Xiaomo: China's photovoltaic industry has ushered in a paradigm shift in sentiment, and this company has become the best risk-return choice

On July 23, 2025, J.P. Morgan's Asia Pacific Equities Research Team released a report on China's PV industry, focusing on market trends in the context of “anti-internal rolls” and supply-side reforms. Through one-on-one communication with around 50 investors, the report revealed important changes in industry sentiment and the investment value of Daxin Energy (DQ.US) in the current environment.

1. Changes in the investor structure: long-term capital enters the market, and hedge funds step back

Recently, J.P. Morgan Chase had in-depth discussions with nearly 50 investors on the topic of China's PV industry and “anti-domestic” and supply-side reforms. Notably, long-term investors (LO) account for nearly half, in stark contrast to the past 12 months — hedge funds (HF) were the absolute dominant force when the PV industry rebounded due to rumours of supply-side reforms.

This change shows that the market's focus on the photovoltaic industry is shifting from short-term speculation to longer-term value considerations, and the diversification of the investor structure has laid the foundation for stabilizing industry sentiment.

2. Policy expectations: Drastic intervention is difficult in the short term, and it will still take time to mitigate overcapacity

Although investors generally believe that it is necessary for the government to solve the problem of overcapacity in the photovoltaic industry (the industrial chain faces cash losses while contributing to the global energy transition), most people are wary of introducing major policies in the short term.

The core reason is:

Since 2022, new production capacity has been released centrally, and the stock is huge;

There is a lack of powerful state-owned enterprises to take the lead in integration, and supply-side reforms are more difficult.

Currently, the potential solution most discussed by investors is “polysilicon companies to set up integrated funds to control production capacity following the OPEC model,” but the market has doubts about whether the government will provide financial support, the viability of the plan, and the implementation time.

3. A shift in the sentiment paradigm: from continuous valuation downgrades to range-bound shocks

The report points out that the photovoltaic industry is undergoing a “paradigm shift” in sentiment: over the past 24 months, the market expects the industry to continue to lower valuations; now, many investors believe that the industry will enter a stage of range-bound shock.

The key sign of this transformation is that senior management has clearly expressed concerns about overcapacity. Despite the difficult problem, the central government and departments are continuously trying various solutions. This positive attitude at the policy level made the market expect the bottom of the industry.

4. Key targets: Big new energy has the best risk return

J.P. Morgan emphasized that Daxin Energy is the company with the most attractive risk-return ratio in its coverage targets, and most investors agree with this.

The core logic includes:

Valuation advantage: The current net market ratio (FY25E P/BV) is only 0.4 times, far below the historical level of 0.8 times, and there was even negative corporate value in the first quarter of 2025;

Financial soundness: leading net cash scale, strong resilience to risks;

Cost leadership: As a benchmark for cost control in the industry, it has a competitive advantage in the industry integration cycle.

Whether a drastic “anti-domestic roll” policy is introduced in the short term or the industry takes 2-3 years to consolidate, Daxin Energy can show good adaptability.

5. Reviews of other new energy standards

Goldwind Technology (Goldwind, 02208), Orient Cables (603606.SH): The fundamentals are strong, but second-quarter results may be under pressure or provide an opportunity for entry;

New energy power generation companies: Changjiang Electric Power (600900.SH) is regarded as a defensive choice; some investors agree with the valuation judgment on Longyuan Electric Power (00916) and downgraded the CGN Power (CGN Power, 01816) to a “neutral” rating.

Conclusions

Currently, the photovoltaic industry is at a critical point of sentiment change. Although it is difficult to completely resolve the problem of overcapacity in the short term, policy exploration and market structure optimization have quietly begun. For investors, Daxin Energy has become the preferred target for seizing industry transformation opportunities due to its valuation, financial and cost advantages.