Bocom Intl released a research report stating that it has upgraded xinyi solar (00968) to a 'buy' rating. Due to the larger-than-expected decline in photovoltaic glass prices and lower-than-expected company output, the profit for 2024-2026 is revised down by 25%/35%/29%. The target price has been adjusted down to HK$4.04 (from the original HK$4.09). The company's photovoltaic power generation business is relatively stable in profitability and can sustainably provide cash flow. The debt ratio is also significantly lower than its photovoltaic glass peers. Therefore, while the industry is collectively facing losses and unable to expand production, the company can still maintain overall profitability, expand production against the trend, and hold a favorable position in the competition.

Bocom International's main points are as follows:

Photovoltaic glass prices continue to drop, but after a significant industry production cut, it is expected to enter a destocking period:

Due to component production cuts and increased glass supply, photovoltaic glass prices have been continuously falling since May, with price drops reaching as high as 35%/24% for 2.0/3.2 mm glass. Currently, all companies' photovoltaic glass businesses are experiencing net losses, with second and third-tier companies having negative gross margins. Due to severe losses, the industry began large-scale cold repairs in July, and from September, no new production capacity will be ignited. The mainland nominal daily melting capacity has decreased from the highest 0.115 million tons in June to the current 0.098 million tons, a 14% decrease. In addition, according to Zhuochuang Information, some companies are also reducing production capacity by blocking the kiln mouth, leading to a greater actual reduction in production. Currently, photovoltaic glass has achieved supply-demand balance. The bank expects that with continued production cuts and component increases, glass is expected to enter a destocking period, and price rebound is expected.

Expanding production and cold repairs carried out simultaneously to reduce costs:

As scheduled in August, the company ignited the scheduled 1200 tons of production capacity in Malaysia, while simultaneously cooling down the old and inefficient production capacity to reduce costs, including 500 tons in Tianjin in September and 900 tons in Malaysia in October. Since the unit cost will increase accordingly, the company did not reduce production by blocking the kiln. Therefore, the current in-production capacity of the company has decreased from 25,800 tons at the beginning of the year to 25,200 tons.

Supply-side reforms are expected to be introduced, accelerating industry clearance and benefiting leading companies:

Under the pressure of losses, the industry's recent calls for supply-side reforms have been increasing. The bank predicts that the government is expected to introduce policies to raise energy consumption standards, accelerate the clearance of photovoltaic glass supply, boost prices, and benefit leading companies with lower energy consumption. The company's built production capacity with higher energy consumption of less than 900 tons only accounts for 7%, lower than the other leading company Flat Glass Group's 10% and the industry average of over 20%, with a lower proportion of capacity that may be eliminated.