BOCOM INTL: Maintains "Neutral" rating on Triumph New Energy (01108) target price lowered to 3.36 Hong Kong dollars

BOCOM INTL released a research report stating that it has lowered the profit forecast and valuation of Triumph New Energy (01108). The bank believes that the price of photovoltaic glass will remain low for a longer period of time, thus maintaining a "neutral" rating on the company. Considering that the decline in glass prices exceeded expectations, based on a 0.43 times price-to-book ratio for 2024, the target price was lowered to HK$3.36. Key points from BOCOM INTL are as follows: Increased losses in the second quarter, with a widening gap in gross profit margin compared to industry leader: The company recorded a net loss attributable to shareholders of HK$48.43 million in the second quarter, an increase from the HK$6.35 million loss in the first quarter, which was in line with performance guidance but lower than the bank's expectations. Revenue increased by 7.2% quarter-on-quarter, with a gross profit margin of 5.9%, a decrease of 2.3 percentage points from the previous quarter, reaching a new low, and recognized an inventory impairment of HK$26.06 million. The company's photovoltaic glass production/sales volume in the first half of the year was 196/194 million square meters, an increase of 27%/31% year-on-year, with a gross profit margin of 6.9%, widening the gap compared to the industry leader's gross margin of over 21%. The company ignited a 1200-ton production line in Luoyang in April and a 650-ton production line in Hefei in July, with the current capacity in operation at 5,000 tons. Continuous record low prices for photovoltaic glass as the industry enters a clearance phase: The production of photovoltaic modules in June and July decreased by 11%/9% compared to the previous months, leading to an oversupply of photovoltaic glass, causing prices for 2.0mm glass to drop by 10%/7% in July and August. At current prices, except for two leading companies, the bank calculates that all other companies are already recording losses. Under the pressure of losses and inventory, the industry is experiencing a wave of cold repairs, with a production capacity of 6250/3000 tons in July and August, while new ignited capacity is only 1200/1200 tons. The nominal daily melting volume of the industry has decreased by about 6% compared to the end of June, with some kilns in operation also reducing production, while module production in August has increased, significantly narrowing the supply-demand gap. With the peak season approaching, the bank predicts that module production will continue to increase in September, driving glass destocking, and prices are expected to rebound slightly in October and November. However, there are still many investment plans yet to be completed by the industry leaders this year, and the bank predicts that there will be an investment wave at the end of the year. With the arrival of the off-season, prices may once again decline in the first quarter of next year. The bank believes that the industry has entered a clearance phase, and glass prices will remain low for a longer period of time, putting continued pressure on the company's performance.