Solarvest's Margin Test: Navigating China's Export Tax Shock & Record Silver Prices
Solarvest faces a historic "double squeeze" as China cancels key solar export rebates and silver prices skyrocket. We analyze the impact on project costs, margins, and the stock's premium valuation in this critical industry moment.
For investors in Solarvest Holdings Berhad (KLSE:SLVEST), a leading Malaysian solar engineering, procurement, construction, and commissioning (EPCC) player, recent months have presented a curious paradox. While the company posts impressive growth figures—net profit doubled year-on-year in its latest quarter, buoyed by a robust RM1.33 billion unbilled order book—its share price has faced pressure amid industry-wide challenges.
The disconnect points to emerging headwinds from two directions: Beijing's policy rooms and the volatile global commodities market.The first and most direct impact is a sweeping policy change from China, the undisputed titan of global solar manufacturing. In a decisive move to address industrial overcapacity and trade tensions, China's Ministry of Finance and State Taxation Administration announced the full termination of value-added tax (VAT) export rebates for photovoltaic (PV) products, effective April 1, 2026.
This is not a minor adjustment; it's the removal of a critical cost lever that has underpinned China's solar export dominance for years. The China Photovoltaic Industry Association (CPIA) estimates the total tax refund value involved is a staggering US$2.2 billion.For a Malaysian EPCC company like Solarvest, which sources a significant portion of its modules from China, this translates into an immediate and substantial increase in procurement costs.
Industry leaders are already sounding the alarm. Executives from Jinko Solar and Trina Solar warn of short-term module price surges of 30-40% in Q1 2026 as manufacturers scramble to adjust and buyers engage in "panic buying" to front-load shipments before the deadline. This policy shock alone would be a significant test for Solarvest's project margins and its ability to price future bids competitively.However, the policy shift is only half the story.
Solarvest and market conditions
Compounding the problem is a historic, breathtaking surge in the price of silver. In January 2026, silver shattered records, reaching an unprecedented $108.17 per ounce, a near 15% jump in a single week and a monumental climb from an average of $28.27 in 2024. Silver paste is an indispensable component in solar cells, forming the conductive grid that captures and transfers electricity.
As Philip Newman of Metals Focus notes, at around $70/oz, silver constituted 18-20% of a module's cost. At current peaks, that share has ballooned to over 30%.This creates a "double squeeze" of extraordinary pressure. Solarvest, sitting in the middle of the supply chain, faces a scenario where its primary input cost is being inflated by both macroeconomic commodity dynamics and deliberate geopolitical-industrial policy.
Analysts at OPIS highlight the grim reality for manufacturers: passing these costs to end-users is "challenging, if not impossible" due to downstream demand sensitivity and existing overcapacity. This margin compression is already evident, with cell and module price increases lagging far behind the meteoric rise in silver.So, where does this leave Solarvest?
The company is not a passive bystander. Its recent acquisition of a stake in Solar District Cooling Group hints at a strategic pivot towards energy efficiency and building management systems, seeking recurring revenue streams and cross-selling opportunities to diversify its risk.
Furthermore, the global industry's frantic push for "silver thrifting" and alternative metallization, like copper-based pastes, may offer a long-term reprieve. Solarvest's ability to partner with manufacturers leading this technological transition will be crucial.Yet, critical questions remain for the award-winning analyst. Can Solarvest's strong order book and historical earnings growth insulate it long enough for these innovations to scale?
Does its high price-to-earnings (P/E) ratio of 39.1x, premium by any measure, justifiably price in this unprecedented risk, or does it leave room for a potential correction if margins erode faster than expected? The market's response to strong earnings has been mixed.In the final analysis, Solarvest finds itself at a complex inflection point. The dual forces of China's rebate cancellation and silver's super-spike represent the most severe cost crisis the solar industry has faced in years.
While the company's fundamentals and strategic moves provide defensive tools, the coming quarters will be a definitive test of its operational agility, supply chain acumen, and, ultimately, its ability to deliver shareholder returns under a harsh new economic sun. The green energy transition continues, but its path just got considerably more expensive.
Johan Chairil