Supporting the policy, whether the photovoltaic industry can embark on the right path

**Abstract** China's photovoltaic industry is facing a tough winter, with domestic overcapacity and foreign EU "double opposition" creating internal and external challenges. In this context, the market is increasingly looking for policy support to help the sector move forward. With industry expectations, official policy documents have been released, aiming to promote the healthy development of the photovoltaic industry. Industry insiders believe that the direction of the sector has become clearer, and with the release of detailed plans, the industry is expected to enter a more stable growth path. **The Domestic Market May Trigger a Rise in Concept Stocks** Recent reports indicate that the State Council has issued "Several Opinions on Promoting the Healthy Development of the Photovoltaic Industry." This document builds upon the earlier "National Six Articles" and sets a 75% increase in domestic PV power generation targets for 2015, raising it from 20 million kilowatts to 35 million kilowatts. It also plans to add 30 million kilowatts of installed capacity over the next three years. For the first time, the policy clearly outlines electricity pricing, subsidies, and access thresholds for photovoltaic projects. According to Any Wenhua, deputy director of the Meishan Aluminum-Silicon Industrial Park Management Committee, the new policy will help open up the domestic PV market, benefiting large and medium-sized companies with strong capabilities. A representative from a polysilicon company that had previously halted operations shared: "Under the broader policy framework, the release of specific rules is crucial. The upcoming policies will further open the domestic market. Only when consumers start buying will our production side benefit. Currently, we are cutting costs through technological upgrades, but even with partial operations, losses are still occurring. We won’t resume full production until the market improves significantly. Many companies in Sichuan are currently idle, waiting for policy changes to bring a turnaround." As outlined in the new opinion, the government is not pushing for continued expansion but rather focusing on quality improvement. Yao Zheng, an analyst at Guangzheng Hengsheng Securities, said: "The industry is facing a severe situation, and it’s urgent to activate the domestic market. This shows the government’s determination to eliminate low-quality products and outdated technologies, accelerate enterprise mergers and reorganizations, and cultivate leading enterprises with strong R&D and market competitiveness." "The biggest highlight of the new policy is promoting distributed photovoltaics. For example, between 2013 and 2015, the annual average installation capacity is expected to be around 10 GW, with total capacity reaching over 35 GW by 2015. As of 2012, China’s total PV capacity was less than 8 GW, meaning more than a threefold increase in three years. The new policy is expected to bring new opportunities to mid-western leaders and polysilicon producers." Driven by positive news, PV concept stocks rose against the broader market on the 16th. Approximately 80% of stocks in the sector saw gains, with several like Lida Optoelectronics, Tiantong, and Longji hitting daily limits. The sector's performance ranked among the top across all industries. **PV Profit Rebounds, Market Welcomes Theme Opportunities** The policy has provided a much-needed boost to PV concept stocks. As the policy continues to be implemented, many industry professionals believe the domestic market will gradually open up. Guifang Xiao, an analyst at Great Wall Securities, stated that the policy aligns with expectations, but more clarity is needed on implementation details. He also pointed out that the domestic market is about to take off, and the mid-term reports of PV companies are expected to show improvement. Based on this, he maintains a "recommended" investment rating for the PV industry. From an industry perspective, the sector is still in a deep restructuring phase. Domestic polysilicon enterprises operate at low capacity, and the bankruptcy of overseas PV companies reflects the current state of the industry. Deng Haolong, an analyst at Changjiang Securities, noted that three overseas PV firms have gone bankrupt, signaling ongoing industry adjustments. However, domestic inverters, silicon wafers, and component leaders have shown strong performance due to their scale and cost advantages. Improved profitability is expected in the second and third quarters, and investors should pay attention to the seasonal turning points in leading component companies. Although short-term product prices remain under pressure, the second quarter saw rising prices, and PV companies' earnings exceeded expectations, with some turning losses into profits. The upcoming quarterly reports are expected to reflect improved performance due to the price recovery in the first half of the year. From the results of PV concept stocks that have already been disclosed, many companies have seen profit improvements. For instance, although Longji's net profit is expected to fall by more than 35% year-on-year in the first half, it is projected to achieve a net profit of 20-22 million yuan. In contrast, its first-quarter loss was 15.91 million yuan, and the second quarter could see a profit of up to 38 million yuan—a significant rebound. Similarly, companies like Sunshine Power, Dongfang Risheng, and Sunflower have reported positive results in the first half of the year, with Dongfang Risheng’s net profit expected to rise by 1,553% to 2,544%. Analysts also advise investors to pay attention to the thematic opportunities brought by guidance and subsidy policies. Hou Wentao, an analyst at Guo Wen Junan Securities, believes that the State Council’s guidance has boosted recovery expectations for the PV industry, and the high-level support has raised hopes for a tax rate reduction. The industry fundamentals are expected to improve significantly. It is anticipated that domestic PV demand will grow by 2GW, 6GW, and 8GW in 2013, 2014, and 2015 respectively. The analyst recommends companies such as Sunshine Power, Longji, Dongfang Risheng, Xinda New Materials, and TBEA.

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