J P M O R G A N Europe Equity Research 20 January 2026 This material is neither intended to be distributed to Mainland China investors nor to provide securities investment consultancy services within the territory of Mainland China. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. EMEA Mining China Economics - Ten questions about China in 2026 JPM Asia Pacific Economic Research (led by Jahangir Aziz) published a detailed assessment o ...

Group 1: Global Market Trends - China's NEV slowdown has caused global BEV growth to drop below 20%, with a growth rate of 17% in November compared to an average of 30% in the previous three months [1] - Global BEV sales reached a record 1.4 million units in November, despite a poor performance in the US market [1][4] - The US BEV market saw a significant decline, with November sales down 36% year-over-year, totaling 76,000 units, compared to an average of 140,000 units from July to September [6] Group 2: Regional Market Insights - China's passenger BEV market experienced a year-over-year growth of just over 10% in November, indicating a shift to a more sustainable growth rate after a previous price-war fueled boom [2] - Europe maintained steady growth in BEV sales, reflecting mid-30s percentage growth for much of 2025 and nearing record sales figures [2] - The US is entering a phase of reduced support for plug-in vehicles, while Europe is re-implementing some plug-in grants, particularly in Germany starting January 2026 [3] Group 3: Technology and Consumer Behavior - PHEV growth has stalled in November, particularly in China, as BEVs remain attractive due to new technology and expanding charging networks [5] - OEMs are increasingly shifting their focus from BEVs to combustion-based technologies, anticipating low growth in the plug-in sector for the foreseeable future [7]

Summary of Trina Solar (688599.SS) Conference Call Company Overview - **Company**: Trina Solar - **Industry**: Solar Energy Key Financial Highlights - **Net Loss**: Rmb2,918 million in 1H25 compared to Rmb526 million profit in 1H24, with a net loss of Rmb1,598 million in 2Q25 [1][9] - **Operating Cash Inflow**: Rmb1,843 million in 1H25, including Rmb2,679 million in 2Q25 [1] - **Revenue**: Decreased by 27.7% YoY to Rmb31,056 million in 1H25 [9] - **Module Shipment Volumes**: 32GW in 1H25, with 17GW in 2Q25, reflecting a 5.9% YoY decline [2][9] - **Gross Profit Margin**: Dropped to 4.9% in 1H25 from 13.4% in 1H24 [9] Core Insights - **Anti-involution Policy**: Trina Solar emphasized the importance of the Chinese government's anti-involution policy, which aims to prevent selling solar products below cost. This policy is expected to benefit polysilicon makers more than module manufacturers [1][8] - **Module Sales Losses**: The company reported losses of Rmb0.08/W on module sales in the first half of the year, while distributed systems generated a profit of Rmb0.2/W [2] - **Technology Outlook**: Trina Solar downplayed advancements in solar cell technology, indicating that TOPCON will remain the primary technology, with marginal improvements from newer technologies [2] Business Segment Performance - **Energy Storage System (ESS)**: The ESS business turned profitable in 2Q25, earning Rmb7-8 million, with a shipment volume of 1.7GWh in 1H25 [6] - **Export Focus**: 90% of ESS shipments were for exports, with significant orders from the US and a target to double shipment volume to 8GWh in 2025E [6] Market Conditions - **US Market Dynamics**: The US solar market may see sustained module demand due to installation rushes, despite regulatory changes that could limit new project approvals [7] - **Polysilicon Preference**: Analysts prefer polysilicon manufacturers like Tongwei over Trina due to uncertain benefits from anti-involution measures for module sales [8] Valuation and Risks - **Target Price**: Rmb12.00/share based on DCF valuation, indicating a potential decline of 28.3% from the current price of Rmb16.740 [4][16] - **Key Risks**: Include faster-than-expected global solar installation growth and price competition among module companies [17] Additional Notes - **Impairment Losses**: Trina may face impairment losses of Rmb400-500 million from its TOPCon production capacity in Thailand [8] - **Debt Levels**: Total debt increased by 5.8% to Rmb48.9 billion in 1H25, with a net debt to equity ratio rising to 91.1% [9]

Summary of Key Points from the Conference Call Industry Overview - The focus is on the **Chinese macroeconomic environment** as of August 25, 2025, highlighting a shift in market sentiment towards a risk-on approach despite economic slowdowns. Core Observations 1. **Economic Slowdown and Policy Impact** - The slowdown in China's economy is attributed to the government's "anti-involution" policy aimed at curbing oversupply, which is expected to positively impact corporate profits and suggests a potential "policy put" if growth declines further [2][5][7] - Industrial production and fixed asset investment have decreased significantly due to this policy shift [5] 2. **Liquidity in Financial Markets** - There has been a notable increase in liquidity within China's financial markets, driven by fiscal expansion and increased government spending [9][10] - M1 and M2 money supply growth has accelerated, indicating a larger pool of liquid money available for investments [9][11] 3. **External Environment and Trade Dynamics** - The external environment has improved, with tariff risks peaking and trade negotiations between the US and China showing progress [12][13] - Despite a decline in exports to the US, China's overall exports grew by 6% year-on-year in the first seven months of 2025, supported by positive growth in other regions [13][15] 4. **Investor Sentiment and National Pride** - There is a growing positive sentiment towards China among both domestic and international observers, with improved perceptions compared to the US [16][18] - A sense of national pride is emerging, driven by technological advancements and cultural recognition, which may contribute to market performance [18] Potential Risks 1. **Economic Reality Check** - If the economic slowdown persists without signs of stabilization, investor sentiment may shift back towards low-risk assets [3][18] - The effectiveness of the government's "anti-involution" measures is crucial; failure to cut capacity could lead to deflationary expectations dominating sentiment [18] 2. **Market Valuation Concerns** - A rapid stock market rally could lead to stretched valuations, raising concerns about financial stability and prompting regulatory actions to limit inflows [19] Conclusion - The current risk-on sentiment in the Chinese market is supported by a combination of domestic policy changes, abundant liquidity, a favorable external environment, and improved national sentiment. However, ongoing monitoring of economic indicators and government policy effectiveness is essential to gauge future market stability and investor confidence [17][19]