Profitability divergence across China’s solar industry chain: overseas module prices rise, while polysilicon and glass remain under pressure

Overview

This report is Goldman Sachs’ China solar profitability tracker, which monthly monitors supply and demand, inventory, spot prices, input costs, and changes in implied cash gross margin/EBITDA margin across each part of the photovoltaic industry chain. The key change in April is that profitability continued to diverge: film, modules, and wafers benefited from price increases or easing cost pressure; polysilicon, cells, and glass were dragged down by falling prices, high inventory, and rising costs.

Core views

The report believes solar film and overseas module prices are more likely to remain at current spot levels, but polysilicon and glass still face short-term downside risk because no new supply-side actions have yet been seen to stabilize prices, while inventory pressure remains high. From an investment perspective, it is more positive on Hangzhou First and Longi within coverage; it remains cautious on Rod Poly-related names (Daqo ADR/A rated Neutral/Sell, Tongwei rated Sell) and Glass-related names (Flat A/H rated Sell).

Analysis framework

The report uses a monthly industry chain tracking approach, combining price changes, output, demand, ending inventory, and inventory days across polysilicon, wafers, cells, glass, modules, film, and other segments to estimate spot-price-implied cash gross margin and unit gross profit changes, and cross-validates these against global module demand, domestic installations, export volumes, and regional demand changes.

Methodology notes

• Industry Chain Profitability TrackingChina Solar Profitability Tracker

  Track supply and demand, inventory, prices, and costs by sub-sector

  This framework focuses on monthly supply-demand and inventory dynamics, and uses spot prices and input costs to infer trends in covered companies’ cash gross margins and EBITDA margins.

• Profitability EstimationSpot price implied cash profitability

  Spot-price-implied cash gross margin

  The estimate does not fully reflect company-level price discounts or premiums, and may also differ from an individual company’s actual operating results due to shutdowns, maintenance, and similar factors.

• Demand EstimationGlobal Module Demand

  Global module demand derivation

  Global module demand is derived by aggregating module demand implied by China installations, China export volumes, and module demand implied by U.S. AC-side installations.

• Valuation MethodEV/EBITDA discounted target price

  12-month target price valuation

  The Longi target price of Rmb18.8 is based on 11x 2027E EV/EBITDA and discounted back to 2026E at an 11.3% cost of equity; the Hangzhou First target price of Rmb20 is based on 13x 2027E EV/EBITDA and discounted back to 2026E at a 10.5% cost of equity.

• Goldman Sachs General FrameworkGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated percentile comparison

  This framework compares individual stocks with the market and industry peers using growth, financial returns, valuation multiples, and composite indicators.

Asset mapping & comparison

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

• Hangzhou First

  Covered name; preferred by the report

  Strengths

  Benefits from rising solar film prices and the potential for expansion in unit profitability.

  Weaknesses

  If installations come in below expectations, capacity utilization and film ASP may come under pressure.

  Comparison

  Compared with polysilicon and glass, profitability improvement in film was more evident in April.

  Risks

  Installations below expectations, capacity expansion slower than expected, slower-than-expected progress in high-end non-PV businesses, and increased procurement pressure for raw materials such as resin.

• Longi

  Covered name; preferred by the report

  Strengths

  Declining upstream prices help EBITDA resilience, and BC technology has mid-cycle upside potential.

  Weaknesses

  If cost reduction through technology or BC development progresses more slowly than expected, the mid-cycle profit inflection point may weaken.

  Comparison

  Compared with upstream polysilicon and glass companies, module/integrated leaders may benefit from easing cost pressure.

  Risks

  If demand exceeds expectations and is combined with strong supply-side policy, polysilicon/glass prices may rebound; adoption of cost-reduction technologies may be slower than expected; BC development may be slower than expected.

• Rod Poly-related companies (Daqo ADR/A, Tongwei)

  The report remains cautious

  Strengths

  If supply-side policy strengthens or demand exceeds expectations, prices may rebound.

  Weaknesses

  Polysilicon prices fell sharply in April and inventory pressure is high.

  Comparison

  Compared with film, modules, and wafers, profitability deterioration in polysilicon was more pronounced in April.

  Risks

  Spot prices still face short-term downside risk, and actions to stabilize prices on the supply side have not yet emerged.

• Glass-related companies (Flat A/H)

  The report remains cautious

  Strengths

  If primary supply is cut or demand improves, price pressure may ease.

  Weaknesses

  Glass prices fell to new lows, inventory days remain high, and LNG costs are rising.

  Comparison

  Compared with overseas modules and film, both prices and profitability in glass were under pressure in April.

  Risks

  Further rising inventory pressure, further price declines, and higher energy costs.

Key data

• Polysilicon price changeDown 14% so far in AprilThe report says this has erased all gains since the anti-involution move in July 2025.
• Glass price changeDown 3% so far in AprilGlass prices fell to new lows, with end-April inventory days at 53 days according to Oilchem.
• Overseas module price changeUp 11% so far in AprilThis mainly reflects price adjustments after the export tax rebate was canceled starting April 1.
• April industry chain production/demand ratio126%Higher than March’s 113%, indicating worsening supply-demand conditions.
• Production-side inventory days82 daysHigher than March’s 57 days, reflecting stable production but weakening module demand.
• March global module demand48GW, down 8% year over yearIn the first three months of 2026, it was 126GW, down 10% year over year.
• March China installations9GW, down 56% year over yearIn the first three months of 2026, it was 41GW, down 31% year over year, below the full-year forecast trajectory of down 25% year over year.
• March China module exports32GW, up 34% year over yearStrong exports were mainly driven by front-loading ahead of the cancellation of the export tax rebate on April 1.
• Longi target priceRmb18.812-month target price, based on 11x 2027E EV/EBITDA.
• Hangzhou First target priceRmb2012-month target price, based on 13x 2027E EV/EBITDA.

Impact & implications

Industry chain profits are shifting from upstream polysilicon and glass toward segments that benefit more from price recovery or falling costs. If the supply side does not contract further, inventory pressure in polysilicon and glass may continue to weigh on prices and profitability; by contrast, rising film prices, higher overseas module prices, and lower upstream costs may support the relative performance of Hangzhou First and Longi.

Risks

• Polysilicon and glass prices continue to decline under high inventory pressure.
• Overseas demand slows and domestic order visibility remains low, causing module demand to come in below expectations.
• If installations are below expectations, film ASP and capacity utilization may be lower than expected.
• If supply-side policy is stronger than expected and demand exceeds expectations, polysilicon and glass prices may rebound, affecting the downstream beneficiary thesis for Longi and others.
• Technology-driven cost reductions and BC technology development may progress more slowly than expected, potentially reducing Longi’s mid-cycle profit improvement potential.

What to watch

• Whether new supply-side production cuts or price-stabilization actions emerge in polysilicon and glass.
• Whether overseas module prices can remain at spot levels after April.
• Whether the production/demand ratio and production-side inventory days decline from 126% and 82 days.
• Whether China installation demand recovers from March’s low level of a 56% year-over-year decline.
• Whether China module export volumes pull back after the front-loading following the cancellation of the export tax rebate.
• Whether rising film prices can translate into unit profitability expansion for Hangzhou First.