Recently, there has been a relatively large increase in the photovoltaic sector, mainly due to the continuous decline in the industrial chain, resulting in a decline in corporate profits. In terms of performance, due to the market's expectations for the Q4 Q1 performance of companies in the sector are generally not high, the annual performance forecast of some companies last Friday was missed, which triggered a short-term lightning sentiment and further compressed the space for further marginal deterioration of Q1 performance. 23 is likely to be the worst time for the performance of the PV sector, and the market has certain expectations for this, which also means that the low point of performance may also be the low point of stock price.
On the demand side, although domestic demand in the traditional off-season this year is still expected to reach last year's average monthly level, better than previous pessimistic expectations, the US Energy Administration's expected 50% domestic demand growth, as well as the potential to double demand in various emerging markets such as the Middle East, South and South America, show that global PV demand still has 20% growth potential in 2024. As the market for quasi-solar resources gradually shifts to quasi-solar resources in 2024, the PV capacitance ratio is expected to continue to rise, which will lead to an increase in module demand.
In addition to the production reduction of more than 100GW of the old production capacity of PERC, the production schedule of some new TOPCon companies in February is also low, and the profitability is under greater pressure. The current round of industry clearance is expected to accelerate under the current bottoming trend, the current module has broken through the break-even point of first-tier integrated module companies, the module is expected to have a small downward space, and the production schedule in March is expected to increase significantly month-on-month, and it is expected to be repaired.
On the issue of tariffs, concerns about policy changes that could result from the US outcome have intensified recently. However, the high profitability of Chinese companies (overseas production capacity) in the U.S. market is largely created by the supply threshold caused by the best barriers, and the underlying logic of the U.S. PV policy against China is to stimulate the development of local manufacturing (including Chinese companies building factories in the United States) without sacrificing a large number of downstream jobs, so there is no need to be too pessimistic.
In addition to the above fundamental factors, the most fundamental reason for the recent sector correction is that there have been too many excess returns relative to market performance in the past month. Although there are signs of improvement in the fundamentals of the industry, they have not yet fully bottomed out, and the recent macro policy and capital-driven style switching have led to the stock price of the sector in the bottom area.
In the short term, the overall sentiment of the photovoltaic sector is extremely pessimistic due to the contradiction between supply and demand and the performance is lower than expected. After this round of over-falling digestion of negative performance feedback, it is a high probability event for the market to revise the consensus demand expectations for 2024 at the end of Q1 and the beginning of Q2 and drive the sector upward. Recently, due to the sharp reversal of style switching, the layout opportunity has been created again. Priority will be given to the links such as auxiliary materials, inverter brackets, etc., which will have positive performance growth in 2024, strong certainty, and direct benefits from the good demand side. The main material link is observed at the end of Q1 and the beginning of Q2, and there will be repair after the bottoming signal.
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