Investment Rating - The report maintains a "Buy" rating for Xinyi Solar (968 HK) [2] Core Views - Xinyi Solar's 1H24 net profit attributable to shareholders reached HKD 1.96 billion, a 41% YoY increase, aligning with the performance forecast [2] - The company's strong 1H24 performance was driven by steady growth in photovoltaic (PV) glass sales (+12.2% YoY) and improved gross margins (+6.3 ppts YoY to 21.5%) [2] - However, PV glass prices have declined since May 2024, and the report expects challenges in 2H24 due to oversupply and lower gross margins [2][3] - The report revised down 2024/2025/2026 EPS estimates by 36%/26%/2% to HKD 0.40/0.65/0.90, and the target price was reduced by 36% to HKD 5.31 [2] Operational Performance and Challenges - PV glass prices have dropped significantly since May 2024, with 2.0mm PV glass prices down by HKD 4/m² (21.9%) from the year's peak and HKD 3/m² (17.4%) lower than the same period in 2023 [3] - Weak terminal demand and rapid capacity expansion contributed to the price decline, with domestic module production in May/June 2024 down by 4.1%/13.4% compared to April 2024 [3] - The report anticipates continued supply-demand challenges in 2H24, leading to a potential decline in gross margins for the PV glass business [3] Capital Expenditure and Production Adjustments - Xinyi Solar plans to reduce 2024 capital expenditure by 17.6% to HKD 5.77 billion, with a 29% cut in PV glass-related capex to HKD 3.2 billion [4] - The company maintains its target of commissioning 6 production lines in 2024 (4 in Anhui, 2 in Malaysia), but the timeline may be delayed [4] - These adjustments aim to better manage supply-demand dynamics and navigate market challenges [4] Industry Outlook - The PV glass industry has seen a slowdown in capacity expansion since 2023 due to improved local government oversight and early warning mechanisms [5] - The report expects a more balanced supply-demand relationship and healthier competition in the industry as capacity warning mechanisms are further refined [5] Financial Forecasts - Revenue for 2024E/2025E/2026E is projected at HKD 27.84 billion/HKD 35.85 billion/HKD 38.52 billion, with YoY growth of 4.56%/28.76%/7.43% [6] - Net profit attributable to shareholders for 2024E/2025E/2026E is forecasted at HKD 3.56 billion/HKD 5.81 billion/HKD 8.00 billion [6] - EPS for 2024E/2025E/2026E is estimated at HKD 0.40/HKD 0.65/HKD 0.90 [6] Valuation Metrics - The target price is set at HKD 5.31, with a current share price of HKD 3.71 as of July 31, 2024 [8] - PE ratios for 2024E/2025E/2026E are 9.28x/5.68x/4.13x, while PB ratios are 0.98x/0.90x/0.80x [6][8]
信义光能：业绩符合预告，但2H24面临挑战