UBS: Maintains "Buy" rating on XINYI SOLAR (00968) with a target price lowered to HKD 4.6

UBS releases a research report that adjusts XINYI SOLAR's (00968) earnings per share forecast for the fiscal years 2024 to 2026 by 70%, 42%, and 27% respectively. At the same time, the target price is lowered from HK$5.7 to HK$4.6, maintaining a "buy" rating. The company issued a profit warning earlier, expecting a decrease in net profit of 70% to 80% for the year ending December 31, 2024 compared to 2023. The research report indicates that profit margin contraction and impairment losses weakened XINYI SOLAR's performance last year, estimating a net loss of RMB 1 to 1.8 per square meter in the second half of 2024. Based on average selling prices, it is believed that the company has incurred cash cost losses in the fourth quarter of 2024, and weak demand in the winter heating season and rising costs may further impact profitability in the first quarter of 2015. UBS expects that the capacity of the photovoltaic industry by the end of 2025 may increase from 10.7 million tons per day in 2024 to 12.2 million tons per day. Due to cash cost losses incurred by leading companies, it is believed that poor profitability may limit the addition of new capacity in 2025. The bank believes that the profitability of CECEP Solar Energy glass by the end of 2024 may recover faster than the main CECEP Solar Energy supply chain, as its capacity is lower than the main supply chain. It is also pointed out that with the recovery of demand in the first quarter, the profit margin of CECEP Solar Energy glass may begin to rise from the second quarter onwards.