ab

GlobalResearch

8May2025

SustainableTransition

PointsofInflection-PolicyParalysisPervades

TransitionThemePerformance-FundamentalsUnanchoredonPolicyRisks

Aprilwasrelativelypositivefortransitionthemeswithbroad-based>benchmarkperformance.Forthesecondmonthinarow,IndustrialEnergyEfficiencywastopperforming(+3.5%),followedbyFoodSystem(+3%)andNaturalCapitalProtection(+2.8%).OnMoMchangein12mfPEonlyFoodSystemandEVssawincreases.Overall,wecontinuetosee12mfconsensusearningsinadownward(3m)revisiontrend,despitepocketsofstrongfundamentals:allthemessawnegativerevisions,withthelargestdowngradesinAlternativeFuels,AutomationandCircularity.ThemestradingatPEmultiplesc.-1SDvs5YPEincludeAutomation,IndustrialEnergyEfficiency,Multi-modalTransport,BuildingEnergyEfficiencyandNaturalCapital.Overall,marketsentiment/feedbacksuggest12mfestimatesarenow"unanchored"bythepolicyandmacropicture,openingupcompellingstockspecificopportunitieswithstrongfundamentals.

Keydevelopment:RareEarths,CommonNecessity

UBSAPACFocusdeepdivesintoEVsandrareearthdemand.Despiteneartermmacroheadwinds,themediumtermpriceoutlookispositive.EVshaveturbo-chargedrareearthsdemandoverthelastfiveyearsandweforecastittocontinuetounderpinrareearthsdemandgrowththroughto2030.Weestimatethatitwillcomprise45%oftotaldemandin2030evs.<5%in2015andseeoverallrareearthsdemandgrowing~10%paasaresult.MeanwhilesupplyrisksareincreasingthroughUS-Chinatradetensionsandwesternreshoringefforts.WethinkBuy-ratedLynasisthebestwaytogainexposuretolimitedexChinasupply,andincreasedourtargetpriceby31%.

ChinaGridEquipmentQ1resultssupportthematicoverweightinGrid:InQ125,wesawChinagridcapexgrowthfurtheraccelerateto25%YoY,andexportvalueoftransformerandhigh-voltageswitchgearmaintainedsolidgrowthof30-40%.Wealsosawpositivesignalsatacompany-specificlevel:1)25-30%netprofitgrowthforcompanieswithaggressiveexportplanssuchasSieyuan,Huaming,andWillfar;2)bullishguidanceincluding>25%newcontractgrowthforSieyuanin2025,18%EPSCAGRforHuamingin2024-27,and12-13%toplinegrowthforNariin2025(vs.8-9%targetin2024).OurmostpreferredstockremainsSieyuan,andwehaveaBuyratingonHuaming,Willfar,andNari.Allofthemaretradingbelow4-yearhistoricalaveragePE.

UBSTransitionResearchReadacross

DespiteforwardsentimentcontinuingitsnegativetrajectoryacrossourglobalTransitionbasketsonpolicyandmacrouncertainty,wecontinuetoseestrongfundamentalsatthestocklevelacrossUBScoverage,underliningtheimportanceofstock-specificpositioning.ThismonthacrossresultsandupdatesanalystsreiteratedBuyratingsorupgradednumbersinGrid(Sieyuan,Huaming,WillfarandNari),Batteries(LGChem),Solar(CanadianSolar,Longi,Sungrow,andFlatGlass),Wind(Goldwind,Iberdrola),DataCentre-exposedFuelCells/Capacity(Bloom,Gamuda),Hydropower(Yangtze,SDIC),WasteManagement(GFL,CWST),EVs/E2Ws/Ebuses(Yutong,Ninebot),HVAC(Envicool,Nidec,Carrier,Chart).

Wereiterateourtransitionthematicorderofpreference:Uniteconomicsanddefensivecharacteristicsmattermoreinthismarket.Ourupdatedthematicassessmentandneworderofpreferencesreflectsthis:BuildingEnergyEfficiency,EnergySystemInfrastructure,Multi-ModalTransport,RenewableEnergyandElectrification.ContactustoquerytheSustainableTransitionthematicscoresatthesub-themelevel.

Equities

Global

GlobalSustainability

PhineasGlover

Analyst

phineas.glover@

+852-37123917

LydiaBrunton

Analyst

lydia.brunton@

+61-2-93242172

YishuYan

AnalystS1460520110001

yishu.yan@

+86-21-38668782

DimAriyasinghe

Analyst

dim.ariyasinghe@

+61-3-92426385

TomLi

AnalystS1460522050003

tom.li@

+86-21-38668862

HughDawson

Analyst

hugh.dawson@

+61-2-93242093

LeighaMiyata

Analyst

leigha.miyata@

+81-3-52087101

GraceAllen

AssociateAnalyst

grace-za.allen@

+61-2-93242000

TimBush

Analyst

tim-d.bush@

+82-2-37028801

ManavGupta

Analyst

manav.gupta@

+1-212-7134399

ShneurZ.Gershuni,CFA

Analyst

shneur.gershuni@

+1-212-7133974

ESG

Environmental

Social

Governance

ThisreporthasbeenpreparedbyUBSSecuritiesAsiaLimited.ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURES,includinginformationontheQuantitativeResearchReviewpublishedbyUBS,beginonpage36.UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

SustainableTransition8May2025ab2

Contents

TransitionMonthlyNavigator

3

Mostmaterialdevelopment

4

KeyDevelopmentsDashboard

5

Energytransition

5

MaterialsTransition

8

MobilityTransition

10

BuildingsTransition

11

IndustrialTransition

12

BiosphereTransition

12

SustainableMarkets

13

TransitionPerformanceDashboard

14

ThemeValuations

17

ThemeSentiment

20

TransitionCommoditiesDashboard

22

CarbonPrices-KeyCharts

23

TransitionCommodities-KeyCharts

24

EventsCalendar

25

SustainableTransitionInvestorToolkit

26

PhineasGlover

Analyst

phineas.glover@

+852-37123917

LydiaBrunton

Analyst

lydia.brunton@

+61-2-93242172

YishuYan

AnalystS1460520110001

yishu.yan@

+86-21-38668782

DimAriyasinghe

Analyst

dim.ariyasinghe@

+61-3-92426385

TomLi

AnalystS1460522050003

tom.li@

+86-21-38668862

HughDawson

Analyst

hugh.dawson@

+61-2-93242093

LeighaMiyata

Analyst

leigha.miyata@

+81-3-52087101

GraceAllen

AssociateAnalyst

grace-za.allen@

+61-2-93242000

TimBush

Analyst

tim-d.bush@

+82-2-37028801

ManavGupta

Analyst

manav.gupta@

+1-212-7134399

ShneurZ.Gershuni,CFA

Analyst

shneur.gershuni@

+1-212-7133974

JonWindham,CFA

Analyst

jon.windham@

+1-617-478-4711

ESG

Eelnl

SustainableTransitionUBSResearch

SustainableTransition8May2025ab3

TransitionMonthlyNavigator

Figure1:SummaryThemePerformance,ValuationandSentiment

Valuation-PE

1M3MYTD12M

0%

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Sentiment-April%Buy

EPS3MConsensus

-0.08

29%

47%

-0.06

38%

50%

-0.04

27%

42%

0.01

42%

N/A

-0.05

25%

38%

-0.05

33%

45%

-0.02

33%

46%

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33%

40%

-0.04

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67%

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29%

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-0.02

25%

56%

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23%

63%

0.00

27%

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-0.05

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-0.04

29%

52%

-0.02

42%

59%

-0.03

32%

47%

-0.04

25%

53%

%UBSBuyRating

AlternativeFuels

Automation

BuildingEnergyEfficiency

CarbonSequestration

Circularity

Electrification

EnergyInfra

FoodSystem

HVAC

IndustrialEnergyEfficiency

MethaneManagement

Multi-modalTransport

NaturalCapitalProtection

PollutionMitigation

RenewableEnergy

SustainableMarkets

SustainableMaterials

Water

Benchmark-MSCIACWIIMI

Performance-totalreturn

1M3MYTD12M

-2%

-8%

-4%

-12%

0%

-13%

-9%

2%

-1%

-9%

-4%

-4%

-5%

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1%

3%

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2%

4%

2%

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-4%

4%

1%

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-2%

4%

3%

0%

6%

2%

2%

-2%

1%

13%

3%

-4%

4%

1%

2%

-3%

3%

9%

1%

-3%

2%

5%

3%

2%

8%

14%

0%

-14%

-11%

-1%

2%

-4%

-1%

4%

2%

0%

4%

14%

0%

-3%

3%

-3%

0%

-3%

-1%

5%

-4%

-1%

-4%

6%

Source:UBS,FactSet-NB:N/Areflectsthemeswithlessthan5coveredstocks.

●ThemeReturnPerformance:InApril,alltransitionthemesoutperformedthebenchmarkwiththeexceptionofCarbonSequestration.Forthesecondmonthinarow,IndustrialEnergyEfficiencywasthetopperformingthemeMoM,gaining3.5%overAprilbutstilllaggingotherthemeson12Mtrailingreturn.FoodSystemwasthesecondbestperformingtheme(3%),followedbyNaturalCapitalProtection(2.8%).Transitionthemesarestilldownona3Mview,exceptNaturalCapitalProtection.On12Mtrailing,NaturalCapitalProtection(14%),SustainableMarkets(14%)andHVAC(13%)arethetopthreethemes.

●ThemeValuations:Onlytwothemeshadpositive1Mchangesin12mfPE:FoodSystem+5%andElectrification+2%.Allotherthemeshadnegative1Mchangesin12mfPEwithPollutionMitigation(-9%),CarbonSequestration(-3.9%)andSustainableMaterials(-3.6%)withthelargestvaluationdeclines.Overall,weareseeingconsensusearningsinadownwardrevisiontrend,reflectedinhigherPEmultiples.Notably,manythemesarenowtradingatPEmultiplesc.-1SDvs5YPEincludingAutomation,IndustrialEnergyEfficiency,Multi-modalTransport,BuildingEnergyEfficiencyandNaturalCapital.

●ThemeSentiment:HVACcompanieshavethehighestaveragenumberofBuyratingsbyUBS,followedbyMulti-ModalTransportandSustainableMarkets.Consensussell-sideBuysentimenthasCarbonSequestration,SustainableMarketsandAutomationastopthreethemes.CircularitycontinuestohavethelowestpercentageofUBSBuyratings.Intermsofearningsmomentum,CarbonSequestrationwastheonlythemewithapositivechangein3Mconsensus12mfEPSrevisions.Allofthethemessawnegativeearningsrevisionswiththelargest3MdowngradescomingfromAlternativefuels,AutomationandCircularity.

●TransitionCommodities:EUGreenH2decreased18%to4.4Euro/kg,JapanGreenH2remainedflatat4.1USD/kgandUSGreenH2increasedby32%to3.3USD/kg,erasingmostofthemonthlydecreaseobservedinMarch.BlueAmmoniapricesdecreasedacrosstheregionswithUSdown5%,EUdown12%andMiddleEastdown15%.LCFSCreditsdeclinedby12%butthepriceofD3andD4RINdidnotchange.NetZeroTransitionMaterialspricesweremixed.Uranium(+5%),Canadian(+5%)andUSPotash(+4%)werethelargestpriceincreases.Zincpricesfellby12%,followedbyLiCarbonate(-7%),andAluminiumLME(-6%).

SustainableTransitionUBSResearch

SustainableTransition8May2025ab4

Mostmaterialdevelopment

RareEarths,CommonNecessity

UBSresearchpublishedanAPACFocusonRareEarths,CommonNecessity.AdeepdiveintoEVdemandandincreasingmotorsizes,theUBSGlobalCommodityTeamfindsthatdespiteneartermheadwinds,analysisofthedemandandsupplyforrareearthsleavesuspositiveonthemedium-termpriceoutlooks.Meanwhileglobalex-Chinasupplylookssettoundershootthis,likelysupportingpriceswhileseparationcapacityandheavyrareearthavailabilityisofparticularfocus.WethinkBuy-ratedLynasisthebestwaytogainexposuretolimitedexChinasupply,andincreasedourtargetpriceby31%.

●Robustdemandoutlookdespitenear-termuncertainty.Weremainpositiveonthelong-termrareearthsoutlookdespitenear-termmacroheadwinds.Whilerareearthsdemandisparticularlyskewedtofuture-facingthematics,wethinkthatitsuseinelectricvehicles(EV's)willcontinuetodriveitsmedium-termdemandprofilewhichwehavegrowingat~10%pathroughto2030e.WhileglobalEVdemandisexpectedtogrow18%pato2030e,anadditionaltailwindforrareearthsisthataveragemotorpoweroutput-whichultimatelydrivesrareearthsdemandinanEV-isexpectedtocontinuetogrow~3%paandwouldseeitbecome~45%oftotaldemandby2030e(vs25%today).

●SupplyRisksIncreasing.Wemodelglobalprimarysupplygrowingat~9%pathrough2030eandwhileChina(~55%ofprimarysupply)remainsanopaquepartofthemarket,itisalsoincreasinglyatriskduetocontinuedU.S.-Chinatensions.Withnear-termvolatilityhigh,wekeeppricesunchanged,butseeincreasingmomentuminreshoringwesternsupplychainsasonlybeneficialforex-Chinarareearthsproducersinthelong-run.

●Lynastheclearleaderinservicingwesternmarkets.WereiterateourpreferenceforLYC(Buy)andupgradedourPT31%toA$10.40/shonthebasisthattheyhavelatentcapacityreadytounderpinwesternreshoringeffortsandmodelthemproducing~14ktpaNdPrlong-term(prev:12ktpaNdPr)vs.limitedwesternalternatives.

Figure2:NdPrSupplyDemandBalance

Source:CompanyFilings,WoodMackenzie,UBSe.

Figure3:GlobalNdPrDemandbyEnd-Market

Source:RhoMotion,CompanyFilings,WoodMackenzie,UBSe.

SustainableTransitionUBSResearch

SustainableTransition8May2025ab5

KeyDevelopmentsDashboard

WecuratekeyresearchreportsfromacrossUBSGlobalResearchthataligntoSustainableTransitionthemeswithafocusonidentifyingemergingsignalsofthematicinflectionpoints.Wealsohighlightthematicallyrelevantstockinitiations,majorchangesinratings,andkeynewdevelopmentsinpolicy,technologiesandESGrisks.

Energytransition

ElectricityGrids

KeyDevelopments:Policy:UK'senergyregulatorOfgemapprovedreformstocutthegridqueueby64%,prioritisingwind,solarandenergystoragedevelopmentsthatuntilnowhavebeenblockedbystalledorspeculative"zombie"projects;Spain-PortugalGridBlackouts-exactcauseunknownbutgridstability(frequencyservices)affectedfromdropinrenewables,nuclearandlackofsynchronousgeneration-EUlaunchesexpertpaneltoinvestigate;MarketOpportunity:Adanitobuild150kmtransmissionlinesfor3mnmt/yearrenewablehydrogenprojectinIndia;IrishtransmissionsystemoperatorEirGridwillallocateoverEU1bninaprocurementprogramtofinanceworksforanoffshoreelectricitygridinIreland;NorthAmericanElectricReliabilityCorpfindsCanadacouldadd12-14GWofinterregionalgridtransfercapability;UKPowerNetworks'dayaheadflexmarketdelivers4.4GWhinitsfirstyear;Technology:GoogledeploysAItospeedupconnectionsattheUS'slargestelectricalgridoperator,PJM;

NewUBSResearch:

●SSEPLC-FYmar25resultinline,guidancetightened:adjustedEPSguidanceto155-160pfrom154-163ponFeb5.Renewableoutputfortheyearwasup17%YoY(vs26%YoYinfirstninemonths),drivenbycapacityadditions.WebelieveZonalpricingadoptioninJuneisunlikelygivenindustrypushback.Lookingahead,weexpectabusinessplanupdateinMaytoaddresssomeofthenear-termbalancesheetconcerns.Changesarelikelytobeimplementedlaterthatyear,giventhenewCEOwillstartinJuly.Hence,wedonotanticipatelargestrategychangesinthe21-MayresultgivenitwillbethelastoneunderthecurrentCEO.ReiterateBuy,PT1,970p(UBS).

●ChinaGridEquipmentProviders:InQ125,wesawChinagridcapexgrowthfurtheraccelerateto25%YoY,andexportvalueoftransformerandhigh-voltageswitchgearmaintainedsolidgrowthof30-40%.Wealsosawpositivesignalsatthecompany-specificlevel,forexample:1)25-30%netprofitgrowthforcompanieswithaggressiveexportplanssuchasSieyuan,Huaming,andWillfar;2)bullishguidanceincluding>25%newcontractgrowthforSieyuanin2025,18%EPSCAGRforHuamingin2024-27,and12-13%toplinegrowthforNariin2025(vs.8-9%targetin2024).OurmostpreferredstockremainsSieyuan,andwehaveaBuyratingonHuaming,Willfar,andNari.Allofthemaretradingbelow4-yearhistoricalaverageP/E.

EnergyStorage&BatteryChemistry

KeyDevelopments:Policy:Australiaproposes30%subsidyforhomebatteries;MarketOpportunity:NewYorkISOcouldaddc.1,385MWofmostlyrenewableenergyresourcesandstorage;ResidentialbatterystoragesurgesintheUS;SolariainvestsEUR20minBESSpurchasetoboostsolarfarmsinSpain.

NewUBSResearch:

●APACFocus:AIbenefitstoemerge,reiterateBuyonMurataManufacturing.WeexpectMLCCmarketrevenuetoincreasec.8-12%YoYfrom2026duetoAIapplicationexpansion,progresswithxEVs,andadvancesinADAS.Weloweroperatingprofitforecastsfrom￥357.1bnto￥320.9bnforFY3/26andfrom￥398.3bnto￥372.9bnforFY3/27reflectingdemandriskfromUStariffsandstrongeryen.ReiterateBuy,PT￥3,100.

●UStariffscreatehighfence:WeestimateUSreciprocaltariffswillincreaseonshorebatterycellcostfrom~$115kWhto~$145kWh.Assuminga100kWh

ElectricityGrids-Sentimentstrong.Wefavourgridexposureinthis

marketgivendefensive

characteristicscoupledwith

structuraldemandpulland

bipartisanpolicysupport.We

continuetoseepoliciesannouncedtoremovethebarrierstogridbuildout.Recentgridblack-outsand

connectionissuessupportgrid

resilienceandpushforreplacementcapex

EnergyStorage-sentimentmixed.ImpactoftariffspotentiallyhighforKoreannames.Globaldemand

growthremainsclearbutindustrystructureandresultingprofitabilityhighlyuncertainontradewar

SustainableTransition8May2025ab6

batterysystemontheaverageEVthiswouldraiseOEMcellcost25%to$14,500pervehicle.Fromabatteryenergystoragesystem(BESS)perspective,by2026batterycellimportcostcouldrisefrom~$65kWhto~$145kWhduetoa~130%importtariffonChinaBESScellimports.CurrentlyweforecastUS2025Ebatterydemandtogrow13%to190GWh.InflationReductionAct(IRA)subsidiesincludingthe$7,500consumercreditandtheproductioncreditcouldsupport2025EVdemandgrowth.However,our30%y/yBESSdemandforecastwilllikelyseeanegativeimpactgivenChina'simportdependence.Nextstepsmayinclude"deals"withhightariffbatterysupplychainjurisdictionssuchasChina(104-130%)andKorea(25%).

●HighfenceforChina:AnnexIofExecutiveOrder14257listscountriesthatwillnowface10%reciprocaltariffs.ForthebatterysupplychainthisincludesadownwardadjustmentoftariffsonimportsfromSouthKorea(-15ppts),Indonesia(-22ppts),Japan(-14ppts)andtheEU(-10ppts).AtthesametimetheChinatariffraterises41pptsto125%or145%includingthe20%fentanyltariff.Inthecaseofthebatterysupplychain,Section301tariffscouldbringthetotaltariffonitemssuchaslithium-ionbatteriesto~174%.ThisleveloftariffwouldlargelyexcludeChinabatterysupplychainexportsfromtheUSmarket.USonshorebatterycostcouldrise5-24%.InourviewthehightarifffencebenefitstheKoreabatterysupplychain(UBS).

●TDK-Conservativeguidanceasexpected.Q4(Jan-Mar)operatingprofitof￥15.1bnis13%belowourforecastand21%belowconsensus.Asexpected,theenergyapplicationproductssegmentoutperformedbutpassivecomponentsundershot.Notably,TDKisconfidentthatitcanadvancefurtherinbatterytechnology.Insiliconanodebatteries(15%ofsmartphonebatteriesinFY3/26),acceleratingmassproductiontimingforthird-generationproductstoFY3/26Q1.ReiterateBuy,PT￥2,500.

●HoymilesPowerElectronics-1Q25netlosslikelytobethetrough:withtheweakresultlikelyduetorisingsellingexpensesandR&Dexpenses.Hoymiles'FY24netprofitwasdown32.8%YoY.Noteworthyareasoftheresultinclude:1)Microinverter:FY24shipmentswere986.2kunits,down25%YoY.In1Q25,theywereover190kunits;2)Hoymilesisexpandingtoresidential,commercial&industrial,andutilityscalestorage,whichcouldcommenceearningscontributionfrom2025;3)Selling&marketingandR&Dexpenseswereup49%and45%respectivelyYoYin1Q25.RetainBuy,PTRmb141.

●LGChemical-Tariffuncertaintyinfocus:ThebeatwaslargelydrivenbyLGESproductioncredits(IRAsubsidies)andpossiblecustomercompensation.ForAM,cathodevolumessequentiallyheldflatandprofitabilitybenefitedfrommetalsdrivenASPlift.Tariffchangeshavebroadlyledtodemanduncertaintyoverconcernsthat,giventhetariff/macrouncertainty,automakerswillcutproductiontargetsandthiswillrippleupthesupplychain.Afteractualizingresultsandincorporatingguidance/LGESconsolidation,welowered2025-26EEPSby5-11%.WealsocutourPTby11%,retainBuy.

●LGES-SlowingInvestment...:LGEStofocusoncapitaldisciplinewith~30%cutincapex,pullingcustomersintoexistingfacilitiestoraiseutilizationandagreateremphasisonLFPbatteryenergystoragesystems(BESS).Owingtotariffuncertaintycustomersaretighteninginventorymanagementandthiswilllikelyleadtoasequentialcontractioninresults.Additionally,inourview,2025guidancewaslargelypulledgivenUStariff/policyuncertainties.

●L&F-Optimisticguidance:Miss.Thecompanyraisedannualvolumeguidancefrom+30%to+40%.MuchofL&FcathodevolumewithTeslawashistoricallyexportedtotheEU.TeslaEUvolumesaredown37%y/yin1Q25whiletheEUBEVmarketisup28%y/y.TheTeslasalestrendseemsatoddswithguidance.In2H24weestimatecathodevolumeintoTeslaaccountedfor70%oftotalL&Fvolume.Additionally,wehavenotseecorrespondingguidancestrengthforLGESbatterysalesintoTesla.

●SKIETechnology-Policyuncertaintyheadwind:Miss.1Q25revenuebelowUBSeandconsensus.Tariff-relatedrevenuedeferral,inventoryreductionandlowerASPcontributedtothemiss.Afteractualizingresultsandincorporatingguidance,2025losswidens.SKIETstandstobenefitfromahightarifffenceintheUS.However,plasticfilmseparatorisnotacriticalmineral.AsseenwiththeIRA,alowerfenceforplasticsseparatorscouldcreateawindowfordirect/indirectexportsfromlowercostChineseproducers.

SustainableTransition8May2025ab7

●POSCOFutureM-Won44bnassetdisposalflattensresult:AlthoughearningsbeatUBS/consensusestimates,webelievemarketsharelosstoChinesecathodemakerswillleadtofurtherdownwardEPSrevisions.Weestimatecathodevolumewillrisec.30%sequentiallytoc.12.5k/t.Webelievecobaltandnickelpriceincreasesdrovetheprofitabilitybeat.RetainSell,lowerPTtoWon113,000.

Solar

KeyDevelopments:MarketOpportunity:Indonesia'sSagulingsolarPVplanttoreceive$60mnfundingthroughJustEnergyTransitionPartnership;India'sTataPowerRenewableEnergytodevelop200MWofcleanenergywithNTPC,withtheprojectconsistingofsolar,windandBESStechnologies;StonepeakacquiresaUS$340mnstakeinU.S.Solar&StoragePortfoliofromRepsol,withtheportfolioincluding777MWofoperatingsolarandstoragefacilities;InnerMongoliaEnergyGroupswitcheson1.6GWsolarfarminnorthernChina.

NewUBSResearch:

●ChinaSolarResultSummaryComments:ThenetlossforthemainsolarsupplychainexpandedinQ424/Q125fromQ324,mainlydueto1)lowerutilizationratefollowingtheself-disciplinedutilizationcut,whichledtohighercosts;and2)largerimpairmentlossinyear-end.OperatingcashflowdeclinedYoYinFY24andsomerecordednetoutflowduetocashburnthroughout2024.NetdebtwidenedQoQinend-1Q25formostplayersinthemainsupplychain.Aftercontinuedlossmaking,smallerplayerscouldbefacinglargercashflowpressures.Andmostofthecompaniesbelievesupply-demandcouldimproveinH225.Withtheindustrysufferingfromearningspressure,webelievecompanieswithstrongcashflow,healthybalancesheetsandcostadvantagescouldoutperforminthelongrun.Webelievelessefficientcapacitiescouldbegraduallyphasedoutandsupply-demandcouldimproveinH225.Wealsobelievetariffriskislargelypricedinformostsegmentsandvaluationisturningmoreattractiveforthesector.WepreferLongi,SungrowandFlatGlass-H(allBuy)inthesolarspace.

●RobustChinasolarexportanddomesticinstallationinMarch...SolarcellandmoduleexportsreachedUS$2.5bninMarch,down23%YoYbutup48%MoM.Impliedshipmentvolumewas27.2GWinMarch,up9%YoYand48%MoM…FinalUSADCVDtariffonsolarimportannounced,withvariableratestobeenforced(likely2June)onCambodia,Malaysia,ThailandandVietnam.CompaniesinMalaysiaaregiventhelowestADCVDrateofc.15%-250%,whilecompaniesinCambodiahavethehighesttariffof660%-3529%.WhilemostofthesolarmodulehasalreadystoppedshippingtoUS,wethinktheoverallimpactisverylimited.(UBS).

●IsSolarNarrowingtheGapwithNatGasonaCostBasis?Overthelastyearalotofinkhasbeenspiltontheneedfornewpowergenerationtofuelincreasingdemandfromdatacentersandbroaderelectrificationtrends.ThepresumptionisthatNatGasisthecheapestandmostreliablesourceofelectricitygenerationandsolarisaddedformostlySustainabilitypurposes.However,inouranalysis,thisisnottheentirestory.Flyingbelowtheradarinourview