Power Equipment and New Energy at the Dawn of a New Cycle
The Chief Analyst of Power Equipment and New Energy at CITIC Construction Investment Securities pointed out that after the baptism of this industrial cycle, the leading companies of China's new energy enterprises have further consolidated their global competitiveness and leadership, and are typical representatives of high-quality green production capacity. A-shares currently gather the world's most outstanding batch of new energy manufacturing assets. Against this backdrop, the power equipment sector is also on a steady and positive development track, benefiting from the increase in new energy investment and the resonance of domestic and foreign power grid investment demands.
The development of new energy has far-reaching strategic significance for China, not only related to energy security and environmental protection, but also the key to promoting economic transformation and upgrading, and achieving sustainable development.
Zhu Yue believes that at the current node, with the transformation of the global energy structure, the continuous progress of new energy technology, and the continuous intensification of grid upgrades and transformations, China's leading companies in the new energy industry chain have further consolidated their global leadership after the baptism of the cycle, and are expected to usher in a new cycle of prosperity in this round of industrial renewal and iteration.
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Zhu Yue said that after using the new construction project indicators of each sub-sector to simulate and predict the fixed asset growth rate of each sector in the next year, it was found that the energy storage industry is expected to continue to be in a high prosperity state, the demand for the offshore wind industry chain is high, and the supply and demand pattern is good, while photovoltaics, lithium batteries, and onshore wind power are also undergoing positive changes. Looking at the capital expenditure, construction in progress, and fixed assets from the financial statements, the industry's willingness to continue expanding production has declined, while the demand side maintains a stable growth rate, and the industry is entering a new cycle.
Zhu Yue believes that the dawn of the reversal has just appeared, and it is judged that the lithium battery industry may see a significant improvement in the industry's supply and demand situation around the spring and summer of 2025. The national level has always attached great importance to the photovoltaic and wind power industry, with clear policy encouragement and demand continuing to be released. The recent self-discipline and standardization of enterprises will play a positive role, and the industry is expected to usher in the dawn of the reversal. Against this backdrop, the power equipment sector has also benefited from the increase in new energy investment and the expansion of overseas markets, and for the first time in ten years, the supply and demand situation is undergoing favorable changes.
Lithium Battery: Capacity utilization continues to improve, expected to officially enter the recovery cycle in 2025
Zhu Yue said that since this year, the capacity utilization rate of the lithium battery sector has continued to improve on a quarter-over-quarter basis, and the shipment of midstream materials has also grown at the same rate with the increase in terminal sales of electric vehicles, showing clear signs of industry recovery. The industry's capacity utilization rate has increased from 40%-60% in the first quarter to 60%-80% in the second quarter, and continued to increase quarter-over-quarter in the third and fourth quarters, with some leading companies achieving full production starting in May-June; in terms of profitability, the increase in utilization rates has led to a reduction in industry depreciation pressure and a quarter-over-quarter decrease in unit costs, with unit profits in batteries, positive electrodes, negative electrodes, and other links significantly improving, and lithium batteries may see a significant improvement in supply and demand situation in the second quarter of 2025.
Energy Storage: The global market is exploding, with Asian, African, and Latin American markets leading the development of energy storage
The energy storage sector also shows strong growth potential. With the promotion of photovoltaic storage parity and the gradual release of the potential of Asian, African, and Latin American markets, the global demand for large-scale storage and household storage is exploding. The shipment of energy storage batteries and inverters increased significantly on a quarter-over-quarter basis in the second quarter. The industry trend of photovoltaic storage parity has promoted the global explosion of energy storage demand, especially the potential of Asian, African, and Latin American markets is large, and the shipment of large-scale and household storage industries has increased significantly on a quarter-over-quarter basis since the second quarter.
Looking at the segments, in terms of energy storage batteries, lithium carbonate has dropped below 80,000 yuan/ton, and energy storage batteries have seen transaction prices below 0.3 yuan/Wh. Quarterly shipments continue to grow on a quarter-over-quarter basis.
In terms of the inverter sector (household energy storage), the demand for energy storage in Asian, African, and Latin American regions has exceeded expectations, and profitability remains at a high level.
In terms of PCS (large-scale energy storage), revenue and shipments have increased significantly, with gross margins remaining stable, and it is expected that shipments will further increase in the second half of the year, with substantial progress in going overseas.
In terms of system integration, large orders in the Middle East have been finalized, and the market is gradually recognizing the global universality of overseas large-scale storage demand.
Photovoltaics: The industry ushers in a reversal moment with clear policy orientation and corporate self-discipline
The photovoltaic sector has experienced the baptism of the cycle, and the current national policy orientation is very clear. Enterprises are strengthening industry self-discipline to curb excessive competition, ensuring that global demand will cover effective production capacity, and the trend of industry supply clearing is relatively certain.
Zhu Yue said that photovoltaics is a national strategic emerging industry. Represented by photovoltaics, the "new three" are a resounding business card of China's manufacturing industry, which has always been highly valued at the national level. Under the guidance of the carbon neutrality goal, domestic demand has continued to grow in recent years, and the advancement of power grid transformation has further released the space for new installations.
Faced with the actual situation of the industry, the industry itself is strengthening self-discipline and standardization. Some time ago, the Photovoltaic Industry Association announced the authoritative cost level of the industry and called on the industry to strengthen self-discipline to eliminate inward-spiraling vicious competition, which has had an immediate effect. With the continuous growth of demand, the introduction of industry self-discipline and restraint, and the positive orientation of national policies, the photovoltaic industry is entering a clear reversal and upward channel.
Wind Power: The profit turning point of wind power hosts is coming, and the gross margin of offshore wind cables remains high and stable
After adjusting in the first half of the year, the wind power sector is expected to see an increase in bidding and installation starting in the second half of 2024. It is expected that the wind power industry installation volume in 2025 will break through 100GW, reaching the highest historical value, which will have a positive impact on the industry chain.
In terms of component prices, the price of casting main shafts has risen in the third quarter, and there is a strong determination for further price increases in the end-of-year negotiations. Zhu Yue expects that in 2025, the supply of components will be tight, including large-megawatt castings, blades, and gearboxes. In terms of wind power hosts, the current five listed host companies have all given expectations for an improvement in gross margins in 2025, and it is expected that the profitability of host companies will further improve in 2025.
In terms of offshore wind power, the market is concerned about the progress of project commencement in Jiangsu and Guangdong. Currently, both provinces are actively promoting progress, and the Jiangsu offshore wind plan for the 14th Five-Year Plan was recently approved, with an expected start at the end of the year. It is expected that there are no substantial obstacles to offshore wind in both provinces, and the bidding status of offshore wind turbines in 2024 is good, with an expected 12-15GW of offshore wind grid connection in 2025, a doubling of growth year-on-year. Subsequent potential deep-sea policies are expected to open up the long-term space for offshore wind.
Power Equipment: Under the demand drive of new energy and artificial intelligence, high-quality production capacity is moving from China to the world
With the rapid development of new energy and artificial intelligence, power equipment has entered the first upward cycle of prosperity in ten years. In the past ten years, the growth rate of global power equipment demand has been relatively stable, and the industry's expansion speed has been slow. Starting this year, on the one hand, the acceleration of China's power grid transformation has brought the annual power grid investment growth rate to double-digit growth; on the other hand, under the trend of the global new energy and artificial intelligence industry revolution, countries have strengthened grid upgrades and transformations, and the demand for power equipment has increased significantly. Chinese power equipment companies, with their strong competitiveness, are effectively filling the global power equipment supply gap and creating a new highlight in China's power manufacturing industry exports as they move from China to the world.
Zhu Yue said that more importantly, in the new energy power equipment industry, China's high-quality production capacity has already occupied a clear dominant position globally. Under the promotion of the country's active policies, the current high-quality leading companies still have an upward trend in the global manufacturing market share in each segment, making an outstanding contribution to the global carbon neutrality process. China's future engineering talent dividend and broad market space will continue to strengthen this advantage. A-shares currently concentrate a group of the world's most competitive new energy manufacturing assets and are the focus of global investors' decision-making for new energy investment. "We judge that the industry is currently at the starting point of a new cycle of recovery and are full of confidence in the subsequent development."