China Solar Profitability Inflection Tracking: Glass Prices Rose in July While Other Segments Remained Weak

Overview

This report is Goldman Sachs's China solar profitability tracker, monitoring monthly changes in supply-demand, inventories, spot prices, input costs, implied cash gross profit, and EBITDA margins across solar sub-sectors. The core conclusion for July is that the value chain overall remained weak, but the glass segment has shown a clearer positive inflection.

Core views

Goldman Sachs believes price trends across the solar value chain diverged significantly in July: glass prices rose 6% during the month due to improved inventory days and coordinated production cuts by leading companies; wafers and cells continued to weaken under the influence of upstream polysilicon prices, silver prices, and downstream demand. On profitability, glass and modules improved, while polysilicon, wafers, cells, and film continued to deteriorate. The new polysilicon energy-consumption standard is stricter than the draft-for-comment version, but because most operating capacity can already comply or be upgraded to comply, the impact on effective supply is expected to be limited.

Analysis framework

The report uses a monthly profitability tracking framework that combines supply-demand, inventories, spot prices, input costs, and cash gross margins by segment, comparing price and profit changes across Poly, Wafer, Cell, Module, Glass, and Film, and assessing the position of the value chain cycle together with changes in global module demand, China installations, China module exports, and regional demand.

Methodology notes

• Industry profitability trackingChina Solar Profitability Tracker

  Monthly tracking of supply-demand, inventories, spot prices, input costs, and implied cash gross margins across solar sub-sectors.

  This framework is used to identify profitability inflection points across segments, but the report notes that estimated gross margins do not include company-level price discounts or premiums and may also differ from actual results at individual companies due to shutdowns, maintenance, and other factors.

• Valuation methodEV/EBITDA, P/B and CoE discounting

  Different valuation multiples and cost-of-equity discounting are applied to covered companies to derive 12-month target prices.

  Maxwell and Hangzhou First use discounted 2027E EV/EBITDA, while Longi and Xinyi Solar use P/B valuation based on the historical relationship between P/B and ROE.

• Factor profileGoldman Sachs Factor Profile

  Stock characteristics are compared using growth, financial returns, valuation multiples, and composite indicators.

  Growth, financial returns, and valuation multiples are based on normalized rankings of forward-looking financial metrics, while the composite indicator is the average of growth, financial returns, and inverse valuation multiples.

Asset mapping & comparison

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

• Maxwell

  One of Goldman Sachs's preferred covered companies, rated Buy.

  Strengths

  New application opportunities offer room for order growth and valuation upside, with a 12-month target price of Rmb278.

  Weaknesses

  Sensitive to demand for new applications and experimental capital expenditure.

  Comparison

  Compared with traditional upstream segments, Maxwell is more driven by equipment and demand from new applications.

  Risks

  Lower-than-expected demand for new applications, tighter export controls on solar equipment, and slower-than-expected development of the semiconductor business.

• Hangzhou First

  One of Goldman Sachs's preferred covered companies, rated Buy.

  Strengths

  Benefiting from solar film price hikes and the potential for expansion in unit profitability, with a 12-month target price of Rmb20.

  Weaknesses

  Affected by installation demand, capacity utilization, and film ASP.

  Comparison

  Compared with upstream polysilicon and wafers, profitability in the film segment depends on price pass-through and raw material costs.

  Risks

  Lower-than-expected installations, slower-than-expected capacity expansion, slower-than-expected progress in non-solar high-end businesses, and intensified procurement pressure for raw materials such as resin.

• Xinyi Solar

  One of Goldman Sachs's preferred covered companies, rated Buy.

  Strengths

  Direct beneficiary of the photovoltaic glass price inflection, with a 12-month target price of HK$2.8.

  Weaknesses

  Profitability is sensitive to glass ASP and energy costs.

  Comparison

  Within the report framework, glass was the segment showing the most visible improvement in July.

  Risks

  Lower-than-expected photovoltaic glass ASP, higher-than-expected raw material and energy prices, and slower-than-expected overseas capacity expansion.

• Longi

  One of Goldman Sachs's preferred covered companies, rated Buy.

  Strengths

  ESS potential, medium-cycle upside from BC, and EBITDA resilience from lower upstream prices, with a 12-month target price of Rmb14.2.

  Weaknesses

  Still affected by industry demand, technology iteration, and price cycles.

  Comparison

  Compared with pure upstream companies, Longi has the buffer of integration and new businesses.

  Risks

  Greater-than-expected rebound in polysilicon or glass prices, slower-than-expected progress in cost-reduction technologies, slower-than-expected BC development, and slower-than-expected ESS development.

• Rod Poly

  An upstream segment on which Goldman Sachs remains cautious.

  Strengths

  Upgraded energy-consumption standards may help constrain outdated capacity.

  Weaknesses

  The report believes most operating capacity can already comply or be upgraded to comply, so the impact on supply is limited, and average utilization in 2026E-2030E is expected to remain low at about 30%.

  Comparison

  Compared with glass and modules, upstream polysilicon profitability continued to deteriorate in July.

  Risks

  Slower-than-expected clearance of effective supply, persistently weak utilization, and weaker-than-expected price recovery.

Key data

• Average price change in the solar value chain in Julyabout -7%The report states that average prices across the full value chain fell about 7% in July.
• Glass price change during the month+6% MTDMainly driven by improvement in inventory days from 57 days in June to 50 days by end-July.
• Wafer price change during the month-7% MTDAffected by declining polysilicon prices.
• Cell price change during the month-11% MTDAffected by lower wafer prices and a 15% drop in silver prices during the month.
• Change in cash gross marginglass +11 percentage points, module +1 percentage point; polysilicon -3 percentage points, wafer -5 percentage points, cell -5 percentage points, film -8 percentage pointsDerived from changes in implied cash profitability based on July spot prices.
• Sub-sector output/demand ratio108%Improved to 108% in July from 110% in June.
• Inventory days at the production end48 daysImproved to 48 days in July from 56 days in June.
• Glass inventory outlookdown to 35 days in September, with glass prices up about 10% in 2H26Based on supply contraction and seasonal demand recovery.
• Global module demand in June37GW, -15% YoY, +33% MoMReached 232GW in 1H26, down 44% YoY.
• China installations in June12.5GW, -13% YoYReached 72GW in 1H26, down 66% YoY.
• China module exports in June17GW, -24% YoYDemand weakened YoY in the Middle East, EU, and APAC, while Africa grew 11% YoY.

Impact & implications

The investment implication is that the solar value chain remains in a phase of structural divergence. The glass segment has upside price elasticity due to falling inventories and supply contraction, while the module segment benefits from lower upstream prices supporting profitability; some film and new-application-related companies may have opportunities for earnings expansion. However, upstream polysilicon, wafers, and cells still face pressure from prices and utilization rates.

Risks

• Global module demand recovery may come in below expectations, leaving value chain prices and capacity utilization under continued pressure.
• Insufficient supply clearance in upstream segments such as polysilicon, wafers, and cells may delay the pace of profitability improvement.
• Glass supply cuts may be less effective than expected, with inventory days falling more slowly than expected and glass price rebounds weaker than expected.
• Volatility in raw materials, energy, and silver prices could alter margins across segments.
• Company-level shutdowns, maintenance, price discounts, or premiums may cause actual profitability to deviate from spot-price-implied estimates.
• Regulation, export controls, or regional demand changes may affect equipment, new applications, and module exports.

What to watch

• Whether glass inventory days can continue falling from about 50 days at end-July to about 35 days in September.
• Whether glass prices can achieve an increase of about 10% in 2H26.
• Whether global module demand can continue recovering from the 37GW level in June, especially China installations and China module exports.
• Capacity upgrades, shutdowns, and actual supply impact ahead of the new polysilicon energy-consumption standard taking effect in 2027.
• Whether prices and cash gross margins in wafers, cells, and film can stabilize.
• Maxwell's new application orders, Hangzhou First's film ASP, Xinyi Solar's glass ASP, and Longi's ESS/BC progress.