing Trends - As of June 19, 2025, spot prices for poly, wafer, cell, module, glass, and film have declined by an average of 6%, 5%, 3%, 0%, 10%, and 3% respectively month-to-date [19]. - The report highlights that module pricing has remained stable, contrasting with the declines seen in other segments, particularly glass [19][20]. Demand and Supply Dynamics - Global module demand surged by 74% month-over-month and 193% year-over-year in May 2025, primarily due to a rush in installations in China [4]. - The report projects that inventory days will rebound to an average of 33 days in June from 27 days in May, indicating increased inventory pressure across the value chain [13][16]. Profitability Outlook - Cash gross profit margins (GPM) for upstream segments are expected to decline, while downstream players are likely to maintain more stable margins [7][10]. - The report suggests that despite the anticipated price declines, profitability may remain resilient due to greater upstream price cuts [20].