Bank of China Securities·2025-08-04 08:19Investment Rating - The report maintains a BUY rating on Xinyi Energy with a target price of HK$1.50 [5][6][7] Core Insights - Xinyi Energy's net profit for 1H25 increased by 23% year-on-year, surpassing market expectations. The company successfully reduced interest expenses by 19% year-on-year through active debt refinancing, alongside a decline in tax expenses, which helped mitigate the impact of worsening curtailment, resulting in a gross profit margin (GPM) drop to 62%, the lowest since its listing in 2019 [5][6][7] - The company has demonstrated capital expenditure discipline in recent quarters, achieving positive free cash flow (FCF) in 1H25. Its expansion into the Malaysian market is expected to be ROE-accretive in the long term [6][7] Summary by Sections Xinyi Energy - Xinyi Energy's 1H25 net profit grew by 23% YoY, exceeding consensus estimates. The company reduced interest expenses by 19% YoY through active debt refinancing, which, along with lower tax expenses, helped it overcome the challenges posed by increased curtailment, leading to a GPM of 62%, the lowest since its IPO [5][6][7] - The company has shown good capital expenditure discipline, resulting in positive FCF in 1H25. Its entry into the Malaysian market is anticipated to enhance its ROE [6][7] Xinyi Solar - Xinyi Solar reported a 59% YoY decline in net profit to RMB745.8 million, aligning with prior profit alerts. The interim dividend was set at HK$0.042 per share, down 58% YoY. The management lowered the 2025 production guidance by 10.4% to 8.137 million tonnes due to industry capacity reductions [8][9][10] - The report maintains a HOLD rating on Xinyi Solar with a target price of HK$3.00, advising investors to remain cautious until negative events occur and industry inventory decreases further [9][10] Shenhua Energy - Shenhua Energy plans to acquire several assets, including coal production entities and a mine-mouth power plant. Concerns have been raised regarding the potential negative impact on payout ratios, ROE, and EPS due to the size of the deal and financing methods [14][15][16] - The report maintains a HOLD rating on Shenhua Energy with a target price of HK$32.18 for its H shares [15][16]