高盛-中国光伏-选择强壮资产负债表的下游公司回避设备等

11July2024|4:35PMCST

ChinaCleanTechnology:Solar

Preferstrongbalancesheets,downstream;avoidsolarcellequipment;initiate13stocks;5Buys,3Sells

Inconjunctionwithourcompanionindustryreport,weinitiateon13stocks

acrossthesolarvaluechain,includingsolarmaincomponents(poly/wafer/cell/module),inverters,materialsandequipment.Ourkeystockviews:

nCashisking:Webelievebalancesheetstrengthisthemostimportantfactortoconsiderwhennearingtheendofacyclicalbottom.WebelieveourcoveredTier

1playersaremuchbetterpositionedthanSuntech/LDK/Yingliwereduringthe

2012downturngiventheirmoreoptimizedbalancesheetswithlowerleverage,lackofforeignbondexposureandlongerdebtmaturityyears.However,

companiesthatmakemajoroperating/financingmisstepsduringachallengingperiodmayincursignificantrisksfortheirbusinesssustainability.Acrosssolar’smainvaluechain,wepreferDaqo(Buy/NeutralonADR/A)/Longi(Neutral)vs.GCL(Neutral)/TongweiandTZE(bothSell-rated).

nPreferdownstream:Weexpectrelativelymodest15%/10%/18%ASPdeclinesin2024Eforinverter/glass/filmvs.~50%formainvaluechain.BuySungrow

(overseasutility-scaleprojectstailwind),FlatH/Xinyi(sharegainin

profitable,growingsubsector),HZFirst(benefitfromN-typesolartechshift).

nAvoidsolarcellequipment:Weproject46%/34%solarcapexdeclinesin

_

2024E/2025Ewithinventory/accountreceivableimpairmentrisk.SellMaxwell(marketoverlyoptimisticonHJT)andNeutralonSZS.C.

nValuation:Forsolarupstream,weapply0.7-1.1X2024EP/Bforstockswith

weakB/S;forthosewithstrongerB/S,weusemid-pointof-1STDandhistoricalavg.P/B.Formid/downstream,weusediscountedmid-cycleEV/EBITDA.

nRisks:(+)Higher-than-expecteddistributedsolardemandunlockedbycheap

modulepriceinoverseasemergingmarketswithpowershortage;(+/-)Faster-orslower-than-expectedsupplycut;(-)Banks’lendingpolicytightening;(-)PotentialUSAD/CVDtariffhikeonChinaplayers’SEAcapacity;(+)Breakthroughinnewcelltech.

Research|Equity

JacquelineDu

+86(21)2401-8948|

jacqueline.du@GoldmanSachs(China)SecuritiesCompanyLimited

MengwenWang

+86(21)2401-8932|

mengwen.wang@GoldmanSachs(China)SecuritiesCompanyLimited

ZhihanYe

+86(21)2411-8029|

zhihan.ye@

GoldmanSachs(China)SecuritiesCompanyLimited

GoldmanSachsdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,

investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthis

report.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegACcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto

/research/hedge.html.Analystsemployedbynon-USaffiliatesarenotregistered/qualifiedasresearchanalystswithFINRAintheU.S.

GoldmanSachsChinaCleanTechnology:Solar

TableofContents

Sixkeyexhibits3

Sungrow(300274.SZ):Ridingonoverseastailwindwithstrongutility-scaleprojectpipeline;initiateatBuy8

HZFirst(603806.SS):KeybeneficiaryofN-Typesolartechshift;initiateatBuy17

Daqo(DQ/688303.SS):Polypriceconcernlooksoverlypricedin;initiateADR/AatBuy/Neutral24

FlatGlass(6865.HK,601865.SS):Sharegaininaprofitable,growingsubsector;initiateH/AatBuy/Neutral31

XinyiSolar(0968.HK):Undervaluedsolarglassleader;initiateatBuy37

Tongwei(600438.SS):DeterioratingpolymarginswithmorepressuredB/Sthanpeers;initiateatSell41

TZE(002129.SZ):InitiateatSellonlikelymoreseveremargincompressionandstretchedB/S45

Maxwell(300751.SZ):HJTnewcelltechupsideoverlypricedin;initiateatSell50

LONGi(601012.SS):StrongerB/SthanpeersbutBCtechyetproven;initiateatNeutral54

GCLTech(3800.HK):Competitivegranularpolytech,butN-Tpressurefromtightliquidity;initiateatNeutral

58

SZS.C.(300724.SZ):Lowvaluationreflectsdimmerorderoutlook;initiateatNeutral62

Appendix:Chinasolarvaluechainmapping65

Appendix:TPvaluationmethodology65

InvestmentthesesandTPmethodologies68

Appendix:M&AFramework73

DisclosureAppendix74

_

11July20242

GoldmanSachsChinaCleanTe

Sixkeyexhibits

Exhibit1:Wepreferinverter/glass/filmvs.solarmaincomponent(poly&waferleastfavored)andcellequipment

SummaryofourASP/capexestimates

Source:CPIA,PVInfolink,SiliconChina,Oilchem,Wind,Bloomberg,companydata,GoldmanSachsGlobalInvestmentResearch

_

11July2024

GoldmanSachsChinaCleanTe

Exhibit2:OurChinasolarcoverageataglance

_

Source:ThomsonReuters,Wind,companydata,GoldmanSachsGlobalInvestmentResearch

11July2024

GoldmanSachsChinaCleanTe

Exhibit3:WeareBuy-ratedonSungrow/HZFirst/FlatH/XinyiandDQADR;weareSell-ratedonMaxwell/Tongwei/TZE

Marketshareataglance

ActionableStockIdea

Sungrow(300274.SZ)BUY

Globalleadingsolarinverter/ESSplayertorideonoverseastailwindwithstrongUSSprojectpipeline.

12mTPRmb95.9|62%upside

●TPbasedon10Xdiscount2027EEV/EBITDA

BUY

HZFirstApplied(603806.SS)

12mTPRmb23.9|80%upside

●Largestsolarfilmproducertoseesharegainandmargin

_

TPbasedon13Xdiscount2027EEV/EBITDA

●upsidefromN-Typesolartechshift.

BUY

XinyiSolar(0968.HK)

12mTPHK$4.9|34%upside

●Largestsolarglassmakertogainmarketshareina

TPbasedon7Xdiscount2027EEV/EBITDA

●profitablegrowingmarket.

Tongwei(600438.SS)SELL

No.1PolyandCellplayerwithvulnerableearningsfrom

12mTPRmb13.4|23%downside

TPbasedon1.1X2024EP/B

●aggressiveexpansionandapressuredB/S.

BUY

FlatGlass(6865.HK)

Secondlargestglobalsolarglassmakertogain

12mTPHK$14.7|36%upside

TPbasedon5Xdiscount2027EEV/EBITDA

●marketshareinaprofitablegrowingmarket.

BUY

Daqo(DQ)

12mTPUS$21.8|38%upside

●Leadinghigh-puritypolyproducerwithsolidbalancesheet

TPbasedon0.4X2024EP/B

●tonavigatethroughindustryheadwinds.

SELL

Maxwell(300751.SZ)

12mTPRmb92.2|16%downside

●LeadingcellequipmentplayerinscreenprintandHJT

TPbasedon19Xdiscount2027EEV/EBITDA

●tosufferfromsolarcellcapexdowncycle.

SELL

TZE(002129.SZ)

12mTPRmb6.1|27%downside

●No.2solarwaferproducerfacingmoreseveremargin

TPbasedon0.7X2024EP/B

●compressionwithstretchedB/S

Note:Globalsharebyproductionforpoly/wafer/cell/modulein2023,GlobalsharebyshipmentforInverter(2022)/Film(2023)/CellEquipment(2023)/Glass(2023)

Source:CPIA,companydata,GoldmanSachsGlobalInvestmentResearch

11July2024

GoldmanSachsChinaCleanTe

Exhibit4:Ourestimatesaresubstantiallybelowconsensusin2024E-2026E

GSevs.consensus

_

Source:Wind,Bloomberg,companydata,GoldmanSachsGlobalInvestmentResearch

11July2024

GoldmanSachsChinaCleanTe

Exhibit5:Forsolarupstream,weapply0.7X-1.1X2024EP/BforstockswithweakB/S;forcompanieswithrelativelystrongB/S,weapplythemid-pointof-1stdandthehistoricamid/downstream,weapplydiscountedmid-cycleEV/EBITDA

SummaryofratingsandtargetpricesforourGSChinasolarcoverage

Note:OurhistoricalEV/EBITDAandP/Evaluationexcludestheupturnin2021-23,aswedonotexpectasimiliarupturnintheforeseeblefutureasin2021-23;bluehighlightstheprimaryvaluationmultipleforrespectivecompanies

Source:WIND,ThomsonReuters,companydata,GoldmanSachsGlobalInvestmentResearch

Exhibit6:Weinitiate13stocksalongthesolarvaluechain;preferstrongbalancesheetsanddownstream

ChinaCleanTech-Solarsectorcompsheet

_

Note:AsofJuly4,2024Eclosing,*denotesBuyonCL

Source:ThomsonReuters,Wind,companydata,GoldmanSachsGlobalInvestmentResearch

11July2024

GoldmanSachsChinaCleanTechnology:Solar

Sungrow(300274.SZ):Ridingonoverseastailwindwithstrongutility-scaleprojectpipeline;initiateatBuy

WithintheChinasolarsector,wepreferinverter/PCSsub-sectorsfortheirless

capital-intensivenatureandbettersupply/demanddynamicsthanthemainvaluechain.WebelieveSungrowisbestpositionedwithinthissub-sector,duetoitsindustry-leadingtechnologyinvestment,costadvantagevs.overseaspeers,andstrongeroverseas

positioningvs.domesticpeers.

nStrongutility-scalepipelinesupportedbyextensiveglobalfootprint:Comparedtomostofthedomesticinverter/PCSpeers(excludingHuaweiandBYD)whichrelymoreondistributionchannelsfortheresidentialandC&Iapplications,Sungrowis

morefocusedondevelopingdirectbusinessrelationshipswithoverseascustomers.Asof2023,Sungrowhasdevelopedasalesnetworkof490+globalservice

branchesand280+authorizedserviceproviderswithanindustry-leadingoverseas

headcountof1,423(+58%yoy)(Exhibit13).Thankstoitsmulti-yearoverseas

investment,ex-Chinacontributionforthecompanyissignificantfortheinverter/ESSbusinesses(70%~80%/80%~90%ofsegmentrevenuerespectively)(Exhibit14).

Meanwhile,Sungrowhasbuiltadiversegeographicalexposure,withNorth

Americas/Europe/Australiabeingthelargestcontributorswithatleast36%/31%/5%overseasrevenuesplitin2023perourestimate,followedbyIndia,Braziletc(Exhibit15).Goingforward,webelieveSungrowisbestpositionedwithinthissub-sectortorideonthetailwindofincreasingutility-scaleprojectdemandinthesemarketsin

additiontoitslatestexpansionintotheMiddleEast;

_

nCostcompetitivenesswillaidinglobalenergystoragePCSsharegain:Duetoitsscaleadvantageandlowdomesticrawmaterialcosts,Sungrowhasdevelopedasignificantcostgapvs.overseasinverter/PCSplayers-ASPofitssolarinverterwas70%~80%lowerthanSMAandSolarEdgeasof2023,ASPofPCSwas30%~40%lowerthanTeslaandFluence(Exhibit16).Asof2022,top8Chinesesolarinverter

companieshave~80%ofglobalmarketshare,whichwebelievewasdrivenbycostcompetitiveness.Goingforward,webelieveSungrow,alongwiththebroadChineseESSsupplychain,canreplicatethesolarinvertermarketsharegainexperiencein

theESSindustry,thankstothewell-establisheddomesticESScomponentsupplychain(e.g.batteries,PCS,andcooling).WeexpectSungrowtomorethandoubleitsglobalex-ChinaESSmarketshareto31%by2030E(vs.13%in2023)while

maintainingastableChinesemarketshareat3%~4%asthecompanyallocatesfewerresourcesdomesticallygivenintensecompetitionandourchallenging

profitabilityoutlookfortheindustry,leadingto28%ESSrevenueCAGRduring2023-30E(Exhibit17).

nContinuedinnovationdrivenbyintenseR&Dinvestment:AsthefirstproducerofChinese-madesolarinverter,Sungrowhasseenastrongemphasisontechnologyandnewproductdevelopment(Exhibit12).Asof2023,Sungrowhasacquiredover4,000patents,supportedbyanabove-peerR&Dheadcountsplitof~40%and

strongR&DinvestmentofRmb2,447mnby2023(largerthanGinlong,GoodWe,

Sineng,Fluence,SMAcombined)(Exhibit10).Goingforward,webelieveSungrow

11July20248

GoldmanSachsChinaCleanTechnology:Solar

cansustainitsproductleadershipasprovenbyitscontinuedinnovationacross

productcategoriesinthepastyears,suchas320kwstringinverterlaunchedin2021(thehighestpowergloballyatthetime)and10MWhliquid-cooledESSlaunchedin

2023(thehighestcapacitygloballyatthetime)(Exhibit11).

SungrowisaleadingglobalsolarinverterandESS(energystoragesystem)providerheadquarteredinHefei,AnhuiProvinceinChina.Weforecast19%/15%

revenue/EBITDACAGRin2023-30EforSungrow(Exhibit9),drivenby(1)on-pargrowthprofileforthesolarinvertersegmentof11%vs.globalsolarinstallationramp-up,givenalreadyhighdomesticcompanies’marketsharegloballyandintensivecompetition

acrossthesolarsupplychain;and(2)28%ESSrevenueCAGRonthebackofglobalmarketsharegain(from9%in2023to13%in2030E)mainlydrivenbyoverseas

marketsandourstrongutility-scaleESSinstallationdemandoutlookinthelongterm,asevidencedbythesolidinstallationdatainChinaandtheUS,twoofthelargest

utility-scaleESSmarketsglobally,inthepastfewyears.However,weexpectmarginstodeclineabitfrom30%/17%/13%in2023to25%/13%/10%in2030EforGPM/EBITDAmargin/NPMduetoincreasingcontributionfromless-profitableregionssuchasSEA,

India,CentralAsia,Africa,andLatinAmerica.

Valuation:Ourtargetpriceisbasedon10X2027EEV/EBITDA(derivedfromthemidofaveragehistoricalP/Eand1std.belowaverageEV/EBITDA)discountedbackto2025Eat10.1%CoE,implying62%upsidefromcurrentlevels(vs.16%avg.upsideforourChinaSolarcoverage).Thecompanycurrentlytradesat9xEV/EBITDA,closeto1sdbelowpast5-yearaverage(Exhibit19).Forcross-check,weconductanSoTPvaluationforthe

companywith2025E-basedtargetP/Esbasedonglobalpeeraverageforeachbusinesssegment(solarinverter,ESS,andsolarprojectdevelopment),whichyieldsanequity

valuepershareofRmb97.0mostlycontributedbytheESSandsolarinverter

businesses.WeinitiateatBuyonthestock.Sungrowshareperformancehasbeen

positivelycorrelatedwithUSutility-scaleindustrycapacitygrowthinthepast,butwe

thinkthestrongESSinstallationYTDisnotfullyfactoredincurrentsharepriceyet

_

(Exhibit20).Catalysts:VolumeshipmentofnewESSproduct(PowerTitan2.0)in3-4Q24todriverevenuegrowthacceleration(Exhibit21);continuedoverseaslarge-scaleorderwins(Exhibit22).

Exhibit7:SOTPcross-check:Rmb97.0pershareimpliedvaluemostlycontributedbytheESSandsolarinverterbusinesses,inlinewithour

TPofRmb95.9

Source:Companydata,Wind,GoldmanSachsGlobalInvestmentResearch

Keyrisks:

nCompetitionandmarginrisk:CompetitioninthesolarinverterandESSspaceremainsintense.Goingforward,ifthecompanycannotmaintainitsleadershipin

11July20249

GoldmanSachsChinaCleanTechnology:Solar

termsoftechnologyinnovation,newproductiondevelopmentandcostcontrol,ourmarketshareassumptionsandfinancialforecastswillbeadverselyimpacted.

nPotentialtradeconflictrisk:CurrentlysolarinverterexportedfromChinatotheUSissubjectto25%tariffwheretheimpacthasbeensomewhatoffsetviaits

productioncapacityinThailandandIndia.Meanwhile,USisplanningtoraisetariffsonnon-EV(includingESS)batteriesfrom7.5%to25%until2026(link),whichcouldunderminethecostadvantageforSungrow.Goingforward,ifthetradeconflict

intensifiesintheUSorinotherregions,ourrevenueandnetincomeforecastsforSungrowwillbenegativelyaffected.

nSolarpowerstationmanagementrisk:Sungrow’s34%revenueand18%grossprofitwasgeneratedfromsolarprojectEPCandBTin2023.Theseprojectsrequiresubstantialupfrontcapitalinvestmentandtheprojecttimelinecanbeaffectedbyaseriesofexternalfactorsinvolvingregulationsandapprovalsfromgovernment

authoritiesandresources(e.g.land,C&I,androoftop)etc.Goingforward,ifprojectsaredelayedatalargescale,ourrevenueforecastofthissegmentcouldbe

negativelyimpacted.

Exhibit8:SungrowisaleadingglobalsolarinverterandESSsupplier

Sungrowcompany101

_

Source:IHSMarkit,WoodMackenzie,Companydata

11July202410

GoldmanSachsChinaCleanTechnology:Solar

Exhibit9:WeexpectSungrowtodeliver22%/18%revenue/EBITDAgrowthin2023-27E

_

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

11July202411

GoldmanSachsChinaCleanTechnology:Solar

Exhibit10:Welikeitsindustry-leadingtechnologyabilitywithstrongR&Dinvestmenttrackrecord

Asof2023

Exhibit11:...whichhasledtocontinuedinovationacrossproductcategories

Source:Companydata

Exhibit12:andhighlycompetitiveproductsvs.overseaspeers

Source:Companydata

_

Exhibit14:Asaresult,ex-Chinasalescontributionhasbeensignificantforinverter/ESSbusinesses

Source:Companydata

Exhibit13:Sungrowisfocusedonwideningitsglobalfootprint

Growattsalesdatafrom2022Source:Companydata

Exhibit15:...withadiversegeographicalexposure,andNorthAmericas(mainlytheUS)beingthelargestcontributor

Source:Companydata,GoldmanSachsGlobalInvestmentResearchSource:Companydata

11July202412

GoldmanSachsChinaCleanTechnology:Solar

Exhibit16:CostadvantageshouldhelpSungrowcontinuetotakesharesglobally

Exhibit17:Drivenbytechinnovationandscaleadvantage,weexpectSungrowtogainshareintheglobalESSmarket

Source:Companydata,WoodMackenzieSource:Companydata,GoldmanSachsGlobalInvestmentResearch

Exhibit18:Withalreadyhighindustryconsolidation,weexpectinverterbusiensstogrowinlinewithglobalsolarinstallation

_

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

Exhibit20:SungrowsharepricehasbeenpositivelycorrelatedwiththeUSutility-scaleindustrycapacityinstallationgrowth,butstrongESSinstallationdataYTDdoesnotlookfullyfactoredin

Source:EIA,Wind

11July2024

Exhibit19:WeseethevaluationattractiveasSungrowiscurrentlytradingatcloseto-1std.EV/EBITDA

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

13

GoldmanSachsChinaCleanTechnology:Solar

Exhibit21:Catalyst1:Revenuegrowthaccelerationin2H24drivenbyvolumeshipmentofnew-generationESSproducts

_

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

11July202414

GoldmanSachsChinaCleanTechnology:Solar

Exhibit22:Catalyst2:Continuedgeographicalexpansionandoverseaslarge-scaleorderwins

_

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

11July202415

GoldmanSachsChinaCleanTechnology:Solar

Exhibit23:Sungrowfinancialsummary

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

_

11July202416

GoldmanSachsChinaCleanTechnology:Solar

HZFirst(603806.SS):KeybeneficiaryofN-Typesolartechshift;initiateatBuy

HangzhouFirstisthelargestsolarfilmproducerwith40%-50%shareofglobalsolarfilmindustrysince2017.AssolarcelltechshiftstoN-Type,webelieveHZFirstiswellpositionedtogainmarketsharewithpotentialmarginupsideduetopremiumpriceofN-typesolarfilmintheearlyadoptionstage.

WebelievethecorecompetitivenessofHZFirstliesin1)highqualitycomprehensive

productcategoriestoenableallkindsofN-typesolartechroutine,2)strongvaluechainbargainingpowerfromitsscaleadvantage,and3)R&Dcapabilitytolowerproduction

costandstrengthenthekeytechnologydevelopment,wherewebelievethecompanyisbetterpositionedvs.restofindustryplayers.

WeexpectHZFirsttodeliveroneofthehighestnetincomegrowthwithinoursolar

coverage(27%in2024Eand23%in2023-27Evs.average22%/14%forourcoveragemid/downstreampeers),drivenbycapacityexpansionandmarketsharegainamid

N-Typesolartechshift.Inthelongerrun,wearepositiveonitsstrategytoexpandmarketshareinsemiconductors(via.DFR)andbatteryvaluechain(via.ALF).

SolarfilmhasthebestS&Ddynamicamongsolarvaluechain:WhilepriceforEVAresinandEVA/POEsolarfilmhasdeclinedby18%/12%/10%sincelatestpeakinMay(onweakermoduledemand),webelievesolarfilmstillhasthebestS&Ddynamic

withinthesolarvaluechain(1.2x/1.0xsupplytodemandforfilmandresin,vs.avg2.0Xforsolarcorecomponentsin2024E;GSe)withpotentialstructuraltightnessfromPOEresinifN-typemodulepackagingsolutionshiftsfromEPEtoPOEfilm.Historically,HZFirst’sstockpricehaspositivelycorrelatedwithresinprice,asresintightnesshas

amplifieditsvaluechainbargainingpower(e.g.,strongerrawmaterialsourcingandcostpass-throughability)andhelpedtosolidifyitsdominantmarketposition.

_

N-typesolartechshifttodrivemarketsharegainandmarginupside:Webelieve

HZFirstisbestpositionedtobenefitfromtheN-Typesolartechshift,intermsofboth

marketsharegain(60%/45%shareinN-Type/overallsolarfilmin2023,GSe;48%in

2024Eto59%in2030E)andmarginimprovement(0.6ppp.a.in2023-2027E),given1)webelieveitisoneoftheveryfewfilmmakersthatcanofferreliableencapsulating

solutionstoallkindsofN-typeroutine(Topcon,HJT,xBC,Perovskite,etc.)and2)marg