BOC International released a research report stating that it raised Xinyi Solar (00968) to “buy” and lowered the 2024-26 profit by 25%/35%/29%, and the target price to HK$4.04 (originally HK$4.09) due to the fall in the price of photovoltaic glass exceeding expectations and the company's production falling below expectations. The company's photovoltaic power generation business is relatively stable in profit and continues to provide cash flow, and the debt ratio is significantly lower than that of the photovoltaic glass industry. Therefore, when the industry all fall into losses and is unable to expand production, the company can still make an overall profit and buck the trend and expand production, and is in an advantageous position in competition.

The main views of JBC International are as follows:

The price of photovoltaic glass continues to fall, but the industry is expected to enter the storage cycle after a sharp reduction in production:

Due to the reduction in module production and the increase in glass supply, the price of photovoltaic glass has continued to fall since May. The price of 2.0/3.2 mm glass has dropped by as much as 35%/24%. Currently, all companies' photovoltaic glass businesses have fallen into net profit losses, and the gross profit of second- and third-tier companies is negative. Due to serious losses, large-scale cooling of the industry began in July, and no new production capacity was started in September. The mainland's nominal daily melting volume continued to drop from the highest 0.115 million tons in June to 0.098 million tons at present, a decrease of 14%. Furthermore, according to Zhuochuang information, some companies have also reduced production capacity by blocking kilns, so the actual production reduction was even greater. Currently, photovoltaic glass has achieved a balance between supply and demand. The bank expects that as production continues to be cut and module production increases, glass is expected to enter the storage cycle, and the price rebound can be expected.

Production expansion and cold repair are carried out simultaneously to reduce costs:

The company started 1,200 tons of production capacity in Malaysia as scheduled in August, while cold repairing old production capacity to reduce costs, including 500 tons in Tianjin in September and 900 tons in Malaysia in October. Since the unit cost would increase accordingly, the company did not cut production by blocking kilns. As a result, the company's current production capacity has dropped from 25,800 tons at the beginning of the year to 25,200 tons.

Supply-side reforms are expected to be introduced to speed up the clean-up of the industry and benefit the leaders:

Under loss pressure, the industry is calling for supply-side reforms recently. The bank expects the government to introduce policies such as raising energy consumption standards to speed up the clean-up of the supply and price recovery of photovoltaic glass, and benefit leading enterprises with lower energy consumption such as companies. The company has built kilns of less than 900 tons with high energy consumption, accounting for only 7% of the production capacity, which is lower than 10% of the other leading company Follett and more than 20% of the industry average, and the share of production capacity that may be eliminated is low.