Zhongtong Finance APP learned that Haitong International released a research report stating that considering the oversupply situation in the industry and the impact of low-priced silicon materials on the company's profit level, it is expected that Xinte Energy (01799) will have a net income attributable to shareholders of 17.03(-70%)/21.10(-77%)/2.454 billion yuan from 2024 to 2026. The company benefits from a diversified business structure, an increase in the proportion of N-type materials shipped, and the continued development of new technologies. The target price is lowered from HKD 18.8 to HKD 13.56, 28% lower, and maintains an "outperform" rating as the company gives a 10 times PE in 2024 (the original is 3.5 times PE in 2023).

Haitong International's main viewpoints are as follows:

The company released its 2023 performance report.

In 2023, the company achieved revenue of 30.75 billion yuan, a year-on-year decrease of 16.5%. The net income attributable to shareholders was 4.35 billion yuan, a year-on-year decrease of 67.4%. In 2023, the company's comprehensive gross profit margin was 33.45%, a year-on-year decrease of 21.84%, mainly due to the sharp decline in polysilicon prices.

Capacity release promotes cost reduction, and the decline in silicon material prices drags down performance.

In 2023, the revenue of the company's polysilicon business was 19.5 billion yuan, a year-on-year decrease of 23.9%. The company's annual polysilicon production/sales volume was 0.1913/0.2029 million tons, a year-on-year increase of 52%/90%, which pushed the cost per ton down to 0.062 million yuan, and the selling price per ton sharply decreased to 0.096 million yuan. The gross profit margin was 36%, a year-on-year decrease of 35 percentage points. The first phase of the Quandong 0.2 million-ton polysilicon project with a capacity of 0.1 million tons was completed and put into operation in August 2023, and the polysilicon production capacity has been increased to 0.3 million tons/year. With the recovery of the Inner Mongolia 0.1 million-ton polysilicon project, the company's silicon material cost per ton is expected to continue to decline. Looking ahead to 2024, the company expects the total annual polysilicon production to be 0.28-0.3 million tons, and the proportion of N-type materials is expected to continue to increase to over 80%.

Increase market development efforts, and continue to expand the scale of power station operation.

1) Power station construction: In 2023, the company realized revenue of 6.3 billion yuan, a year-on-year decrease of 18%. In 2023, the company confirmed that the scale of the power station construction project was 2.2GW, a year-on-year decrease of 5%. The company expects to confirm the scale of the income in 2024 to be 2-3GW. The gross profit margin of the power station construction business in 2023 was 19%, a year-on-year decrease of 0.4%; 2) Power station operation: In 2023, the company achieved revenue of 2.2 billion yuan, a year-on-year increase of 8%. As of the end of 2023, the cumulative installed capacity of the company's power station operation connected to the grid reached 3.2GW, an increase of 0.6GW year-on-year, and there were approximately 1GW of projects under construction. The company expects to achieve a cumulative installed capacity of 4-5GW by the end of 2024. The gross profit margin of the power station operation business in 2023 was 58%, a year-on-year decrease of 1 percentage point. In 2023, the company provided an asset impairment of 1.53 billion yuan, mainly due to a write-down of inventory of 0.86 billion yuan and a write-down of fixed assets of 0.62 billion yuan.

Risks: the decline in polysilicon prices, intensified industry competition, and the N-type component ratio did not increase as expected.