Analysis Based on the Sustainability of Polysilicon Price Rebound and the Profitability Recovery Elasticity of Tongwei Co., Ltd. and Hesheng Silicon Industry

• Polysilicon prices rebounded sharply from 33,000-35,000 yuan/ton at the end of June 2025 to 53,200-53,900 yuan/ton in December, an increase of about 54%[1]
• The main polysilicon futures contract once surged from 53,130 yuan/ton to 62,200 yuan/ton, with a short-term increase of more than 17%[7]
• The current production cost is about 41.58 yuan/kg (41,600 yuan/ton), and profit margins are now available[5]
• The average price is expected to reach 60,000 yuan/ton in the fourth quarter, with a gross margin of about 20%[4]

• Industry self-discipline production cuts:
  Silicon material output fell to 115,000 tons in November, a 14.5% month-on-month decrease, with leading enterprises actively cutting production[10]
• Implementation of anti-involution policies:
  The polysilicon capacity integration and acquisition platform “Beijing Guanghe Qiancheng” was officially established with a registered capital of 3 billion yuan[1,10]
• Gradual inventory destocking:
  The industry’s high inventory (about 230,000-303,000 tons) is being gradually absorbed[5,10]
• Cost support:
  Electricity prices rose during the dry season in the southwest, providing cost-side support

(1) 2026 will be a critical period for photovoltaic “anti-involution” governance. The Ministry of Industry and Information Technology clearly stated that it will strengthen capacity regulation and promote the orderly exit of backward capacity through market-oriented and legal means[2,8]

(2)

The polysilicon capacity integration and acquisition platform has been launched, and will adopt a “price trigger + capacity linkage” adjustment mechanism, aiming to stabilize polysilicon prices in a reasonable range where “compliant enterprises are profitable and downstream can afford it”[10]

(3)

11 polysilicon enterprises in production have reached a consensus on self-discipline production cuts, and polysilicon output in 2025 is expected to decrease by 29% year-on-year[5]

(4)

Except for individual enterprises with lower electricity prices whose full tax-included cost is below 40,000 yuan/ton, most enterprises have a full tax-included cost of around 45,000 yuan/ton[5], which supports prices

(1) The nominal capacity of silicon material in the entire industry has exceeded 1200 GW, while the global new photovoltaic installation demand in 2025 is only 570-630 GW, with a capacity utilization rate of less than 60%[1,6]

(2)

Polysilicon inventory is 303,000 tons, and silicon wafer inventory is 21.7 GW, with a slow destocking speed[5]

(3)

December is the off-season for photovoltaic installations, with downstream silicon wafer enterprises cutting production by about 16%, and cell production scheduling decreasing by 12.5% month-on-month[5]

(4)

The December delivery price of 59,100 yuan/ton and the spot average price of 50,000 yuan/ton have a huge difference of 18%, and there is a bubble risk in futures prices[7]

• In the short term (1-2 months): Prices are expected to fluctuate in the range of 57,000-61,000 yuan/ton[5], pay attention to new silicon wafer quotations and January production scheduling plans
• For the whole year of 2026: Whether prices can continue to rise depends on the actual progress of capacity clearance. If the storage policy is effectively implemented and backward capacity exits substantially, prices are expected to rise steadily to a reasonable profit range of 65,000-70,000 yuan/ton
• Risk warning: If the implementation of the industry self-discipline agreement is insufficient, or downstream demand remains weak, prices may fall again to around the cost line of 40,000-45,000 yuan/ton

Indicator	Tongwei Co., Ltd. (600438.SH)	Hesheng Silicon Industry (603260.SH)	Advantageous Party
Business Structure	Polysilicon (70%) + Cells + Modules + Feed (cash cow)	Industrial silicon + Silicones, most complete business chain	Tongwei (dual business + cash flow)
2025 First Three Quarters Revenue	64.6 billion yuan (-5.38%)	15.206 billion yuan (-25.35%)	Tongwei
2025 First Three Quarters Net Profit Attributable to Parent	-5.27 billion yuan (-32.64%)	-321 million yuan (-122.1%)	Hesheng (smaller loss)
2025 Q3 Single Quarter Net Profit	-315 million yuan (narrowed by 62.69%)	76 million yuan (-84.12%)	Hesheng (already profitable in single quarter)
Q3 Operating Cash Flow	+4.776 billion yuan (turned from negative to positive)	Not disclosed (but Q3 single quarter non-GAAP profit was 262 million yuan)	Tongwei
Gross Margin	Photovoltaic business negative, feed business 9.38%	8.19%	Tongwei (stable feed business)
Debt Ratio	Approximately 71.95% (estimated)	62.89%	Hesheng
Cost Advantage	Cash cost about 30 yuan/kg, total cost <50 yuan/kg	Not clearly disclosed (higher silicone cost)	Tongwei
Position in Capacity Integration Platform	Largest shareholder, holding 30.35%	Not participating	Tongwei
Technology Route	Mainly rod silicon, leading TBC/TNC cell technology	Industrial silicon + silicone integration	Tongwei

(1) The cash cost of polysilicon is about 30 yuan/kg, and the total cost is below 50 yuan/kg, which is lower than the industry average[10]. It already has profitability at the current price of 53,000-54,000 yuan/ton

(2)

Silicon material accounts for about 70% of the company’s revenue, so price rebound has the greatest elasticity on the company’s performance. The polysilicon business has confirmed profitability in Q3[10], and is expected to continue and expand profits in Q4

(3)

As the largest shareholder (holding 30.35%) of the polysilicon capacity integration and acquisition platform, Tongwei is not only a rule-maker but also the largest executor, and will be the first to benefit from capacity clearance and price recovery[10]

(4)

Q3 operating cash flow turned from negative to positive at 4.776 billion yuan, which is a key indicator of the cycle inflection point[10]

(5)

The net profit of the feed business reached 1.5 billion yuan (+8%) in the first three quarters of 2025, contributing stable cash flow to the company and becoming a “ballast stone” to resist the downward cycle of photovoltaics[11]

(1) Adopting a heavy asset model of “self-built capacity + vertical integration”, which requires large capital, continuous increase in debt scale, and higher financial expenses than peers[11]

(2)

Continuous losses since Q4 2023, and it takes time to repair financial statements[11]

(3)

Although the proportion of overseas shipments has increased (>50%), the module business is still loss-making, dragging down overall performance[10]

Assuming polysilicon prices rise from the current 54,000 yuan/ton to 65,000 yuan/ton (an increase of 20%):

• Tongwei’s polysilicon cost <50,000 yuan/ton, so the net profit per ton will increase from about 4,000 yuan/ton to 15,000 yuan/ton
• If Tongwei’s annual polysilicon capacity is about 300,000 tons, the annualized net profit will increase from 1.2 billion yuan to 4.5 billion yuan, with huge elasticity

(1) Q3 2025 net profit attributable to parent was 75.6675 million yuan, non-GAAP net profit was 262 million yuan, achieving profitability earlier than Tongwei[4]

(2)

Industrial silicon + silicones, with the most complete business chain and largest production scale, strong risk resistance[4]

(3)

62.89% debt ratio is lower than Tongwei, with relatively small financial pressure[4]

(1) Not a shareholder of the polysilicon capacity integration and acquisition platform, so cannot directly benefit from industry integration dividends[10]

(2)

Weak silicone demand, gross margin only 8.19%, weak profitability[4]

(3)

Although it has a polysilicon business, its proportion is not as high as Tongwei’s, so price rebound has a smaller elasticity on its performance

(4)

Did not disclose specific polysilicon cost data, so cost advantage is not as significant as Tongwei’s

• Hesheng Silicon Industry lost 321 million yuan in the first three quarters of 2025, and made a profit of 76 million yuan in Q3, basically breaking even
• Assuming polysilicon prices recover to 65,000 yuan/ton, Hesheng’s polysilicon business (assuming annual capacity of 50,000-100,000 tons) can contribute 500 million-1 billion yuan in net profit
• However, the silicone business may still drag down overall performance, so elasticity is relatively limited

Based on the PR valuation framework provided:

• Current status:
  Continuous losses, ROE is negative, PR indicator is invalid
• Expected status:
  If polysilicon prices remain at 65,000 yuan/ton in 2026, Tongwei is expected to achieve net profit attributable to parent of 5-8 billion yuan
• Assuming net assets are about 50 billion yuan, ROE is about 10-16%
• If given a PE of 15-20 times, the corresponding market value is 75-160 billion yuan, and the current market value is about 50-60 billion yuan (estimated), so undervaluation + diversification strategy is feasible

• Current status:
  Profitable in Q3, but cumulative loss in the first three quarters, ROE is still negative
• Expected status:
  If polysilicon + silicone prices recover, it is expected to achieve net profit attributable to parent of 1-2 billion yuan in 2026
• Assuming net assets are about 25 billion yuan, ROE is about 4-8%
• If given a PE of 15-20 times, the corresponding market value is 15-40 billion yuan, and the current market value is about 40-50 billion yuan (estimated), so valuation is high

Comparison Dimension	Tongwei Co., Ltd.	Hesheng Silicon Industry	Winner
Polysilicon Business Elasticity	★★★★★(70% proportion)	★★★☆☆(relatively low proportion)	Tongwei
Cost Advantage	★★★★★(cash cost:30 yuan/kg)	★★★☆☆(unclear cost)	Tongwei
Industry Integration Position	★★★★★(largest shareholder of platform)	★☆☆☆☆(not participating)	Tongwei
Cash Flow Improvement	★★★★★(Q3 cash flow +4.776 billion yuan)	★★★☆☆(already profitable in single quarter)	Tongwei
Business Safety	★★★★☆(feed business provides cash flow)	★★★☆☆(silicone business drag)	Tongwei
Valuation Attractiveness	★★★★☆(undervalued + diversified)	★★☆☆☆(high valuation)	Tongwei

1. Profitability Recovery Elasticity: Tongwei Co., Ltd. > Hesheng Silicon Industry

• Tongwei has a higher proportion of polysilicon business (70% vs undisclosed specific proportion), more obvious cost advantages, and a more prominent position in industry integration
• Against the background of polysilicon price rebound, Tongwei’s performance elasticity is significantly greater than Hesheng’s

2. Investment Safety: Tongwei Co., Ltd. > Hesheng Silicon Industry

• Tongwei’s feed business provides stable cash flow (net profit of 1.5 billion yuan in the first three quarters of 2025), forming a safety cushion
• Hesheng’s silicone business is weak with a gross margin of only 8.19%, dragging down overall performance

3. Valuation Attractiveness: Tongwei Co., Ltd. > Hesheng Silicon Industry

• Tongwei’s current market value implies a low expected valuation for 2026, and the PR indicator shows undervaluation
• Hesheng’s current valuation already reflects some optimistic expectations, so attractiveness is limited

4. Investment Suggestions:

• Core Recommendation:
  Tongwei Co., Ltd. (600438.SH), adopt the “undervaluation + diversification” strategy and continue to allocate during the capacity clearance process
• Satellite Allocation:
  Hesheng Silicon Industry (603260.SH), can be allocated in small amounts for diversification, but not a core target
• Key Time Point to Watch:
  Q1 2026, pay attention to the actual implementation of the storage policy of the polysilicon capacity integration and acquisition platform and the actual progress of capacity clearance

1. If polysilicon prices fall below the cost line of 45,000 yuan/ton again, Tongwei will fall into loss again
2. If the capacity integration platform is not implemented effectively, or the industry self-discipline production cut agreement cannot be sustained, price wars may reignite
3. If terminal demand remains weak, prices may be difficult to rise sustainably even with supply-side contraction
4. Debt risk under Tongwei’s heavy asset model: if the industry adjustment period is extended, financial pressure may increase

[1] Yicai - 2025 Photovoltaic Industry Review: “Anti-involution” Promotes Price Stabilization (https://www.yicai.com/news/102977930.html)
[2] Yicai - Photovoltaic Industry Moves from “Involution” to “Breaking Involution” (https://finance.sina.com.cn/roll/2025-12-20/doc-inhcnchx5972380.shtml)
[3] Securities Times - 2025 Photovoltaic Industry Battle (https://stcn.com/article/detail/3550235.html)
[4] StockStar - Hesheng Silicon Industry (603260) Main Capital Net Buying on December 26 (https://www.163.com/dy/article/KHP79Q240553O7RC.html)
[5] Huatai Futures - Polysilicon Weekly Report: Policy Impact Weakens, Polysilicon Enters Volatile Range (https://futures.cngold.org/c/2025-12-29/c10256513.html)
[6] Guangzhou Futures Exchange - Improving Risk Management in the Polysilicon Industry (http://www.gfex.com.cn/gfex/mtjj/202512/2e32905fafb14f138dd51f19f441881f.shtml)
[7] Jiemian News - Huge Price Difference Between Polysilicon Delivery Price and Spot Price Sparks Discussion (https://m.jiemian.com/article/13799932.html)
[8] CICC - PV & Energy Storage: Photovoltaics Await Inflection Point (https://finance.sina.com.cn/stock/stockzmt/2025-12-26/doc-inheaqmr2648003.shtml)
[9] East Money - Probability Analysis of Tongwei Co., Ltd.'s Turnaround to Profit in Q4 (https://caifuhao.eastmoney.com/news/20251224141825961626930)
[10] Caifuhao - Anti-involution: Polysilicon Capacity Integration and Acquisition Platform Beijing Guanghe Qiancheng Established (https://caifuhao.eastmoney.com/news/20251215130220528045050)
[11] Tencent News - Stock Price Plunges for Days Due to Storage Details Falling Short of Expectations (https://news.qq.com/rain/a/20251223A02XCS00)

Based on the above analysis, my view is: Polysilicon prices will fluctuate upward in the short term, and the whole year of 2026 depends on the progress of capacity clearance; in the comparison between the two companies, Tongwei Co., Ltd.'s profitability recovery elasticity is significantly greater than Hesheng Silicon Industry, so it is recommended to focus on allocating Tongwei Co., Ltd. using the “undervaluation + diversification” strategy.