XINYI ENERGY(3868.HK)：EXPENSE SAVINGS OFFSET CURTAILMENT WOES

Core Viewpoint - Xinyi Energy (XYE) reported a 23% year-on-year increase in net profit for 1H25, driven by higher power generation, reduced interest expenses, and lower tax expenses, despite a decline in gross margin due to worsening curtailment [1][2]. Financial Performance - XYE's net profit reached RMB450 million in 1H25, reflecting a 23% YoY growth, attributed to increased power generation and a 19% YoY reduction in interest expenses [2]. - Gross margin decreased to 61.8%, down 2.5 percentage points YoY, primarily due to deteriorating curtailment [2]. - Income tax expenses fell by 17% YoY, benefiting from lower withholding tax in 1H25 [2]. - The company declared an interim dividend of HK$0.029 per share, a 26% increase YoY, maintaining a 50% payout ratio [2]. Strategic Moves - XYE has demonstrated prudent asset acquisition strategies, acquiring only 30MW of new projects in 1H25 while awaiting clarity on provincial tariff policies [3]. - The company is pursuing overseas opportunities, particularly in Malaysia, where it is set to begin construction on a 100MW joint venture solar farm in 2H25, which is expected to enhance profitability in the long term [4]. Valuation and Outlook - The company maintains a BUY rating with a DCF-based target price of HK$1.50, factoring in lower interest rates and tax expenses [4]. - The target price implies a 4.1% dividend yield for 2026E, assuming a 50% payout ratio [4]. - A key catalyst for XYE in 2H25 is the potential collection of overdue subsidies, which has not yet been fully anticipated by the market [4].