Photovoltaic Solar: The polysilicon industry is still in its business cycle

The polysilicon industry is still in its boom cycle: cost is the key to the selection of the target: polysilicon prices have begun to retreat significantly, but the profitability of first-tier silicon manufacturers is still highly profitable.

Taking into account that global polysilicon supply remains tight and China's imports continue to maintain high levels, we believe that the polysilicon industry is still in a boom period. Although the price of silicon is a stimulus for stock prices, the cost is the key to selecting the target.

The decline in silicon prices is beneficial to ease the squeeze of the two downstream industries: the decline in silicon prices is the only way for the development of the photovoltaic industry. The drop in module prices since the end of last year and the firmness of silicon prices have kept the downstream industry gross margins from being compressed. In particular, the impact of batteries and wafers has been the most obvious. The recent decline in silicon prices has made this situation significantly improved.

The speed of demand recovery will determine the time when prices stabilize, but the current situation is not clear: the industry faces price risk factors in the short term, including Germany's cut in on-grid tariffs on July 1; Italy's New Deal has added subsidies to European products; the euro may weaken. But overall, these three factors have little effect on the price or the profitability of manufacturers, and demand will still dominate the price direction.

The gross profit of Q2, an integrated manufacturer, is about 28%, which is 4% lower than that of Q1: the gross margin of integrated company 2011Q1 is down by 4 percentage points from 2010Q4; the current price level means that the gross profit level is 2-3 percentage points lower than 2011Q1; we expect the 2011Q2 gross profit level. Will fall back to about 28% level.

Late-stage demand will resume its trend, but in the short term there will be no over-expectation stimulus: the Italian, German, and American markets will all improve in the later period. In terms of shipments, Q2 is better than Q1, and it is worth looking forward to in the second half of the year. However, at present, the magnitude and intensity of the recovery in demand are still relatively modest, and factors that may exceed expectations are not yet seen.

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