China's solar export subsidy phase-out: A boon for Indian firms? | Stock Market Insights
China's decades-long focus on export promotion, with a fifth of its economy driven by exports, has faced challenges due to strained China-US relations. To sustain the export engine through the intermittent trade war, China heavily subsidized domestic manufacturing. Among these subsidies, solar exports were no exception, benefiting from rebates that translated to 9-13% discounts, according to Arihant Capital.
However, concerns about profitability and domestic self-sufficiency have taken center stage. On January 9, China announced the removal of rebates on photovoltaic products and a reduction in battery rebates from 9% to 6% starting April 1, 2026, with a complete phase-out by early 2027. This move is expected to significantly impact global solar panel prices, as China accounts for 80% of the global solar panel value chain.
This development could be a game-changer for India's solar exporters, which have been overshadowed by China's subsidized products. India's solar module manufacturers, such as Waaree and Premier Energies, are poised to benefit. While Waaree leads with a 5.4 GW and 18.7 GW cell and module manufacturing capacity, Premier Energies follows with 5.1 GW and 3.2 GW.
China's module manufacturing is currently 10% cheaper than India's, 20% cheaper than the US', and 35% cheaper than Europe's. The removal of the 9-13% rebate will likely shift the advantage to India, not only for domestic consumption but also for exports. Waaree's exports contributed 47% of its revenue in Q2FY26, up from 17% in FY25, while Premier has more room to grow its exports, as 99% of its revenue currently comes from domestic sales.
Both companies have expanded their EBITDA margins to a healthy 25-30%, with Waaree growing faster. Waaree's revenue has expanded over seven-fold from less than ₹2,000 crore in FY21 to almost ₹15,000 crore in FY25, while Premier's revenue has less than doubled to ₹1,100 crore over the same period. Waaree's growth lead continued in FY26.
With global module prices expected to rise, Premier can accelerate growth, as its margin situation is already favorable. Waaree may balance margin expansion and growth. Both have negative net debt, allowing for faster growth. Order books of ₹47,000 crore at Waaree and ₹13,250 crore at Premier provide almost two years of revenue visibility at the annualized quarterly run rate.
The stocks have lost nearly a third of their value since September 2025, reducing their trailing 12-month P/E ratios to 27. China's developments have boosted investor sentiment for Premier, with its shares rising 4% on January 10, compared to Waaree's 1% increase.
However, the solar glass sector faces challenges. India's solar glass scene is dominated by Borosil Renewables, which competes directly with cheap Chinese imports. Borosil's profitability is volatile due to India's regulations on customs duties and the approved list of models and manufacturers (ALMM). The situation improved in FY25 with a reduced debt-to-equity ratio, but further gains depend on Chinese solar glass becoming expensive.
Domestic competition could intensify, as firms like Asahi India Glass, Hindustan Glass, and Sejal Glass already have solar glass as a revenue stream. Borosil's working-capital management is another concern, with a 159-day cycle in FY25, up from 96 days in FY24, potentially impacting cash flows. These risks have kept the stock flat since late 2021, despite China's rebate removal.
In the EV chemical sector, India's chemical players are expanding capacities for lithium hexafluorophosphate and lithium cobalt oxide, used in photovoltaic cells. Neogen Chemicals' joint venture with Morita Chemicals to build India's largest lithium hexafluorophosphate facility is timely, given the potential shift away from China. Neogen's stock has gained over 15% since January 9.
Himadri Speciality Chemical is set to become India's first advanced carbon material producer for lithium-ion battery anodes, leveraging its partnership with Sicona Battery Technologies. Gujarat Fluorochemicals, India's only fluoropolymer manufacturer, has a five-year CAGR of 42%, but its stock has corrected since January 9 due to limited growth potential.
Risks persist, as China's rebate removal on metals triggered a 20-50% rally in aluminium and copper prices. This trend can be applied to solar modules, but the picture is less optimistic for other value chain segments.
CRISIL's report highlights a wider gap in solar cell manufacturing, with Indian production costs up to twice those in China. While China's rebate removal will help close the gap, India's cell manufacturing process still lags in scale and price. Building solar plants will become more expensive, benefiting companies like Tata Power and Adani Enterprises, but independent power producers like NTPC may face higher costs.
Ananya Roy, founder of Credibull Capital, emphasizes the need for readers to conduct their own research and consult financial professionals before making investment decisions.
