Shenwan Hongyuan Group: Steady recovery of profits in lithium battery industry, sustained realization of wind power prosperity.

Shenwan Hongyuan Group released a research report stating that the current pattern of polarization between the top 20% and the rest of the sectors has become clearer. The main variable driving the advancement of the new energy industry is increasingly relying on innovative enterprises continuously exploring in product and market segments. The fluctuations in policy environment are only temporary, and more attention should be paid to the breakthroughs in new technologies and markets. In the next 25 years, the group recommends focusing on two main lines - 1) strong performance; 2) strong technology. Key viewpoints of Shenwan Hongyuan Group are as follows: Electric vehicles: Shipments in Q1 increased significantly year-on-year, prices stabilizing and industry profits continuing to recover. Industry production remained high in 1Q25, with most segments showing a year-on-year increase in output. According to SMM, the output of ternary cathode material/lithium iron phosphate cathode material/anode material/separators/electrolytes/lithium batteries in 1Q25 were 160,000 tons/750,000 tons/520,000 tons/5.5 billion sqm/430,000 tons/378GWh, with year-on-year changes of -3%, +139%, +54%, +57%, +88%, and +73%, respectively. At the same time, the negotiation on lithium battery prices in 1Q25 has essentially concluded, and the first-line companies in the industry chain are operating at high capacity, with overall profits expected to stabilize and rise in the lithium battery sector. Solar PV: New policies driving rapid installations, boosting production in the first quarter. New policies driving the "531" solar PV installations, with prices across the solar PV industry chain showing slight increases, leading to profit recovery across upstream and downstream segments. According to Infolink, in 1Q25, silicon materials/silicon wafers/cells/modules saw price increases of 2%-3%/11%-29%/5%-28%/4%. The price increases in January were mainly due to production cuts to support prices, while price increases in February-March were influenced by the approaching policies on distributed and new energy market entry, leading to a significant increase in end demand, driving growth in orders in the midstream and downstream segments, and subsequent price recovery. From mid-February to the end of March, price increases for silicon wafers/cells/modules were 2%-12%/5%-21%/7%, with significant increases in prices of mainstream specifications such as 210R silicon wafers and battery cells for distributed projects with low inventory and low production. With the price rebound, the profitability of the battery and module segments has been significantly restored. Wind power: Continued high prosperity, wind power companies expected to accelerate performance under the rush to install. The certainty of the large-scale wind power installations continues to increase, with prices rising in multiple component segments and tight delivery situations, leading to a continued improvement in the industry's installation prosperity. In addition, rapid progress in domestic offshore wind power construction will support the demand for offshore wind power in China in 2026; in addition, the demand for European offshore wind power in 2026 is also expected to be released. Based on the shortage of supply and demand relationships and the early shipment of components, the recommendation is to focus on the large megawatt casting segment, and companies like Jinlei Technology, Riyue Heavy Industry, and Zhangjiagang Guangda Special Material should be considered. Based on the growth trend of domestic offshore wind power, it is recommended to focus on sea cables and tower foundation segments, with companies like Jiangsu Haili Wind Power Equipment Technology, Ningbo Orient Wires & Cables, Shanghai QiFan Cable, Titan Wind Energy, Dajin Heavy Industry, Shanghai Taisheng Wind Power Equipment, and Jiangsu Zhongtian Technology being recommended. Due to the high demand for land-based wind power, leading to profit recovery through scale, it is recommended to focus on main engine segment, companies such as Goldwind Science & Technology, Windey Energy Technology Group, and Sany Renewable Energy. Risk warning: 1) Risks of policy changes and trade wars; 2) Risks of fierce competition leading to price declines beyond expectations; 3) Risks of technological iteration.