Industry recent situation: April-May, the world's major PV market, Germany, Italy, due to policy expectations, the photovoltaic installation is almost stagnant, overcapacity brings serious inventory pressure, making the spot market polysilicon price drop since April 1 % to $53.7/kg, wafer prices fell 40% to $0.54/watt, and component prices fell 27% to $1.13/watt. The rapid decline in the price of the whole industry chain caused the gross profit margin of all PV companies to fall sharply, and the profit margin was rapidly narrowed. Some small and medium-sized enterprises with no cost advantage suffered losses, and the operating rate fell below 50%.
In June, Germany's new subsidy policy was introduced. Since only 700MW of PV modules were installed in March-May, the annual installed capacity is lower than the 3.5GW policy threshold. On July 1st, the subsidy will be exempted, which is better than the market before 3- 6% lower expectations. Another highlight is from the Chinese market. In early June, China announced that the 12th Five-Year PV installation will be upgraded by 5GW to 10GW. In 2020, it is generally believed that the installed target will be raised to 50GW, higher than the previous 20GW. Recently, we learned that Qinghai Province will have a 1GW-scale photovoltaic power plant connected to the grid in September, which will echo the 12-500 installation target, and will make China's PV installed capacity in 2011 exceed the previous 1GW.
Due to the pressure of falling product prices, all links in the industry chain are actively researching and developing new processes, new materials, and new equipment to accelerate the decline in the cost of crystalline silicon photovoltaic power generation and achieve parity at an early date. In our research, we found that the application of diamond wire in wafer cutting has already begun to show industry trends. At present, diamond wire-cut monocrystalline silicon wafers have been used in Japan for 100%, and Sharp will use diamond wires on a large scale before the end of the year. China's largest wafer company, Poly GCL, has also been successfully tested, and it is expected to be widely promoted after its quasi-single crystal technology matures. A number of other domestic wafer companies are also actively testing diamond wire wafer cutting. Some companies hope to jointly produce diamond wire with Japanese companies, and companies require Swiss suppliers to transform traditional cutting machines to use diamond wire. We expect this technology to be obtained. Industry replacement is not far off.
Comment: The German and Italian policies have been exhausted, and the launch of the Chinese market has led us to believe that the global PV demand turning point in 2011 will appear in June. In fact, the sales of first-line enterprises in June have seen a significant rebound, with a 20% increase in the chain, and the inventory has dropped significantly. The capacity utilization rate of some enterprises has rebounded to 70-80% or even higher. The reason is that we believe that the policy is warming, bringing more certain on-grid tariffs and grid-connected time, so that downstream system investors can see a definite return on investment, thus releasing the demand for pre-inhibition. In fact, after the price of components fell sharply, the installed internal rate of return in Germany and Italy rebounded. It is expected that Germany can reach 12% and Italy can reach 21%, which is very good.
Prices will gradually stop falling. At present, the price of upstream wafers has fallen to the equilibrium price, and some of the high-cost excess capacity has been converted to inefficient capacity. We estimate that the wafer balance cost will be 0.46 US dollars / watt by the end of the year, and the cash cost will be about 0.43 US dollars / watt. The current price of silicon wafers has not fallen much. The processing cost of the two parts of the battery and components is generally around 0.50 US dollars / watt, so the end of the equilibrium price of the calculation component is around 1.10 US dollars / watt, the current price decline space is not large. The slowdown in component price declines will put the demand for a wait-and-see situation in the first half of the year to begin release in June.
Valuation and recommendation: The industry is picking up. It is recommended that investors pay attention to the component companies Haitong Group, the silicon wafer company GCL, and the diamond line enterprise Yu Diamond. The Haitong Group and GCL earnings forecasts are lowered, but we believe the stock price has already reflected this expectation in the short-term slump. Looking forward to the next year, the performance will return to a higher growth rate. At present, the 2012 P/E ratios of Haitong Group, GCL and Yu Diamond are 17 times, 8 times and 22 times respectively, maintaining Haitong Group's “prudent recommendationâ€, GCL “Accumulateâ€, and Yu Diamond “recommended†rating. China International Capital Corporation
In June, Germany's new subsidy policy was introduced. Since only 700MW of PV modules were installed in March-May, the annual installed capacity is lower than the 3.5GW policy threshold. On July 1st, the subsidy will be exempted, which is better than the market before 3- 6% lower expectations. Another highlight is from the Chinese market. In early June, China announced that the 12th Five-Year PV installation will be upgraded by 5GW to 10GW. In 2020, it is generally believed that the installed target will be raised to 50GW, higher than the previous 20GW. Recently, we learned that Qinghai Province will have a 1GW-scale photovoltaic power plant connected to the grid in September, which will echo the 12-500 installation target, and will make China's PV installed capacity in 2011 exceed the previous 1GW.
Due to the pressure of falling product prices, all links in the industry chain are actively researching and developing new processes, new materials, and new equipment to accelerate the decline in the cost of crystalline silicon photovoltaic power generation and achieve parity at an early date. In our research, we found that the application of diamond wire in wafer cutting has already begun to show industry trends. At present, diamond wire-cut monocrystalline silicon wafers have been used in Japan for 100%, and Sharp will use diamond wires on a large scale before the end of the year. China's largest wafer company, Poly GCL, has also been successfully tested, and it is expected to be widely promoted after its quasi-single crystal technology matures. A number of other domestic wafer companies are also actively testing diamond wire wafer cutting. Some companies hope to jointly produce diamond wire with Japanese companies, and companies require Swiss suppliers to transform traditional cutting machines to use diamond wire. We expect this technology to be obtained. Industry replacement is not far off.
Comment: The German and Italian policies have been exhausted, and the launch of the Chinese market has led us to believe that the global PV demand turning point in 2011 will appear in June. In fact, the sales of first-line enterprises in June have seen a significant rebound, with a 20% increase in the chain, and the inventory has dropped significantly. The capacity utilization rate of some enterprises has rebounded to 70-80% or even higher. The reason is that we believe that the policy is warming, bringing more certain on-grid tariffs and grid-connected time, so that downstream system investors can see a definite return on investment, thus releasing the demand for pre-inhibition. In fact, after the price of components fell sharply, the installed internal rate of return in Germany and Italy rebounded. It is expected that Germany can reach 12% and Italy can reach 21%, which is very good.
Prices will gradually stop falling. At present, the price of upstream wafers has fallen to the equilibrium price, and some of the high-cost excess capacity has been converted to inefficient capacity. We estimate that the wafer balance cost will be 0.46 US dollars / watt by the end of the year, and the cash cost will be about 0.43 US dollars / watt. The current price of silicon wafers has not fallen much. The processing cost of the two parts of the battery and components is generally around 0.50 US dollars / watt, so the end of the equilibrium price of the calculation component is around 1.10 US dollars / watt, the current price decline space is not large. The slowdown in component price declines will put the demand for a wait-and-see situation in the first half of the year to begin release in June.
Valuation and recommendation: The industry is picking up. It is recommended that investors pay attention to the component companies Haitong Group, the silicon wafer company GCL, and the diamond line enterprise Yu Diamond. The Haitong Group and GCL earnings forecasts are lowered, but we believe the stock price has already reflected this expectation in the short-term slump. Looking forward to the next year, the performance will return to a higher growth rate. At present, the 2012 P/E ratios of Haitong Group, GCL and Yu Diamond are 17 times, 8 times and 22 times respectively, maintaining Haitong Group's “prudent recommendationâ€, GCL “Accumulateâ€, and Yu Diamond “recommended†rating. China International Capital Corporation
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