Tianhong Fund Liu Xiaoming: Photovoltaic May Rebound in the Short Term

Photovoltaic plate continues to adjust, how to look at investment opportunities?

Liu Xiaoming said that since the beginning of this year, the market of the photovoltaic sector has generally been a unilateral downward trend. Recently , however, there have been signs of a possible stabilization and rebound. The biggest reason is that the market as a whole is stable , and from the industry's own point of view, it does have a short-term rebound basis, that is, the price is low enough.

It said that the ceiling of photovoltaic installation demand is far from being reached, and after the price drops, people will start some demand. Last year, silicon materials were very tight, component prices were very high, and a lot of demand was suspended. But this demand has not disappeared, the general trend of new energy installation is still there, the demand will be delayed, and it is likely to be released next year.

The following is the essence of the text:

1, Celestica Fund Liu Xiaoming: Photovoltaic plate market has stabilized

Question: First review the photovoltaic market this year, what factors bring disturbance? Recently, however, there have been signs of a possible stabilization and rebound. But since the beginning of the year, the overall situation is in a downward process, and there are many reasons behind it.

First of all, because of the market level, this year's market is a downward trend. Photovoltaic plate is a relatively large beta plate, the intuitive understanding is that its elasticity may be relatively large, compared with the market average, when it rises, it will rise a little more as a whole, when it falls, the downward elasticity will be a little larger. This is itself based on the past market, statistical indicators or technical attributes, in the downward trend of the market environment, it is more likely to fall than market average.

In addition, there are also reasons at the industrial level. Since this year, the capacity of the industrial chain has expanded rapidly. On the general trend, in the process of structural transformation of new energy, there are many opportunities in the future and the ceiling is very high, so in the past few years, enterprises have been investing in this industry. Leading enterprises are financing to expand production capacity, and some enterprises in other industries are crossing the border. The investment rhythm of

various links is different, from silicon materials to silicon wafers to batteries to components, all of which are expanding rapidly. However, due to the different rhythm of expansion, the core concern in the past few years is the partial imbalance in the industrial chain.

This year, the price of silicon materials has dropped sharply, which is also transmitted to other links of the industrial chain, along the industrial chain from upstream to downstream. The

bidding price has also dropped a lot, so people will worry about the key price of the industrial chain, whether it reflects the problem of overcapacity, the answer is yes, but it is not for the long-term development of the industry, it is an insurmountable obstacle. The

problem of overcapacity is not unique to the photovoltaic industry, basically in a relatively fully competitive or free competitive industry, overcapacity is usually the norm. Slight over

capacity is not an unhealthy state, because if there is no overcapacity, there is no full competition, and there is no way to achieve technological progress and cost reduction and efficiency in the industrial chain.

It is precisely because of the continuous periodic overcapacity that we need to serve with lower cost and better quality, which will promote the long-term and sustained progress of the industry. Over

capacity is a phased problem, which is essential for the iterative development of technology in the industry in the long run. It is also a normal phenomenon, and the industry will solve it through supply and demand adjustment. It is not a problem that needs to be particularly worried about in the medium and long term. If the market has fallen a lot because of this problem and has fallen for a long time, it is an opportunity to pay proper attention to it. The growth rate of the

photovoltaic industry has been very high in the past few years. With the structural transformation of macro-economy, the economic growth has slowed down from the previous high-speed growth to a more quality-oriented growth. However, the photovoltaic industry, whether from the industry installed capacity, or the growth rate of profit and revenue at the enterprise level, has been double-digit or even doubled in the past few years. Therefore, it is a very rare plate that can sustain high-speed growth in the current macro state.

2. Tianhong Fund Liu Xiaoming: Photovoltaic may rebound

in the short and medium term Question: Recently, there are signs of a small rebound in photovoltaic, what is the reason behind it? Can this rebound be stabilized?

In addition, from the perspective of the industry itself, it does have the basis for a rebound in the short and medium term, that is, the price is low enough. Any plate, can not be separated from the price to talk about whether this plate is worth investing. If the valuation is very expensive, the industry will not necessarily be able to make the corresponding money if it buys the stock. Behind the performance of the photovoltaic sector, there are fluctuations in valuation. Since

the beginning of the year, photovoltaic continues to adjust, we expect that the end is near, the profit expectations are relatively accurate, the valuation level has been very low. Photovoltaic has risen a lot in the past 20 or 21 years. At that time, the valuation may be more than 30 times. Now, the valuation of more than ten times or eleven or twelve times has declined a lot.

But if we look at this market, the index has fallen but not so much, the other reason behind it is that profits have been rising, so on the one hand, because prices have fallen, on the other hand, because profits have risen, valuations will fall faster.

Now the market's sentiment or views on photovoltaics are too pessimistic. Since this year, the industry has encountered various difficulties, many industry-level problems began to ferment, people will tend to think that these problems will always exist, will continue to bring great trouble to the industry. In fact, not necessarily, some problems are temporary, and some problems have begun to ease and develop in a positive direction.

Even if it is a problem of overcapacity, as long as it is a fully competitive market-oriented industry, it will have its own adjustment mechanism and its own cycle, so it is not a process that can be extrapolated linearly. Many factors have reached a turning point or a time point of change, so in the current time point, whether from the price or from the marginal change, there may be a rebound opportunity in the short and medium term. It's difficult to judge the

turning point, but what we can do is to keep track of it, from the price level, from the capacity release level, from the data of installed exports and profit start-up rate disclosed in the next few key months, but one of our big points of view is that at this time point, combined with this price. It already has a good cost performance ratio, and has reached the stage where the market can actively pay attention to configuration.

It is not necessarily that all indicators have been completely improved that the stock price will rise. Generally speaking, the logic is not like this. When everyone expects to change, the stock price will be reflected first. It takes time for indicators to count. When we really observe these changes afterwards, when you get them, it reflects the situation a month or two ago.

When we observe that these indicators have begun to improve in an all-round way, the stock price has also gone up, and at that time the valuation may rise again, and the valuation has been repaired, so it is not necessarily that the indicators we observe have improved before we can invest, and it is not often that we can make a pre-judgment from some emotions and prices. At this time, we can pay attention to it first.

3, Tianhong Fund Liu Xiaoming: Next year's overseas photovoltaic installation demand may exceed expectations

Question: Is there any opportunity for the photovoltaic industry to fight back?

First of all, everyone's concern is caused by overcapacity. The growth of installed capacity this year is relatively high, and this year may be about doubled. How much growth can installed capacity have next year? How can power grid absorb more installed capacity? This is a growing concern.

Because when the volume is very small, it does not involve the problem of absorption, but when the volume slowly increases, although it is still not the ultimate goal of a new power system based on new energy, the relative power generation is increasing, which brings greater pressure to the operation and absorption of the power grid. People will worry about whether this will become a bottleneck, because a lot of installed capacity can not be absorbed, which will further inhibit demand.

However, we have recently seen that the requirements of photovoltaic distribution and storage, including the capacity tariff mechanism, belong to the top-level design level and the grid level.It is not only aimed at the photovoltaic industry, but also at the problem of new energy. It is to solve the problem of consumption, especially the capacity tariff mechanism. So its release is for the ceiling of new energy installation in the future. It is a positive factor to make everyone feel more at ease.

Second, people will also worry about the problem of photovoltaic exports and the inventory problem in Europe. Because last year and the year before last, the reason why photovoltaic exceeded expectations was that the export growth to Europe was very fast. In 2021 and 2022, the export of modules to Europe was very large, which was a phenomenon of volume and price increase, greatly exceeding expectations. There are many reasons behind it, such as Europe's own problems, the problems of Russia and Ukraine, and the shortage of natural gas, which has led to a surge in demand for energy storage and photovoltaics, and it is a centralized release.

But this year, our photovoltaic exports to Europe are a little lower than expected, for the simple reason that there were too many exports in the previous two years. At the same time, because the European side is worried about not buying, so they bought a lot in advance, the inventory is also very high, there is a process of digestion. Therefore, the high inventory in Europe this year has led to the suppression of our photovoltaic exports to Europe.

However, in the second quarter, we have seen that the inventory level in Europe has begun to enter the destocking, and the destocking time will probably last for half a year to the first quarter of next year. When the inventory is almost gone, we can expect exports to the European market to pick up next year. As this year's exports have been suppressed and the base has become lower, once next year's exports pick up, the growth rate and prosperity will be very good, which is also a factor that is slowly improving.

Another important reason is that the photovoltaic market is not a stock market, or the more it falls, the more people dare not buy it. The ceiling of

installed demand is far from being reached, which means that after the price drops, to a certain extent, people will start some demand. Last year, silicon materials were very tight, component prices were very high, and a lot of demand was suspended. But this demand has not disappeared, the general trend of new energy installation is still there, the demand will be delayed, and it is likely to be released next year.

Including some Asian, African and Latin American countries, this trend can be sustained next year. Component prices continue to decline this year, to the present position, component prices will stabilize, and there is little room for further decline. This position can stimulate a lot of potential demand in the future, which is also a guarantee for next year's quantity. I don't know if the industry has a chance to fight back, but I can see a lot of problems for investors, and there will be positive changes in the coming months, which will be reflected in the market.

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