GS SNEC Notes: Weak PV Sentiment; Surging Energy Storage Orders Stand Out

Overview

Based on Goldman Sachs' research notes from the 2026 SNEC PV Expo in Shanghai, including discussions with management from eight listed PV companies and nearly 20 industry experts, this report highlights sharply divergent market sentiment between the main PV supply chain and Distributed Energy Storage Systems (DESS). The main PV chain is weighed down by price wars and overcapacity, resulting in weak sentiment; meanwhile, the energy storage sector has become the expo's highlight, driven by explosive global demand and surging orders. The report maintains its view of an H2 PV demand inflection point and clearly favors battery/module stocks while remaining bearish on upstream materials and glass.

Core views

Energy storage sector demonstrates robust growth and earnings resilience. Distributed Energy Storage Systems (DESS) were the standout sub-sector at this expo. On orders, leading companies guided for 60-70% QoQ growth in Q2 and expect continued QoQ growth in H2. Unlike past reliance on single markets, this year's growth is driven jointly by Southeast Asia, the Middle East, Eastern Europe, Australia, and Africa; management views this demand recovery as more sustainable. Leading Battery Energy Storage System (BESS) firms are currently running at full capacity utilization, with H2 order ceilings dependent on expansion progress. On margins, despite rising lithium carbonate costs, DESS margin guidance remains stable. This is mainly due to improved battery density and product mix optimization: for example, upgrading battery cells from 180Ah to 340Ah can reduce unit production costs by ~20%, while newly launched products absorb battery cost inflation through more efficient cost structures. PV demand expectations revised upward; H2 inflection point approaching. Multiple module manufacturers raised their 2026 China PV installation estimates from 200GW at the start of the year to 220-240GW (GS forecast: 235GW), implying H2 YoY growth exceeding 30%. Strong domestic demand stems primarily from lower-than-expected impact of 'Document No. 136' and better-than-expected distributed PV demand driven by improved economics. Overseas, demand has been strong YTD in Africa, South Korea, Southeast Asia, India, and Australia, though declines may occur in the Middle East and Brazil. Price competition remains a core concern; upstream pressure intensifies. While Tier-1 module makers uniformly guide to maintain current price levels, some Tier-2 players have recently resumed aggressive low-price strategies to secure operating cash flow. Overseas price competition is particularly intense, with multiple companies estimating their Middle East projects are essentially at breakeven. For upstream polysilicon, pricing pressure is even more severe, mainly due to destocking needs and potential significant new supply from Tier-1 producers resuming production starting June.

Analysis framework

The report employs an 'on-site expo research + supply chain cross-validation' methodology. First, it intuitively assesses industry divergence by observing changes in booth sizes at the expo (expansion in ESS, contraction among top PV players, absence of Tier-2/3 players). Second, through interviews with management and experts, it dissects fundamentals across sub-sectors along three dimensions: 'Volume' (QoQ order growth, regional distribution), 'Price' (Tier-2 low-price strategies, breakeven points), and 'Profit' (cost pass-through mechanisms, cost reductions via tech upgrades). Finally, combining macro policy impacts (e.g., Document No. 136) and marginal supply-demand changes (capacity restarts, inventory cycles), it derives conclusions on the H2 demand inflection point and sub-sector allocation recommendations.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report analyzes changes on the supply side (Tier-1 production resumption in June, inventory destocking) and demand side (diversified overseas demand, weakening domestic policy impact) to judge price trends and profit potential in polysilicon and module segments. This is the core logic for cyclical industry analysis.

• Industry/Sector Analysis FrameworkUpstream-Midstream-Downstream Transmission

  Upstream-Midstream-Downstream Transmission

  The report differentiates performance across upstream (polysilicon), midstream (glass, cells/modules), and downstream applications/supporting sectors (distributed energy storage). It notes upstream faces the largest supply shock, midstream is impacted by price wars, while energy storage strengthens as a supporting segment due to independent demand logic, reflecting asynchronous prosperity across the supply chain.

• Company Fundamentals & Financial FrameworkOperating/Financial Leverage Analysis

  Cost Structure Optimization & Tech Iteration

  The report mentions that upgrading battery capacity from 180Ah to 340Ah can reduce unit costs by ~20%, illustrating how tech iteration spreads fixed costs and how learning curves drive cost advantages—a common manufacturing logic where scale and technological improvements offset raw material price hikes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• LONGi Green Energy (LONGi)

  Beneficiary: Module segment leader benefiting from H2 demand inflection and relatively stable price guidance

  Strengths

  Tier-1 brand advantage, cost control capability, benefits from improving distributed demand

  Comparison

  Outperforms glass and polysilicon segments

• Tongwei Co. (Tongwei)

  Negatively Impacted: Polysilicon segment facing severe pricing pressure and new supply shocks

  Weaknesses

  High inventory destocking pressure; supply shock from Tier-1 production resumption

  Comparison

  Underperforms module segment

  Risks

  Further polysilicon price declines

• Flat Glass Group (Flat Glass)

  Negatively Impacted: PV glass segment affected by overall weak supply chain sentiment and competition

  Comparison

  Underperforms module segment

Key data

• DESS Q2 Order QoQ Growth60-70%Guidance indicates continued QoQ growth in H2
• 2026 China PV Installation Forecast220-240GWModule makers raised forecasts from 200GW at year-start; implies H2 YoY growth >30%
• Cost Reduction from Battery Upgrade~20%Unit production cost decline from upgrading 180Ah to 340Ah
• LONGi Green Energy Target PriceRmb 13.13Rating: Buy
• Tongwei Co. Target PriceRmb 13.60Rating: Sell
• Flat Glass Group (A-share) Target PriceRmb 11.13Rating: Sell

Impact & implications

For portfolios, the report recommends a structural strategy: overweight battery and module segments, especially leaders with brand and technological advantages (e.g., LONGi Green Energy), as they are better positioned to maintain share amid price wars and benefit from demand recovery; underweight or avoid glass and polysilicon segments (e.g., Flat Glass, Tongwei) due to more severe oversupply and downward pricing pressure. The energy storage sector is viewed as an independent source of alpha; investors should focus on leading DESS/BESS firms with global channel presence and expansion capabilities.

Risks

• Persistent aggressive pricing by Tier-2 players eroding industry-wide profits
• Unexpected decline in overseas market demand (especially Middle East and Brazil)
• Faster-than-expected release of new polysilicon supply exacerbating price wars
• Significant volatility in raw material costs such as lithium carbonate impacting ESS margins

What to watch

• Whether actual H2 China PV installations validate the 220-240GW forecast
• Actual output and inventory destocking progress after Tier-1 polysilicon producers resume operations in June
• Order conversion and expansion progress of DESS companies across multiple overseas regions
• Breakeven status and pricing strategy shifts of Tier-2 module makers in overseas projects