The difficulty of industry production cuts is high and costs are high! Goldman Sachs reiterates sell on "solar glass dual giants"
Goldman Sachs released a research report stating that the photovoltaic glass industry faces significant challenges in production cuts and high cost issues, and it is expected to experience a deeper downturn in the next two years. Goldman Sachs reiterated its "Sell" rating on XINYI SOLAR and FLAT, and lowered the EBITDA expectations for both companies for 2025-26 by 73% and 58%, respectively. Due to weak demand and difficulties in production cuts, it is expected that the global average monthly shipment of photovoltaic glass will drop to 25GW in 2025, with price forecasts further downgraded
Goldman Sachs warns the photovoltaic glass industry may face deeper downturns in the next two years.
According to the Chasing Wind Trading Desk, Goldman Sachs recently released a research report stating that the difficulty in implementing production cuts and high costs, combined with weak demand, will drive glass prices further down. It is expected that the photovoltaic glass industry will experience a deeper decline in profitability from the second half of 2025 to 2026.
In the report, Goldman Sachs reiterated its "sell" rating on the two major photovoltaic glass giants, XINYI SOLAR and FLAT, lowering the EBITDA expectations for both companies for 2025-26 by 73% and 58%, respectively.
Weak demand combined with production cut difficulties puts greater pressure on the industry
Goldman Sachs' analysis shows that since mid-July, the inventory of production enterprises has rapidly decreased, driven by two main factors: first, the market's expectation of price increases for photovoltaic glass under the "anti-involution" policy, as current spot prices indicate that first-line production capacity is in a negative cash profit state; second, component companies are stocking up in advance against the backdrop of expected further reductions in export tax rebates.
According to Oilchem data, the weekly glass shipment volume in the last week of July reached about 22GW, nearly doubling from the average weekly shipment volume of 12GW from June to early July. This surge in shipments pushed the inventory days on the production side down from 33.4 days in mid-July to 22.6 days, with glass prices stabilizing at 10 yuan/square meter in the last two weeks of July.
However, Goldman Sachs believes that this inventory improvement is mainly driven by short-term factors. Considering the "rush" in demand since mid-July, it is expected that the global average monthly shipment volume of photovoltaic glass will drop to 25GW from August to December 2025, a significant decline of 42% compared to 52GW in the same period of 2024.
Production cuts raise costs, price forecasts further downgraded
The report points out that due to the relatively new average age of industry furnaces, the current round of supply cuts will mainly be achieved through production halts rather than previous cold repairs.
According to Goldman Sachs' production cost model, a 15% production capacity cut will lead to a 10% increase in unit production costs due to the allocation of fixed energy, labor, and depreciation costs. Taking a 1200 tons/day furnace as an example, under full-load operation, the unit production cost is 9.8 yuan/square meter. Halting 1-5 production lines will respectively increase costs by 10%/23%/45%/91%/236%.
Based on the deterioration of supply and demand relationships and the continued decline in raw material prices, the report has lowered the price forecast for photovoltaic glass from the third quarter of 2025 to 2026 by 9%-20%, to 10-11 yuan/square meter.
However, the report also indicates that the forecast for a turning point and normalization of prices in the second half of 2026 remains largely unchanged at 13 yuan/square meter.
"Photovoltaic Duopoly" performance far below expectations
Regarding the "photovoltaic glass duopoly," Goldman Sachs believes that both companies' performances are below expectations and maintains a "sell" rating. XINYI SOLAR's performance report for the first half of 2025 shows that revenue fell by 7% year-on-year to 10.9 billion yuan, and net profit plummeted by 59% year-on-year to 746 million yuan, far below Goldman Sachs' expectation of 1.3 billion yuan.
The report pointed out that the underperformance was mainly due to a 14% drop in confirmed glass prices to 13.5 yuan/square meter, as well as an asset impairment loss of 314 million yuan caused by early maintenance.
FLAT's preliminary performance report for the second quarter of 2025 shows that net profit is between 89 million and 139 million yuan, a year-on-year decline of 81%-88%, also significantly lower than Goldman Sachs' expectation of 637 million yuan.
As a result, Goldman Sachs has significantly lowered its earnings forecast, reducing the average EBITDA forecast for XINYI SOLAR and FLAT for 2025-26 by 73% and 58%, respectively.
After adjusting the valuation benchmark to 2026, Goldman Sachs has adjusted the target prices for FLAT's H shares and A shares to 6.6 HKD and 10.2 RMB, respectively, while maintaining XINYI SOLAR's target price at 1.9 HKD, indicating a potential decline of 37%-39% compared to the current stock price.
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