China Solar: Tracking Profitability Inflection — Oct-26: Profitability deteriorated in Wafer/Glass due to higher cost; Poly inventory rises despite production cuts

Our China Solar Profitability Tracker follows monthly supply/demand and inventory dynamics by sub-sector, and spot prices/input costs implied cash GP & EBITDA margin trends for companies under our coverage. Key highlights in Oct MTD: Wafer/Glass profitability weakened due to higher cost — value chain prices were largely stable with Poly/Glass pricing sustained at Rmb43/kg and Rmb10.5/sqm at end-Sep, but transactions have been muted due to weak downstream demand expectations; spot price implied cash profitability deteriorated in Wafer (-8pp) and Glass (-5pp) due to higher cost in Poly (+24% mom) and LNG (+17% MTD). Poly inventory rises despite production cuts — Oct production across the value chain is expected to decline by avg. 3% mom, mainly driven by -23% mom in Poly, but we believe these cuts are insufficient to alleviate high inventory pressure given the sluggish pace of downstream procurement;