Investment Rating - The report maintains a "Buy" rating for Xinyi Solar (0968.HK) with a target price of HKD 4.33, indicating a potential upside of 38% from the current price of HKD 3.14 [5][10]. Core Views - The company has issued a negative profit warning, expecting a significant decline in net profit for 2024, projected to decrease by 70-80% year-on-year, with an estimated net profit range of HKD 8.37 billion to HKD 12.56 billion [8][3]. - The decline in profitability is attributed to several factors, including an imbalance in supply and demand for photovoltaic glass, leading to a substantial drop in glass prices in the second half of 2024, and impairment provisions for production lines that are either halted or under maintenance [3][8]. - Despite the expected losses, the company is anticipated to experience a smaller loss compared to smaller competitors due to its scale and cost advantages [3][8]. Summary by Sections Financial Performance - For 2024, the company forecasts a net profit of HKD 1.05 billion, a 74.9% decrease from 2023, with a projected revenue of HKD 23.95 billion, reflecting a 10.1% decline [6][14]. - The EBITDA margin is expected to drop to 0% in 2024, with a recovery anticipated in subsequent years [15][14]. Industry Outlook - The photovoltaic glass industry is undergoing significant production cuts, and as inventory levels decrease, a price recovery is expected in 2025. The report suggests that after the seasonal downturn in Q1 2025, demand is likely to rebound in Q2, improving the supply-demand balance [4][9]. - Current market prices for photovoltaic glass remain stable, with 2.0mm coated glass priced at HKD 12 per square meter and 3.2mm coated glass at HKD 19.5 per square meter as of January 3 [4][9]. Valuation Metrics - The updated target price of HKD 4.33 corresponds to a price-to-earnings (PE) ratio of 15 times for 2025 and 13 times for 2026, indicating a favorable valuation compared to current market conditions [5][10]. - The report highlights that the company's price-to-earnings ratio at the current price is 26.6 for 2024, which is expected to decrease significantly in the following years [6][12].
信义光能：24年盈利预警，行业拐点渐行渐进