Guolian Securities maintains a "buy" rating on XINYI SOLAR (00968) as the supply and demand of photovoltaic glass may continue to improve.

Guolian Minsheng Securities released a research report stating that there are signs of improvement in supply and demand of photovoltaic glass, and they maintain a "buy" rating for XINYI SOLAR (00968). Since 2024H2, the capacity expansion of photovoltaic glass has accelerated, and industry inventory has continued to decline after the Spring Festival, indicating an improvement in supply and demand. The company continues to strengthen its competitive advantages in cost and overseas capacity continues to be put into operation, which is expected to contribute to income growth. It is estimated that the revenue from 2025 to 2027 will be 23/25/28.9 billion yuan, with year-on-year growth of +5%/+13%/+11%; net profit attributable to shareholders will be 2.4/2.8/3.2 billion yuan, with year-on-year growth of +133%/+17%/+15%. EPS will be 0.26/0.30/0.35 yuan respectively. The main points of Guolian Minsheng Securities are as follows: The company announced its performance for 2024. The company's revenue in 2024 was 21.9 billion yuan, down 9% year-on-year; net profit attributable to shareholders was 1 billion yuan, down 74% year-on-year. In 2024H2, the company's revenue was 10.3 billion yuan, down 20% year-on-year and 11% month-on-month; net profit attributable to shareholders was -0.8 billion yuan, turning to a loss from the previous month. The pressure on photovoltaic glass prices is a key factor affecting performance. In addition, the impairment of the company's plant and equipment in 2024, as well as an increase in provisions for inventory impairment, also had a negative impact (the impairment losses on plant and inventory in 2024 were 390 million and 160 million yuan respectively, compared to -/0.01 billion yuan in 2023). In 2024H2, the volume of photovoltaic glass increased while the price decreased, and the gross profit margin turned negative for the first time. In 2024, the company's revenue from photovoltaic glass was 18.8 billion yuan, down 12% year-on-year; the gross margin was 9.7%, down 11.9 percentage points year-on-year. In 2024H2, revenue was 8.7 billion yuan, down 25% year-on-year and 14% month-on-month; the gross margin was -4.1%, down 31% year-on-year and 25.6% month-on-month. Both revenue and profit from the company's photovoltaic glass business were under pressure. The main reason for this, according to the bank, is that the industry's prosperity continued to decline in 2024H2, with the average price of 2.0mm photovoltaic coated glass in the market being 12.5 yuan, down 5.7 yuan or 31% year-on-year and 4.5 yuan or 26% month-on-month. The company's sales volume in 2024 increased by 9.6% year-on-year, with sales volume in 2024H2 estimated to increase by 7% year-on-year and 16% month-on-month. At the end of 2024, the company's production capacity decreased year-on-year, and a new 4,000 t/d production line is planned for 2025. In 2024H2, the industry's prosperity continued to decline, and the pace of cold maintenance of production capacity accelerated. In 2024H2, the industry's cold maintenance and production capacity (including new production and resumption of production) were 23,400 and 1,200 t/d respectively. At the end of 2024, the industry's production capacity in operation was 92,490 t/d, a decrease of 22,220 t/d compared to the end of 2024H1. The company's cold maintenance and production capacity were 6,100 and 4,400 t/d respectively in 2024. At the end of 2024, the company's total production capacity and production capacity in operation were 30,200 and 23,200 t/d, an increase of 4,400 and a decrease of 2,600 t/d respectively compared to the same period last year. The company plans to start a new production line with a capacity of 4,000 t/d in 2025, and two production lines under construction in Indonesia are expected to start production in Q1 2026. The profitability of photovoltaic power generation has slightly improved, and the increase in grid-connected capacity is in line with expectations. In 2024, the company's CECEP Solar Energy generated revenue of 3 billion yuan, a year-on-year increase of 12%; the gross profit margin was 67.3%, a decrease of 1.2 percentage points year-on-year. In 2024H2, revenue was 1.6 billion yuan, an increase of 22% year-on-year and 14% month-on-month; the gross profit margin was 68.9%, an increase of 2.4 percentage points year-on-year and 3.3 percentage points month-on-month. The gross profit margin of photovoltaic power generation improved slightly in 2024H2. In 2024, the company added 300MW of grid-connected capacity (with no new capacity added in 2024H2), and the total new capacity for the year was in line with the previous plan. By the end of 2024, the company's cumulative grid-connected capacity was 6.2GW (5.8GW for centralized projects). The company has not yet specified the planned new grid-connected capacity for 2025. Risk warning: Excessive expansion of production capacity; slower progress in the construction of in-progress production capacity; risks of rising prices of major raw materials such as high-quality soda ash/natural gas; and slower-than-expected growth in photovoltaic installation rates.