The first phase of the photovoltaic asset sale agreement with China Huaneng Group was signed on January 21, and more asset sales are expected to be completed in 2020. Xiexin Group announced on January 21, 2020 that two investment funds held by Xiexin Group and China Huaneng Group had formally entered into the first phase of the share purchase agreement for the sale of the company's seven Zaiyun photovoltaic power plants in Chinese mainland area. The net income generated by the exchange is about 1.08 billion yuan, meaning the assets sold are valued at about 6. 8 times 2018 earnings. Xiexin Group will use the proceeds from this sale to further repay its current debt.

The number of new photovoltaic installations in China in 2019 was 30.1 gigawatts, down 32.1 percent from the same period last year. According to the China Photovoltaic Association, 30.1 gigawatts of solar energy were installed in China in 2019, down 32.1% from the same period last year. Among the total new installations, centralized solar power stations installed 17.9 gigawatts, down 23% from the same period last year, while distributed solar projects installed 12.2 gigawatts, down 41% from the same period last year. We expect China's new solar installed capacity to remain at a low level in 2020 and to record about 25 gigawatts of new installed capacity under the influence of continued subsidies.

We maintained our "neutral" investment rating but lowered our target price to HK $0.15. After the sale of solar assets to China Huaneng Group, Xiexin New Energy's profitability is expected to be further weakened if it fails to record significant asset disposal gains or achieve effective leverage reduction. The new target price is equivalent to 0.4 / 0.3 times the 2019 / 2020 market-to-book ratio.