UBS Group released a research report stating that it has lowered the earnings per share forecast for XINYI SOLAR (00968) for the fiscal years 2024 to 2026 by 70%, 42%, and 27% respectively, while reducing its Target Price from HKD 5.7 to HKD 4.6, maintaining a "Buy" rating.
The company earlier issued a profit warning, expecting that the net profit for the year ending December 31, 2024, will decrease by 70% to 80% compared to 2023. The research report pointed out that the narrowing profit margin and impairment losses have resulted in weak performance for XINYI SOLAR last year, estimating its net loss for the second half of 2024 to be between 1 RMB and 1.8 RMB per square meter. Based on average selling prices, it believes that the company has entered a cash cost loss in the fourth quarter of 2024, and the weak demand during the winter heating season and rising costs may further impact the profit margin in the first quarter of 2015.
UBS Group anticipates that by the end of 2025, the capacity of the photovoltaic industry may increase from 0.107 million tons per day in 2024 to 0.122 million tons per day. As leading companies have already experienced cash cost losses, it believes that poor profitability may lead to limited new capacity in 2025. It estimates that the profitability of solar glass by the end of 2024 may bottom out faster than the major solar supply chain since its capacity is below that of the main supply chain. It also indicated that as demand recovers in the off-season of the first quarter, the profit margin for solar glass may start to rebound in the second quarter.
