Goldman Sachs - China Solar Research | Analyzing proposed... Goldman Sachs - C… · @2030FY_X · TwKit

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Goldman Sachs - China Solar Research | Analyzing proposed... Goldman Sachs - China Solar Research | Analyzing the potential impact of proposed photovoltaic technology export controls; reiterating Buy rating on Maxwell Technologies as the bear case is largely priced in Goldman Sachs conducted an in-depth impact assessment of the proposed photovoltaic technology export controls jointly announced by China's Ministry of Commerce and Ministry of Science and Technology on October 16 (which proposes to include 12 PV technologies, covering upstream to downstream segments such as polysilicon, wafers, and cells, as well as source codes, basic algorithmic models, and core equipment, into the prohibited or restricted export catalog, among which technologies for large-scale polysilicon production, large-format thin wafer production, and perovskite cell production are listed as prohibited from export, but PV end products are not within the scope of the controls). Goldman Sachs believes the market sentiment impact of this proposal is neutral to slightly positive, and the bear case has been fully priced in. It maintains a Buy rating on Maxwell Technologies (300751 CH) with a price target of RMB 270 (representing approximately 102% upside from the October 16 closing price of RMB 133.45); and maintains a Neutral rating on Shenzhen SC (SZSC, 300724 CH) with a price target of RMB 60 (approximately 24% upside). I. Policy Background and Core Judgments The three major drivers of the proposed controls are: national security considerations (the penetration of PV technology in aerospace, national defense, etc.), green technology sharing orientation (only targeting high-spec technologies/equipment, while general green technology exports remain open), and regulatory alignment (standardizing licensing requirements for turnkey production line exports). Goldman Sachs points out that this is a routine administrative update, not targeted at specific entities or regions, and the public comment period is from October 16 to November 15, 2026. Before the official catalog update, companies need to register the export of restricted technologies. The market previously experienced a cumulative drawdown of about 60% in covered equipment stocks from March to July due to rumors of potential export bans, compressing the current 12-month forward EV/EBITDA to 12x, approaching the historical bottom of 2024 to the first half of 2025, while the order outlook has actually improved significantly (expected 2025-2027 CAGR of +13%, compared to -43% for 2023-2025). Goldman Sachs believes that based on the principle of green technology sharing and the absolute advantage of Chinese PV manufacturing costs being 30%-200% lower than global peers, the impact on the overseas business of covered equipment companies (Goldman Sachs forecasts the average overseas share of new orders from 2027-2030 to be only about 25%) is limited, and it provides clear policy visibility for companies that have been on the sidelines since the second quarter, which is expected to restart shipments. II. Bear Case Stress Test and Valuation Margin of Safety Goldman Sachs quantified two extreme bear cases to test downside risks: Scenario 1 (Ban on new overseas orders starting in 2027, existing orders can continue to be executed): Maxwell's average EBITDA for 2027-2030 is expected to decline by 15% compared to the Goldman Sachs base case forecast (GSe), with valuation down 28%; Shenzhen SC's EBITDA to decline by 26%, with valuation down 17%. Scenario 2 (Ban on all overseas shipments and revenue recognition starting in 2027, the most severe): Maxwell's average EBITDA is expected to decline by 31%, with valuation down 50%; Shenzhen SC's EBITDA to decline by 32%, with valuation down 17%. The key conclusion is that the latest closing prices of Maxwell and Shenzhen SC are already trading at a 2%-3% discount to their implied equity values under Scenario 2, meaning the most pessimistic assumptions have been priced in by the market. Coupled with strong orders in Maxwell's semiconductor segment (Goldman Sachs forecasts order value to double in 2027), Goldman Sachs believes the risk-reward profile is highly attractive, thus reiterating the Buy rating. Shenzhen SC is rated Neutral due to the further commercialization timeline of new perovskite applications (post-2028) and lower near-term visibility. III. Core Company Logic and Valuation Methodology Maxwell Technologies (Buy): The global leader in screen printing equipment (over 80% market share) and HJT cell equipment (over 70% market share). The investment logic lies in the second growth curve brought by new applications (HJT and semiconductors), which is expected to hedge against the cyclical weakness caused by the anti-involution of domestic PV capital expenditures. The RMB 270 price target is based on a 29x EV/EBITDA multiple on 2027 expected EBITDA (20x for the core business, 85x for the new application business, based on an 86%/14% EBITDA blended ratio), discounted back to 2026 at an 8.3% cost of equity. Key risks include order cancellations due to weaker-than-expected demand for new applications, tighter-than-expected export controls, and a slowdown in semiconductor business expansion. Shenzhen SC (Neutral): The global leader in TopCon equipment (over 50% market share) and a pioneer in perovskite equipment (40% market share). Although pilot orders can improve the outlook, intensifying competition in perovskite technology and an ambiguous commercialization timeline result in a relatively balanced risk-reward. The RMB 60 price target is based on a 9x EV/EBITDA on 2027 expected EBITDA (7x for the core business, 45x for new applications, based on an 87%/13% blend), with a 10.6% discount rate. Upside risks come from higher-than-expected capital expenditures driven by perovskite technology breakthroughs, while downside risks stem from order losses due to competition and valuation converging toward the core business. IV. Core Conclusions and Investment Implications Goldman Sachs believes the proposed PV technology export controls are more of an expectations correction than a fundamental reversal. For Maxwell Technologies, the current stock price has fully or even overly reflected extreme concerns about restricted overseas orders, while the volume ramp-up of the semiconductor business and the materialization of HJT pilot orders will constitute core catalysts over the next 12 months. For Shenzhen SC, it is recommended to wait for improved visibility on new perovskite applications before making allocation decisions. Investors should currently focus on the final policy implementation after the public comment period ends on November 15, as well as the progress of pilot capital expenditures secured by the two companies against the backdrop of domestic anti-involution.

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