The company plans to ignite and commence production of four 1,000-ton and one 900-ton production lines that are undergoing maintenance this year, as well as the newly constructed production line in Wuhu, depending on market and company conditions.
According to the Zhitong Finance APP, Zhongtai International released a research report stating that it maintains a 'neutral' rating on XINYI SOLAR (00968). The adjustment of the production line startup will undoubtedly affect short-term revenue, but it can alleviate the issue of oversupply in the market and support the mid-term recovery of the Industry. The target PE for FY25 has been adjusted from 8.0 times to 9.0 times to reflect the recent stabilization of macro risks. Accordingly, the target price has been lowered from HK$3.85 to HK$3.22.
The main points from Zhongtai International are as follows:
A temporary decline in production capacity, with weak Glass prices expected, results in a year-on-year drop of 3.1% in effective annual melting volume for FY24.
As of the end of November, the company has cumulatively cold-repaired nine Photovoltaic Glass production lines this year, with a total daily capacity of 7,000 tons (2,000 tons in the first half of the year and 5,000 tons in the second half). The two 1,000-ton production lines cold-repaired in the first half of the year have completed their engineering but have not yet been reignited for production, while the rest of the cold repair projects are still underway. In terms of new capacity, the company has completed the construction of six Photovoltaic Glass production lines this year, of which (1) two 1,200-ton lines in Malaysia were ignited and commenced production in June and August; (2) two 1,000-ton lines in Anhui Wuhu were ignited for production back in March; (3) the remaining two 1,000-ton lines in Wuhu did not commence production as originally planned. The company plans to ignite and commence production of four 1,000-ton and one 900-ton production lines being cold-repaired this year, as well as the newly built Wuhu production line, depending on market and company conditions, in a timely manner in the future.
The bank expects a daily production capacity of 23,200 tons at the end of FY24, a decrease of 10.1% compared to 25,800 tons at the end of FY23 (note: there was no cold repair in FY23). Since most of this year's cold repair projects are in the second half, the bank expects the effective annual melting volume for FY24 to decrease by only 3.1% year-on-year to 7.6 million tons. Considering that some production lines will go into operation, the bank anticipates a year-on-year rebound in effective annual melting volume of 15.5% and 3.0% for FY25-26, reaching 8.78 million tons and 9.04 million tons respectively.
Photovoltaic Glass prices remain weak.
In the second half of the year, the price decline of Photovoltaic Glass continues. As of December 11, the market average price of Photovoltaic Glass (3.2mm coated) is 19.25 RMB per square meter, down 27.4% and 9.4% compared to the beginning of the year and the end of September, which were 26.5 RMB and 21.25 RMB respectively. However, the recent decline in raw material soda ash and fuel Henry Hub Natural Gas prices helps mitigate the impact of the glass price drop on the company's profits.
Lowered profit forecasts.
In summary, the bank has lowered the forecast for FY24-26 Net income for Shareholders by 16.9%, 24.4%, and 28.2% to 2.98 billion, 3.24 billion, and 3.58 billion HKD respectively. FY24 profits are expected to decline by 28.9% year-on-year, but FY25-26 are projected to rebound by 8.9% and 10.5% year-on-year respectively.