Trina Solar, one of the largest solar manufacturers in China, anticipates an earlier recovery in its business performance than industry peers, as it diversifies into the booming energy storage sector https://t.co/ifa82iz7Tt ...

Summary of the China Solar Sector Conference Call Industry Overview - The conference call focused on the **China Solar Sector**, particularly the polysilicon industry and its consolidation efforts [1][2]. Key Points 1. **Government Rejection of Proposal**: The PRC government rejected the initial proposal for the foundation of an industry consolidation fund aimed at acquiring and shutting down low-efficiency polysilicon production capacity, raising investor concerns about the consolidation of the solar sector [1][2]. 2. **Market Reaction**: Following the news, share prices of 16 Chinese solar companies under coverage dropped by an average of **5%** [1]. 3. **Revised Proposal Expected**: The proposal for the consolidation fund will be revised and resubmitted to the government, with expectations that the capacity to be acquired and shut down may be scaled down [2][3]. 4. **Current Industry Measures**: Other anti-involution measures, such as output caps on high energy consumption production lines and prohibiting sales prices below cost, remain valid [1][5]. 5. **Cyclical Perspective**: The worst phase for the solar sector appears to be over, with industry participants reducing capital expenditures (capex) and improving cash flow amid rising sales prices [5]. Company-Specific Insights 1. **GCL Technology**: - GCL Poly indicated that the consolidation fund aimed to acquire and shut down **2.0 million metric tons (MT)** of low-efficiency capacity, with operational capacity expected to be no more than **1.5 million MT** post-consolidation [3]. - Acquisition costs were guided at **RMB 600-800 million** per **10,000 MT**, with discounts for high energy consumption standards [3]. - Target price set at **HK$1.72**, based on a DCF valuation, reflecting a **20%** premium over its 10-year historical average [7]. 2. **Trina Solar**: - Aiming to reach breakeven in **2Q/3Q 2026** after reporting net losses of **RMB 1,598 million** in **2Q 2025** and **RMB 1,283 million** in **3Q 2025** [6]. - Targeting **8 GWh** of energy storage system (ESS) sales in **2025**, with plans to increase to **15-16 GWh** in **2026** [6][13]. - Target price set at **RMB 25.00** based on DCF valuation [13]. 3. **Ningbo Deye Technology**: - Target price of **RMB 102.0/share**, reflecting sustainable growth in energy storage demand [9]. - Risks include lower-than-expected demand and increased price competition [10]. 4. **Sungrow Power Supply**: - Target price of **RMB 240.00**, based on DCF valuation, with key risks including slower solar installation growth and intensified trade tensions [11][12]. Risks Identified - **GCL Technology**: High risk due to share-price volatility, with potential downsides from slower polysilicon capacity reduction and higher power costs [8]. - **Ningbo Deye Technology**: Risks from lower-than-expected energy storage demand and increased competition [10]. - **Sungrow Power Supply**: Risks from slower solar installation and energy storage demand [12]. - **Trina Solar**: Risks from slower global solar and ESS installation growth [15]. Conclusion The conference highlighted significant challenges in the Chinese solar sector, particularly regarding government policies on consolidation and the financial health of key players. The outlook remains cautious, with potential for recovery as companies adjust their strategies and operations in response to market conditions.

Group 1: China's Battery Storage Sector - China's National Energy Administration plans to mobilize 250 billion yuan (~$32 billion) for 180 gigawatts of new energy storage capacity by 2027 [1] - In H1 2025, 47 of 55 listed companies in the Chinese energy storage sector were profitable, indicating robust growth [1] - Contemporary Amperex Technology Co. (CATL) reported H1 2025 operating revenue of RMB178.886 billion ($25.15 billion), a 7.3% year-over-year increase, with net profit up 33.33% to RMB30.485 billion [1] Group 2: U.S. Battery Storage Market - The U.S. utility-scale battery storage market has seen a 15-fold increase in capacity since 2020, with nearly 30,000 megawatts (MW) installed [6] - Battery storage output now exceeds other power sources in certain markets, driven by a 40% decline in battery prices since 2022 [6] - California leads the U.S. in utility-scale battery storage, accounting for approximately 42% of the national total with ~13,000 MW [7] Group 3: Global Trends in Battery Storage - Global investment in battery storage is projected to reach approximately $1.2 trillion by 2034 to support over 5,900 GW of new wind and solar capacity [4] - The China Energy Storage Alliance reported that Chinese battery storage firms secured ~200 overseas orders totaling 186 gigawatt-hours (GWh) in H1 2023, a 220% year-over-year surge [3] - Advanced battery technology is crucial for maintaining grid stability as renewable energy sources become more prevalent [4]

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies [1]. Core Insights - The report highlights a tentative US-China détente following a call between Trump and Xi, with discussions on trade and potential sanctions [1]. - The HSCEI index increased by 2.5% and the CSI 300 by 0.9% during the week [1]. - China is considering a RMB500 billion investment to accelerate infrastructure projects in AI, digital economy, and consumption [1]. - The report notes that the IT, Communication Services, and Broadline Retail sectors outperformed, while Industrials, Consumer Staples, and Energy sectors underperformed [1]. Key Themes Update - The report identifies key themes in the China market, focusing on index-heavy stocks with high dividend yields and local champions expanding globally [12]. - High yield stocks listed include CCB, ICBC, and PetroChina, with dividend yields ranging from 5.1% to 7.1% [12]. - Local champions going global include companies like BYD and Great Wall Motor, which are less impacted by US/EU tariffs [12]. Market Movements and Capital Flows - The report indicates that the A-share market saw a 22.9% year-over-year increase in new account openings in May [3]. - Preliminary data shows that May passenger vehicle wholesales increased by 14% year-over-year, with NEV sales up by 38% [3]. Earnings Revisions - The report does not provide specific details on earnings revisions for the industry or companies [1]. Recovery Trends - The report notes that the top 100 developers' home sales decreased by 8.6% year-over-year in May [3]. - Average new home prices in 100 cities increased by 0.3% month-over-month in May, while secondary home prices decreased by 0.7% [3]. Key Events - The report mentions that the US made tough requests to Vietnam in trade talks, including reducing reliance on Chinese industrial goods [2]. - The PBOC is set to inject RMB1 trillion via outright reverse repos in June [2]. Key News - The report highlights that the EU voted to limit China's access to its medical device procurement [1]. - China is reportedly considering a major deal to order hundreds of Airbus jets during EU leaders' visit [1].