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].

Index Performance - The Hang Seng Index (HSI) closed at 25,562, up 0.7% for the day and 27.4% year-to-date[2] - The MSCI China Index increased by 0.4%, with a year-to-date growth of 25.4%[2] - The KOSPI index showed significant growth, up 33.8% year-to-date, closing at 3,210[2] Commodity Price Performance - Brent Crude oil prices rose by 2.9% to $70 per barrel, but are down 3.1% year-to-date[3] - Gold prices decreased by 0.7% to $3,315 per ounce, with a year-to-date increase of 26.3%[3] - The Baltic Dry Index (BDI) surged by 126.5% year-to-date, remaining stable at 2,258[3] Economic Outlook - China's GDP growth is projected at 4.9% for the year, with Q3 and Q4 expected to grow at 4.7% and 4.3% respectively[6] - Manufacturing investment is anticipated to slow from 7.5% in H1 to 3.6% in H2, while infrastructure investment is expected to decrease from 8.9% to 6.8%[6] - Consumer retail sales are forecasted to grow by 4.3% in H2, with an annual growth of 4.6%[6] Monetary Policy Insights - There is potential for a 50 basis point reduction in reserve requirements, with an expected interest rate cut of 10-15 basis points in H2[7] - Fiscal policy may see optimization in the use of existing funds and an increase in policy financial tools, though aggressive new debt issuance is not anticipated[7]