Since the end of June 2025, there has been a surge of top-level signals surrounding the "anti-involution" strategy in the photovoltaic industry, leading to a sustained rebound in the photovoltaic sector of the Hong Kong and A-share markets. Recently, media outlets reported that relevant national departments are about to release a notice on "Strengthening Photovoltaic Production Capacity Control," reigniting investor enthusiasm for the sector. According to sources, on October 14, relevant regulatory authorities are expected to announce a notification for enhanced production capacity control in the photovoltaic industry, marking a transition from "barbaric growth" to "high-quality breakthroughs." This development has prompted a wave of limit-up trading within the A-share photovoltaic supply chain, while Hong Kong-listed stocks, represented by 01799, exhibited relatively subdued performance. The sector entered a consolidation phase over the following trading days to digest this information.

In fact, after four years of significant corrections, the photovoltaic sector has witnessed a valuation shrinkage of over 70% across A-shares, Hong Kong stocks, and U.S. stocks. 2025 has continued to test lows, but a policy turning point began to emerge in June with the rollout of "anti-involution" policies, providing price support within the supply chain. Anticipation of performance reversals has led to a six-month rebound in photovoltaic stocks across the three markets. The "anti-involution" measures of 2025 have seen notable improvements compared to 2024, particularly in the areas of exiting excess production capacity and avoiding low-price competition, which has significantly supported valuations in the photovoltaic sector. The strong expectations surrounding capacity control policies are gradually revealing cyclical investment opportunities.

As industry prices stabilize and trend upward, the effects of the "anti-involution" strategy become apparent. Since the introduction of the dual-carbon policy in 2020, a flurry of supportive subsidy policies has pushed the photovoltaic sector into a phase of rampant growth, resulting in rising prices across the supply chain. However, the pace of capacity expansion has far outstripped the installation rates on the downstream side, leading to severe oversupply issues. For example, according to research from Guojin Securities, the total production and ongoing construction capacity in the industry has reached 3.76 million tons. On the pricing front, the price of polysilicon peaked at over 300,000 yuan per ton in 2022, but fell below the cost line to a low of 30,000 yuan per ton in 2024.

In 2024, China’s top-level policy-making institutions signaled multiple times the need to address structural contradictions in key industries represented by photovoltaics, with the Central Political Bureau meeting in the second half of the year introducing measures to prevent "involutionary" cutthroat competition for the first time. In 2025, "anti-involution" policy signals have intensified. The Ministry of Industry and Information Technology and five other ministries have clearly stated their intent to combat behaviors that involve selling below cost while promoting the orderly exit of outdated production capacity through market-oriented and lawful means. Recent policy moves show a commitment to facilitating high-quality development in photovoltaic and related fields, as exemplified by the "Action Plan for Stable Growth in the Electronic Information Manufacturing Industry for 2025-2026," announced in September, which aims to eliminate "involutionary" competition.

The national standard draft for "Energy Consumption Limits for Unit Products in Polycrystalline Silicon and Germanium" has been published, imposing deadlines for companies not meeting Level 3 standards to rectify their operations, with non-compliance resulting in shutdowns. This governmental intervention has shown significant results, with a continuous improvement in supply-demand relations leading to higher prices across the photovoltaic supply chain. In September, prices for polysilicon raw materials, wafers, cells, and photovoltaic modules all increased, with polysilicon futures prices rising over 50% since June this year.

However, achieving capacity reduction in polysilicon remains a daunting task. As of the end of September, the number of operating domestic polysilicon enterprises remained at 10, with an overall utilization rate still at relatively low levels. From the downstream demand perspective, photovoltaic installation capacity continues to grow robustly, with China's photovoltaic power generation capacity reaching 886.6 GW in 2024, reflecting a compound annual growth rate of 36.82% over the past five years. The dual-carbon policy remains the primary driver for downstream expansion in photovoltaics, with expectations for sustained mid-to-high double-digit growth. Additionally, energy storage systems will address the volatility and consumption challenges of renewable energy integration, further boosting demand for photovoltaic installations.

With valuations rebounding from their lows and stringent supply-side controls alongside increased demand-side support, opportunities for new investments in the photovoltaic sector are emerging. The photovoltaic supply chain comprises polysilicon producers (Tongwei Co, Daqo New Energy, and 01799), silicon wafers (TCL Zhonghuan and Shuangliang Eco-Energy), cell manufacturers (Aiko Solar), and integrated module manufacturers (Longi Green Energy and JA Solar), with photovoltaic cell technology at its core. Leading battery manufacturers are expected to break through the longstanding profit hurdles posed by homogenous competition through TOPCon capacity upgrades, emerging from the cyclical low sooner than others.

Nevertheless, due to price declines and industry competition, many segments of the photovoltaic supply chain have been losing money for over a year, with widespread losses in 2025. Over the past six months, key players in specific segments, such as Tongwei Co, JA Solar, and Longi Green Energy have reported net losses of 4.955 billion yuan, 2.58 billion yuan, and 2.57 billion yuan, respectively. In contrast, 01799 incurred a net loss of less than 300 million yuan during the same period.

The relatively low loss rate of 01799 can be attributed to its strategic expansion into the downstream demand side, focusing on photovoltaic power station construction and operations that contribute some profitability, offsetting polysilicon business losses. In the first half of 2025, the revenue contributions from polysilicon, wind energy, and photovoltaic power station construction and operation were 13.68%, 67.62%, and 18.9%, respectively, while the gross loss from polysilicon was 1.033 billion yuan, and the gross profits from power station construction and operations totaled 1.423 billion yuan. Additionally, the company has an electrical equipment business, including inverters, accounting for 22.5% of revenue, yielding a gross profit of 236 million yuan.

The company has kept pace with policy trends, increasing investments in photovoltaic power stations amid the industry chain adjustment cycle, maintaining a multi-track approach to developing centralized, distributed, and decentralized projects. This year, it accelerated the construction of a 3GW new energy project in Junzhong, continuously contributing to performance through self-use and expansion initiatives. As of the first half of 2025, the company has completed and confirmed revenue for photovoltaic and wind power construction projects with a total installed capacity of approximately 1.35 GW. Due to the lower proportion of polysilicon business, 01799 is less susceptible to price fluctuations in the supply chain compared to its peers.

For instance, Longi Green Energy has also engaged in power station business, but its revenue contribution is meager, as reflected by only 3.54% from power station operations in the first half of 2025, while photovoltaic products accounted for as much as 93.5%. Similarly, TCL Zhonghuan's power station business made up 0.76% of its revenue, with photovoltaic wafers, components, and other silicon materials exceeding 92%. In summary, the photovoltaic supply chain has faced a three-year oversupply cycle, yet some manufacturers continue to push for capacity expansion, resulting in slow capacity digestion during this period, and leading to persistent price declines and significant losses throughout the supply chain.

In light of industry calls for action, this capacity control initiative is anticipated to be expedited, imposing strict limitations on supply and encouraging the introduction of more efficient photovoltaic technologies, thus promoting high-quality development across the board and fostering ongoing rebounds in the sector. Regarding investment targets, segment leaders like Longi Green Energy and TCL Zhonghuan, as their business contributions are concentrated, are highly sensitive to supply chain prices, which may yield greater valuation premiums in the current market recovery. Conversely, 01799 stands out for its diversified business model, resilience amid performance fluctuations, and robust profitability, making it a top choice for conservative investors.