Main points of investment
Debt is a drag on performance. The company's annual revenue in 2018 was 5.63 billion yuan, an increase of 43% over the same period last year, and its net profit was 470 million yuan, a decrease of 39% to 2.46% per share. The company's performance fell short of market expectations, mainly due to a loss of 405 million yuan on the exchange of US dollar bonds. After deducting non-recurring profits and losses, the company realized a pre-tax profit of 850 million yuan (compared with 760 million yuan in the same period last year). Other reasons for the decline in the company's performance are a sharp increase of 59% in financing expenses and a 34% increase in administrative expenses.
The sale of power stations is not as expected, and power plants above 3GW are expected to be sold in 2019. In the second half of 2018, the company sold 160MW and 140MW power plant projects to CGN Solar and three Gorges New Energy respectively, recovering a total of about 470 million yuan in cash and reducing debt by 1.6 billion yuan. On March 28, 2019, the company continued to announce the sale of 55% of the equity in the 280MW power plant project to Wuling Electric Power for 250 million yuan, reducing the debt by another 1.5 billion yuan. The company's plant sales in the second half of 2018 were lower than the company had expected (about 2GW), mainly due to concerns about the recovery of subsidized power plant assets after the new deal. The company expects plant sales in 2019 to be much better than in 2018, and is expected to sell 3-5GW assets directly, further reducing debt ratios.
The debt situation remains to be resolved. The company's current asset-liability ratio is 84%, net debt ratio is 384%, cash on hand plus financing line is 12.8 billion yuan, while maturing debt within one year is 9.5 billion yuan. In the debt structure, the proportion of maturing debt in the short term is also higher than at the end of last year.
Our point of view: Xiexin New Energy is the largest private photovoltaic power station operator in the world, with a cumulative installed capacity exceeding 7GW. At present, the company has a high debt ratio, so we still need to pay attention to the sale of the company's power station in the short term. We have lowered the company's 2019-2020 revenue forecast by 3.6% and 16.5% respectively, and raised the shareholder profit forecast by 19.9% and 16.0% respectively. It is estimated that the company's 2019-2021 revenue will be 5869 yuan, 5151 yuan and 5218 million yuan respectively, the net profit of the company will be 857,861 and 876 million yuan respectively, and the EPS will be 4.49,4.51 and 4.59 points respectively. Maintain the "prudent overweight" rating and raise the target price to HK $0.37 (previously HK $0.30).
Risk hints: the sale of power stations is not up to the plan, the time in arrears of subsidies has increased, and the subsidy policy for stock power stations has changed.