1、 Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:The Hongkong and Shanghai Banking Corporation Limited View HSBC Global Investment Research at:https:/ Antici

2、pation of anti-involution has already rerated the sector,but actual industry consolidation is behind pace therefore,earnings would remain under pressure as overcapacity remains,especially as solar demand weakens Downgrade XYS and FGG-H/A to Hold(from Buy)for lack of growth catalysts;we cut earnings

3、by 80-93%for 2026e Rerating has played out;time to take a breather:Sector has rerated over anticipation of anti-involution and historical demand spike over 2025,but industry consolidation seems to lag behind pace with overcapacity likely to stand at more than 30%over projected demand for 2026e.Meanw

4、hile,pricing for solar glass has fallen by 17%y-o-y in 2025 without signs for rebound given weak demand.Given share prices for XYS and FGG-H already up by 11-24%since 2 July 2025(HSCEI:+1%),we downgrade both stocks to Hold(from Buy)as we cut forecasts.Upcoming results and policy announcements around

5、 the NPC meetings in March are potential catalysts for revisiting our thesis.Fundamentals are yet to improve:In 2025,newly installed solar capacity in China reached a record 315GW(+13%y-o-y),but the pricing for solar glass hit a new low at-17%.The supply consolidation has taken longer than what we o

6、riginally expected,due to sustained demand in 2024-2025 and some pre-constructed new capacity proceeding ignition despite being loss-making.Although production capacity for solar glass in China has effectively been contracted by 23%with more plants being put into cold maintenance,monthly supply stil