汇丰银行能源设备行业太阳能未来光明

1、Equity Research ReportEnergy Equipment & ServicesJune 2019By: Corey Chan (S1700518100001) and Dun Wang (S1700519060002) S P O TL I G H T China Solar Equipment Initiate coverage: Brighter days aheadWe forecast an industry upcycle in 2019-20e, driven by robust export demandWe see upside to stock p

2、rices due to market expansion and falling costsInitiate on Longi, Tongwei, Zhonghuan, and Jingsheng with Buy ratings, and First Applied Material with a ReduceDisclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and wit

3、h the Disclaimer, which forms part of it.获取报告1、2、3、每周群内7+报告；当日华尔街日报、4、行研报告均为公开利归原作者所有，起点财经仅分发做内部学习。扫一扫关注 回复：加入“起点财经”群。Equities Energy Equipment & ServicesJune 2019Why read this report?We are bullish on the global photovoltaic product market in 2019-21e as solar gets closer to competing with foss

4、il fuels on an equal footingproducers stand to benefit as they increase their dominance of the global supply chain; we think policy concerns are overdoneWe explain why Longi and Tongwei are best positioned to benefituuuThe key messagesThe solar industry is no stranger to volatility. Sharp swings in

5、product prices, overcapacity issues and, in turn, knock-on effects on stock prices have been common. The root cause is often subsidies as governments push for cleaner power. Germany led the way and became the worlds largest solar market in 2010. China soon took over and solar capacity grew from 19GW

6、 in 2013 to 175GW in 2018. But this led to overcapacity and a supply glut, so China has cut back subsidies and plans to phase them out completely by 2021. China is not alone in cutting subsidies. Other countries like Britain and Spain have also reduced subsidies as solar getscloser to competing with

7、 fossil fuels on an equal footing. Corey Chan* (S1700518100001) Head of A-share Infrastructure ResearchHSBC Qianhai Securities Limited corey.chanIn this report, we explain why we have a bullish outlook on thesolar companies, given:1) our global teams bullish forecasts for global solar installations:

8、 and 2) Chinas rising penetration of the global solar supply chain. While we expect costs in the supply chain to keep falling, we believe the rate of cost decline is likely to subside. We expect future cost reductions to come in the form of higher cell efficiency, less raw material consumption, and

9、economies of scale in production. Lower solar costs they have already fallen 92% in the last decade should drive long-term demand and increase photovoltaic (PV) installations.Dun Wang* (S1700519060002)Analyst, A-share Infrastructure HSBC Qianhai Securities Limited dun.wang* Employed by a non-US affi

10、liate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulationsWhere our view differs from consensusuWe believe consensus concerns about policy risk are overdone. We think the role policy incentives play in new solar installations will diminish as the market moves

11、closer to gridparity, the point where alternative energies like solar match the price of using fossil fuels.uWe analyze industry technology trends and see more uncertainty in cell and module technology than for wafer and polysilicon.We compare the risks to oversupply of different parts of the supply

12、 chain and conclude that wafer manufacturing is a relatively safe place given its relatively consolidated market andhigh investment barriers.uStocks: As supply-chain cost pressure is likely to persist, we expect cost leaders to stand out; we prefer Longi the cost leader in wafer and Tongwei the cost

13、 leader in polysilicon and cell, both rated Buy. Compared with other parts of the supply chain, we believe wafer and polysilicon cost leaders will find it relatively easier to maintain scale advantages, given the high share of fixed cost in their cost structure. We also have Buy ratings on Zhonghuan

14、 and Jingsheng. We have a Reducerating on First Applied Material (FAM) as we see pressure on earnings.1Equities Energy Equipment & ServicesJune 2019ContentsWhy read this report?1Facts and figures3Related research4Entering a new, brighter era5Technology upgrades, lower costs to drive upside15Our

15、stock-picking framework37Company sectionLongi Green (601012 CH) Tongwei (600438 CH)Zhonghuan Semiconductor (002129 CH)Jingsheng M&E (300316 CH)First Applied Materials (603806 CH)434455687990Disclosure appendix105Disclaimer1082Equities Energy Equipment & ServicesJune 2019Facts and figures11%G

16、lobal new PV installations CAGR in 2018-20e129GWGlobal new PV installation in 2020ecRMB270bnMarket size of the global PV supply chain in 2020ec90%Chinas share in global wafer supply in 2018c80%Chinas share in global cell/module supply in 2018c50%Chinas share in global polysilicon production in 20182

17、6%The share of new global PV installations by countries that achieved solar grid parity in 201892%How much solar costs have dropped in the last decade10-40%This is how much solar costs need to drop from the current level for solar grid parity on a global scale3We expect the share to increase to over

18、 70% by 2021 when China reaches grid parity, making policy incentive a less- important factor for solar demandWe expect a closer levelized cost of electricity (LCOE) gap between solar and competing power sources to drive global new PV installation growth in a secular mannerEquities Energy Equipment

19、& ServicesJune 2019Related researchRecommended reading.uChina Power T&D Equipment: Initiate coverage: Time to power up, 11 April 2019GCL-Poly Energy Holdings (3800 HK), 30 March 2019uuGlobal Upstream Solar, 25 March 20194Equities Energy Equipment & ServicesJune 2019Entering a new, bright

20、er eraWe believe there are brighter days ahead for the solar industry, underpinned by sustainable growth in long-term demand and the move towards grid parity. With technology advances and cost reductions underway, we see opportunities for suppliers along the solar supply chain. Our preferred stocks

21、are Longi and Tongwei.Long-term sustainable growth aheadChina supplies 80-90% of the global mid-to-downstream PV products, and its dominance is expanding upstream to polysilicon. Our global team expects the country to account for 60% of global polysilicon supply in 2019, up from 53% in 2018 (see HSB

22、C Global Renewable teams report titled Global Upstream Solar, 25 March 2019). Given Chinas rising penetration of theglobal solar supply chain and our global teams bullish forecasts for global new PV installationsChina supplies 80-90% of the global mid-to-downstream PV products(Exhibit 2), we see ups

23、ide potential forproducers positioned along the supply chain.We believe consensus concern about policy risks is overdone. In fact, we think the role policy incentives play in new solar installations will diminish as the market moves closer to grid parity. Globally, 26% of PV new installations in 201

24、8 came from the markets which have already achieved grid parity. With China targeting grid parity by 2021, the share would increase to c70%. In fact, the share could be higher as Chinas solar levelized cost of energy (LCOE) premium is one of the highest globally due to the low generation cost of its

25、 coal-fired powerplants. LCOE describes the cost of the power produced over a period of time.PV system costs have dropped by 75% since 2010. While we expect this to continue, the rate of cost decline is likely to subside. We expect another 10-40% cuts in system costs to enable grid parity on a globa

26、l scale. Not all cost cuts will pressure margins, as some of the reduction could come from the improvement in cell efficiency. We expect a 1ppt increase in cell efficiency tobring about at least 3% reduction in PV system cost.Given the important role that technology plays in the solar industry, supp

27、liers that have invested in the right equipment and processes are likely to become tomorrows winners. While some technology outcomes can be difficult to predict, some trends are easy to observe like mono-Si over multi-Si in the wafer space. This should give mono-Si market leaders like Longi and Zhon

28、ghuan a material advantage over their multi-Si peers. We see more uncertainties aboutcell and module technology trends as there are more alternatives than in the upstream.Suppliers that have invested in the right equipment and processes are likely to become tomorrows winnersCompared with other parts

29、 of the supply chain, we believe wafer manufacturing is safer from oversupply due to its relatively consolidated market, high investment barrier, and relative low profitability for incumbents. However, module production is more vulnerable to new supply givenrelatively low investment levels and techn

30、ology barriers.A-share PV product suppliers are trading at a 19x 12-month forward PE, close to the historical average valuation since 2015. However, in view of lower demand volatility associated with policy changes with the industry approaching grid parity, we expect valuation to rise to 20-30x,at t

31、he upper-end of the historical range. As the supply-chain cost pressure is likely to persist in5Equities Energy Equipment & ServicesJune 2019the near term, we expect cost leaders to outperform its peers down the road. We therefore have Longi the cost leader in wafer and Tongwei the cost leader i

32、n polysilicon and cell as our preferred stocks. Compared with other parts of the supply chain, we believe it should be relative easy for wafer and polysilicon cost leaders to maintain their scale advantage, given the highshare of fixed cost in their cost structure.Exhibit 1. A-share PV product suppl

33、iers: Industry trading close to the historical average valuationExhibit 2. HSBC forecasts global PV installations to rise at a 11% CAGR in 2018-20e70.060.050.040.030.020.010.0-20Jan-12PEJan-14MeanJan-16Jan-18China+1SD-1SDSource: Wind, HSBC Qianhai Securities.Source: Wind, HSBC Global Research estima

34、tesConcerns over the China-US trade dispute overdoneIn June 2018, the US started to impose an additional 25% tariff on importedsolar cellsExports to the US accounted for only 4% of Longis 2018 salesand modules. Many market participants are concerned about the negative impacts of the tariff on the de

35、mand of Chinas PV product. We believe such concern is overdone. Exports to the US accounted for only 4% of Longis 2018 sales, and almost none for Tongwei. In addition, Chinas overwhelming share in the producer market implies limited likelihood of US reducing its relianceon Chinas PV products, given

36、a lack of substitute supplies.In fact, the trade dispute could be a blessing in disguise forupstream solar producers.In August 2018, China announced plans to impose an additional 5-25% tariff on polysiliconimported from the US. We believe this could reduce foreign competition for polysilicon supplie

37、rs, including Tongwei and TBEA. Should the trade dispute deepen to include a trade ban on US-made production equipment, we expectequipment makers like Jingsheng to benefit.6sola installations (GW)Equities Energy Equipment & ServicesJune 2019Exhibit 3. China accounts for c30% of global cumulative

38、 PV installationsExhibit 4. but more than 50% of the global PV supply chainChina's share ofglobal supplyGlobal cumulative PV installations (2017)Latin America & Carribbean 2%India 5%Middle East & Africa2%94%100%90%80%70%60%50%40%30%20%10%0%84%82%Rest of Asia-Pacific & Central Asia5%J

39、apan12%68%68%68%53% China32%14%North America 14%Europe 28%WaferCellPV ModulePolysilicon20182010Source: Bloomberg, HSBC Qianhai Securities.Source: Company, Wind, HSBC Qianhai Securities.How much higher can renewable energy penetration go?Thegovernment has set bold targets for renewable energy, aiming

40、 for a 50% share ofpower generation from renewable sources (including hydro, solar, and wind) by 2030. Some market participants doubt the feasibility of such a scenario given the variable nature of power outputs from renewable sources like solar and wind. We believe this concern is groundless.Power

41、penetration of wind and solar reached 28.3%/24.5%/23.8%/25.1%/21.2% inGermany/Netherlands/Portugal/Spain/UK in 2018. The shareand the US is still low, at7.8% and 8.2% respectively, implying great growth potential. We believe dispatchable baseloadpower such as hydro (18% share of power mix) and natur

42、al gas (35% share of powermix in the US), and a smarter grid can help to smooth out tsolar farms.eration cycles of wind andExhibit 5. National policy targets for solar capacitiesCountryChinaPolicy TargetsTo increase power generation from renewables from 30% in 2018 to 50% in 2030France Germany India

43、 Italy Japan Sweden USTo increase solar capacity from 10GW in 2018 to 20GW in 2023Renewables' share of power generation to rise from 46% in 2018 to 80% in 2050 To increase solar capacity from 28GW in 2018 to 100GW in 2022To increase solar capacity from 20GW in 2018 to 50GW in 2030Renewables'

44、 share of power generation to rise from 16% in 2017 to 22-24% in 2030 100% power generation from clean energy sources by 2040Investment tax credits on solar at federal levelSource: Bloomberg, HSBC Qianhai Securities.7Equities Energy Equipment & ServicesJune 2019Exhibit 6. Chinas power mix (2018)

45、: Solar and wind accounted for just an 8% shareExhibit 7. Germanys power mix (2018): A 28% share from solar and wind powerBiomass and other 13%Biomass and other 1%Wind21%Wind5%Nuclear4%Solar3%Nuclear 13%Solar8%Hydro17%Hydro 4%Thermal power 41%Thermal power 70%Source: Wind, HSBC Qianhai Securities.So

46、urce: Bloomberg, HSBC Qianhai Securities.Exhibit 8. Chinas solar tariff: Subsidies reduced for centralized projects after 1 July 2019RMB/kWhPoverty-alleviation projectsZone I 0.65Zone II 0.75Zone III 0.85Bidding or Not No biddingCentralizedOn grid before 1st Jul. 2019 On grid after 1st Jul. 20190.50

47、0.400.600.450.700.55No bidding BiddingHouseholdSelf-useSold to gridOn grid before 1st Jul. 2019 On grid after 1st Jul. 20190.18+retail tariff 0.18+retail tariff0.18+coal-fired plant on-grid tariff 0.18+coal-fired plant on-grid tariffNo bidding No biddingOther decentralizedSelf-useSold to gridOn grid

48、 before 1 July 2019On grid after 1 July 2019Source: NEA, NDRC, HSBC Qianhai Securities.0.32+retail tariff 0.10+retail tariff0.32+coal-fired plant on-grid tariff 0.10+coal-fired plant on-grid tariffNo bidding BiddingInitiate coverage of five A-share PV product makersuLongi (601012 CH, Buy, TP RMB36.2

49、): As the largest global mono wafer producer, Longi is well positioned to benefit from the trend of rising share of mono wafers in PV panel production (up from 45% in 2018 to 69% in 2021e). The company has been a cost leader in the wafer industry, cutting its non-Si cost by 72% since 2013. We expect

50、 further declines of c40% in 2018-21, driven by economies of scale. This, together with the addition of 37GW new wafer capacities in 2019-21, should lead to market share gains from 35% in 2018 to 42% in 2021. Valuation at 20x 2019e PE looks attractive, with a 43% earnings CAGR in 2018-21e.Tongwei (6

51、00438 CH, Buy, TP RMB19.4): Tongwei is a global cost leader in both Passivated Emitter and Rear Cell (PERC) and polysilicon production. Its cell processing cost at RMB0.23/W in 1Q19 is 34% below the industry average, and we expect that to drop to RMB0.19/W in 2021. In polysilicon production, the com

52、panys Baotou Ph1 and Leshan Ph1 projects have a unit overall cost of RMB50,000/t, close to the bottom of the industry range. Around 60% of the companys revenue in 2018 came from the agriculture business, which generates steady cash flow. This should alleviate the capex burden of Tongweis PV business

53、. Valuation at 17x 2019e PE looks attractive, in our view, with a 27% earningsCAGR in 2018-21e.u8Equities Energy Equipment & ServicesJune 2019uZhonghuan (002129 CH, Buy, TP RMB14.3): The state-owned company is the second largest PV mono wafer supplier in the world and a leading semiconductor waf

54、er supplier in China. We expect its revenue to more than double in 2018-21e with the completion of new PV and semiconductor wafer capacities. Compared with its private sector peers, access to funding is relatively easy and the company has a low borrowing cost historically thanks to its SOE status. O

55、n the completion of the RMB5bn private placement, we expect its net gearing to drop to 27% in 2019 from 55% in 2018. While 2019e PE appears rich at 51x, we expect that to drop to 24x in 2020e and 16x in 2021e.Jingsheng (300316 CH, Buy, TP RMB14.1): We view Jingsheng as the best way to play the wafer

56、 capacity upcycle among our coverage, given the companys market leadership inuwafer-making equipmentmade crystal-growing equipment. The company has a c50% market share in third party. We expect Jingshengs crystal-growingequipment to register a 28% revenue CAGR in 2018-21e, driven by capacity expansi

57、ons in Chinas PV and semiconductor wafer industry, leading to a 25% earnings CAGR in 2018- 21e. Valuation at 19x 2019e PE is attractive, in our view.FAM (603806 CH, Reduce, TP RMB25.8): The company is the largest supplier of ethylene vinyl acetate (EVA) film in the world, with around a 60% market share in 2018. While the EVA market is likely to grow with risin