Xinyi Solar (0968.HK)_ What's New from 2024 Citi China Conference_ Loss on Solar Glass to Persist in Next 5 Months

Summary of Xinyi Solar (0968.HK) Conference Call Company Overview - Company: Xinyi Solar (0968.HK) - Date of Conference: 06 November 2024 - Market Capitalization: HK$35,134 million (US$4,520 million) [3] Key Industry Insights - Solar Glass Sector: Xinyi Solar is currently experiencing losses in solar glass sales due to low prices, with profitability expected to decline further due to rising winter gas prices [2][4] - Production Capacity: The solar glass sector needs to reduce production capacity by 10% from the current level of 112,950 tons/day to achieve supply-demand balance [5] - Inventory Management: Xinyi Solar's inventory period is below 30 days, which is 10 days shorter than the industry average, indicating effective inventory management [4] Financial Performance - Gross Profit Margins: Some production lines are marginally break-even, with a unit sale price of Rmb12/m² for 2.0mm solar glass. Over 50% of solar glass companies are currently facing cash losses [4] - Projected Earnings: - 2022 Net Profit: HK$3,820 million - 2023 Net Profit: HK$4,187 million - 2024E Net Profit: HK$2,694 million (down 35.7% YoY) - 2025E Net Profit: HK$2,436 million (down 9.6% YoY) [6] Market Outlook - Price Recovery: Management believes that solar glass prices may recover starting March 2025, coinciding with the next peak demand season for solar installations [4] - Demand Dynamics: The company does not anticipate any supply control policies on solar glass, suggesting that market mechanisms will dictate re-balancing [11] Risks and Challenges - Cost Pressures: Difficulty in passing on higher natural gas costs to customers due to high inventory pressure, although the cost increase may be smaller than the previous year [4] - Credit Risk: Xinyi Solar has an average accounts receivable collection period of 3-4 months, which is manageable given that most sales are to tier 1 module companies with limited credit risks [12] Valuation and Investment Perspective - Target Price: The target price for Xinyi Solar is set at HK$3.60, reflecting a cautious outlook on profitability [2][17] - Expected Returns: The expected share price return is -7.0%, with an expected total return of -3.2% [3] Additional Insights - Polysilicon Plant: The polysilicon plant with an annual capacity of 60,000 tons is undergoing safety tests, with no determined start time due to competitive market conditions [13] - Solar Farm Capacity: Xinyi Solar added 300MW of solar farms in 1H24 and has no target for 2H24E, a significant reduction from previous years [14] This summary encapsulates the critical points discussed during the conference call, providing a comprehensive overview of Xinyi Solar's current situation, market dynamics, and financial outlook.