BOCOM INTL: Upgrades XINYI ENERGY (03868) to "buy," with a target price raised to 1.02 Hong Kong dollars.

BOCOM INTL's research report stated that XINYI ENERGY (03868) had its rating upgraded from "Neutral" to "Buy": Due to the appreciation of the Renminbi and the unexpected interest rate cut by the US Dollar, the profit forecast for 2024-2026 was raised by 2%/3%/4%. The 2024 price-to-earnings ratio was maintained at 10 times, and the target price was raised to 1.02 Hong Kong dollars (original 1.00 Hong Kong dollars). After a 37% drop in the stock price this year, the company's dividend yield for 2025 is currently as high as 7.2%. The bank believes that the valuation is attractive, and any previous undervaluation due to the lower than expected mid-year report has already been fully reflected. The unexpected interest rate cut by the US Dollar is expected to improve investor pessimism towards the company, and the downward interest rate cycle is beneficial for the company's profit growth. The main points of BOCOM INTL are as follows: The unexpected interest rate cut by the US Dollar benefits lower borrowing rates: On September 19, the US Federal Reserve FOMC meeting lowered the benchmark interest rate by 50 basis points to a range of 4.75-5.0%, which exceeded market expectations, and the Hong Kong Monetary Authority subsequently announced a simultaneous rate cut. The company's average borrowing rate at the end of June was 4.71%, with 78% of borrowing in Hong Kong dollars. The unexpected interest rate cut in Hong Kong dollars is beneficial for lowering borrowing rates. Based on financial data as of the end of June, for every 0.25 percentage point decrease in Hong Kong dollar interest rates, profit will increase by 13 million Hong Kong dollars, accounting for 1.6% of 2024 profits. For every 5 percentage point increase in the proportion of lower-interest-rate Renminbi borrowing, profit will increase by 7 million Hong Kong dollars, accounting for 0.8% of 2024 profits. With continued interest rate cuts by the US Dollar and an increase in the proportion of Renminbi borrowing, the bank predicts that the company's borrowing rates will decrease to 4.7%/3.8%/3.3% in 2024-2026, still with significant room for further decline, and the proportion of Hong Kong dollar borrowing will decrease to 70%/65%/60% respectively by the end of the period. The continuous lowering of photovoltaic module prices benefits the increase in new project yields: Due to oversupply, the price of N-type photovoltaic modules has dropped from 1 RMB per watt at the beginning of the year to the current 0.75 RMB per watt, and is still hitting new lows. The bank predicts that in the fiercely competitive solar manufacturing industry, module prices will remain low for a long period of time, benefiting from the reduction in investment costs and the increase in yields for the company's new projects.