The industrial chain hits bottom and rebounds, "anti internal grinding" drives the accelerated return of the valuation of the photovoltaic sector.

Since the end of June 2025, there has been a dense release of top-level signals surrounding the "anti-internal competition" in the photovoltaic industry. The Hong Kong A-share photovoltaic sector has also started a sustained rebound, and recent reports suggest that relevant national departments are about to issue a "notice on strengthening photovoltaic capacity control," reigniting interest in the sector. It is understood that on October 14, the relevant regulatory authorities may issue a notice on strengthening photovoltaic capacity control, pushing the photovoltaic industry towards "high-quality breakthrough" from "barbaric growth." As a result, the A-share photovoltaic industry chain has seen a surge in trading volume, but Hong Kong stocks such as XINTE ENERGY (01799) have had a relatively subdued performance, with the sector digesting the information over the following trading days. In fact, the photovoltaic sector has experienced a significant downturn for four consecutive years, with the valuation of investment targets in A-shares, Hong Kong stocks, and US stocks shrinking by over 70% on average. Despite hitting rock bottom in 2025, a turning point in policies emerged in June, with a series of anti-internal competition policies being introduced, providing support for industry chain prices. With expectations of a turnaround in performance, the photovoltaic targets in the three major markets have seen a six-month rebound. Compared with 2024, the "anti-internal competition" measures in 2025 have been significantly enhanced, with clear progress in dealing with excess capacity and preventing low-price competition, providing substantial valuation support for the photovoltaic sector. The strong expectations for capacity control policies have gradually revealed cyclical investment opportunities. As a result of government intervention, the effectiveness of "anti-internal competition" measures is evident. The relationship between supply and demand in the industry continues to improve, leading to price increases in the photovoltaic industry chain. Prices of polysilicon, silicon wafers, batteries, and photovoltaic modules have all risen in September, with the price of polysilicon futures rising by over 50% since June. However, the task of reducing polysilicon production capacity remains daunting, with only 10 domestic polysilicon producers still in operation by the end of September, maintaining a relatively low overall operating rate. In terms of downstream demand, the installation of photovoltaic power capacity continues to grow at a high rate. China's photovoltaic power capacity reached 886.6GW in 2024, with a compound annual growth rate of 36.82% in the past five years. The guidance of the dual-carbon policy remains a major driver for downstream expansion in the photovoltaic industry, with expectations of continued double-digit growth. Additionally, energy storage systems can address the variability and integration problems of renewable energy, further driving the demand for photovoltaic installation capacity. With strict control on the supply side and increased support on the demand side, the industry is expected to maintain a high-growth trend, leading to a rebound in industry chain prices and creating new investment opportunities in the photovoltaic sector. The photovoltaic industry chain includes silicon materials (Tongwei Co., Ltd., Xinjiang Daqo New Energy, and XINTE ENERGY), silicon wafers (TCL Zhonghuan Renewable Energy Technology and Shuangliang Eco-Energy Systems), battery cells (Shanghai Aiko Solar Energy), and integrated components (LONGi Green Energy Technology and JA Solar Technology), with photovoltaic cell technology being the most crucial. Top cell manufacturers are expected to break away from the long-term homogenized competition in the industry and lead the way out of the bottom of the cycle with upgrades in TOPCon production capacity. However, due to price declines and internal competition in the industry, most links in the photovoltaic industry chain have been operating at a loss for over a year, with significant losses in 2025. In terms of the first half of the year, leading companies in specific sectors, including Tongwei Co., Ltd., JA Solar Technology, and LONGi Green Energy Technology, reported net losses of 4.955 billion yuan, 2.58 billion yuan, and 2.57 billion yuan respectively. In comparison, XINTE ENERGY in the Hong Kong stock market recorded a net loss of less than 300 million yuan during the same period. XINTE ENERGY has a lower loss rate mainly due to the extension of its business downstream, such as the construction and operation of photovoltaic power stations, which have contributed to profits offsetting losses in the polysilicon business. In the first half of 2025, the company's income from polysilicon business, wind energy photovoltaic power station construction, and operation accounted for 13.68%, 67.62%, and 18.9% respectively, with a gross loss of 1.033 billion yuan in the polysilicon segment and a total gross profit of 1.423 billion yuan in the construction and operation of power stations. In addition, the company also has businesses in inverters and other electrical equipment, accounting for 22.5% of its income, with a gross profit of 236 million yuan. The company has been following policy trends and increasing investment in photovoltaic power stations during the industry chain adjustment cycle in recent years. It has been accelerating the construction of the 3GW new energy project in Quandong this year, providing continuous performance contribution through self-use and external expansion. By the first half of 2025, the company had completed and confirmed approximately 1.35GW of installed capacity from photovoltaic and wind power construction projects. With a lower proportion of polysilicon business, XINTE ENERGY is less affected by industry chain prices compared to its competitors. For example, LONGi Green Energy Technology also has a presence in power station business but with a very low contribution, accounting for only 3.54% of its income in the first half of 2025, while photovoltaic products accounted for as high as 93.5%. Similarly, TCL Zhonghuan Renewable Energy Technology's contribution from photovoltaic power stations is only 0.76%, while photovoltaic silicon wafers, components, and other silicon materials account for over 92% of its income. In conclusion, the photovoltaic industry chain has experienced three years of oversupply, with some manufacturers persisting in expanding capacity, leading to difficulties in digesting excess capacity during the cycle. As the industry calls for it, the expected capacity control measures may accelerate, imposing strict controls on capacity supply on the supply side, encouraging breakthroughs in technology to introduce more efficient photovoltaic cells, and promoting the high-quality development of the industry, thereby driving sustained rebound in the sector. In terms of investment targets, leading companies in the specific sectors such as LONGi Green Energy Technology and TCL Zhonghuan Renewable Energy Technology, due to their concentrated business contributions and high sensitivity to industry chain prices, may receive higher valuation premiums in this wave of sector recovery. On the other hand, companies like XINTE ENERGY, with a diversified business driving performance resilience and low sensitivity to prices, strong profitability, and profit margins significantly higher than the industry average, may be the preferred choice for conservative investors.