It is expected that China's new photovoltaic installed capacity in 2022 will be no less than 75 gigawatts. The China Photovoltaic Industry Association (CPIA) announced in February 2022 that the number of new photovoltaic installations in China is expected to be between 75 and 90 gigawatts (with a median of 82.5 gigawatts) in 2022, the highest level in the history of solar energy development in China. After adding 54.9 gigawatts of solar installed capacity in 2021 (a year-on-year increase of 13.9%), China is expected to add no less than 75 gigawatts of solar installed capacity in 2022.

We believe that investment in capital-intensive solar power plants will be mainly carried out by state-owned energy companies to achieve China's strategic goals of carbon peak and carbon neutrality.

The company's results in 2021 are in line with its earlier profit warning. Due to the impact of asset sales, Xiexin New Energy's revenue fell 43.4% year-on-year to 2.845 billion yuan in 2021. The company's net loss narrowed from 1.368 billion yuan in 2020 to 790 million yuan during the period. At the end of the reporting period, the company's total installed solar capacity was 1051 megawatts (year-on-year-84.2%), while grid-connected solar capacity was 996MW (year-on-year-79.2%). The decline in solar installed capacity also led to a 44% year-on-year drop in electricity sales and 45% in revenue during the period. Solar assets that have been contracted for sale but have not yet been delivered are 298 megawatts, and the company's total installed capacity will be reduced to about 753 megawatts after these projects are delivered.

Due to the uncertainty of the hydrogen business, we maintain our "neutral" rating and adjust our target price to HK $0.15. The new target price is equivalent to a price-to-earnings ratio of 39.6 times 2024 or a price-to-book ratio of 2022 to 2024, respectively.

It is expected that China's new photovoltaic capacity will reach about 75 gigawatts in 2022. According to data from the National Energy Administration of China, from January to April 2022, the total investment in the power industry was 206.6 billion yuan, an increase of 5.0% over the same period last year. Power project investment and power grid investment reached 117.3 billion yuan (5.1% year-on-year growth) and 89.3 billion yuan (4.7% year-on-year growth). Investment in solar energy projects increased by 204.1% to 29 billion yuan over the same period last year, accounting for about 24.7% of the total investment in power projects within maturity. From January to April in 2022, the country's newly installed power generation capacity reached 42.33 gigawatts, an increase of 42.5% over the same period last year or 12.62 gigawatts more than the same period last year. In the first four months of 2022, with the exception of thermal power (9.38 gigawatts newly installed, down 3.9 gigawatts from the same period last year), the new installed capacity of all types of power sources recorded positive growth, with solar energy contributing 16.88 gigawatts (an increase of 138.4% or 9.8 gigawatts more than the same period last year). By the end of April 2022, the country's cumulative installed power generation capacity had reached 2412 gigawatts, an increase of 7.9 percent over the same period last year. Thermal power, hydropower, nuclear power, wind power, solar power and others contributed 53.9%, 16.4%, 2.3%, 14.0%, 13.4% and 0.1% of the cumulative installed power capacity, respectively. By the end of April 2022, the country's cumulative solar installed capacity was 322.57 gigawatts, an increase of 23.6 percent over the same period last year. In the first four months of 2022, the average number of hours of solar energy utilization increased by 23 hours to 432 hours compared with the same period last year. The China Photovoltaic Industry Association (CPIA) announced in February 2022 that the number of new photovoltaic installations in China is expected to be between 75 and 90 gigawatts (with a median of 82.5 gigawatts) in 2022, the highest level in the history of solar energy development in China. After adding 54.9 gigawatts of solar installed capacity in 2021 (a year-on-year increase of 13.9%), China is expected to add no less than 75 gigawatts of solar installed capacity in 2022. In order to achieve China's national strategic goal of carbon peak and carbon neutrality, we believe that capital-intensive solar power plants will be mainly invested by state-owned energy enterprises in the future.

The company's results in 2021 are in line with its earlier profit warning. Due to the impact of asset sales, Xiexin New Energy's revenue fell 43.4% year-on-year to 2.845 billion yuan in 2021. The company's net loss narrowed from 1.368 billion yuan in 2020 to 790 million yuan during the period. The main reasons for the narrowing of net losses are: 1) reduced impairment losses on assets and receivables (asset impairment losses fell 74.1% year-on-year to 294 million yuan); and 2) debt repayment led to a decrease in financial costs during the period (due to a sharp decline in total borrowing, financial costs fell 35.6% year-on-year to 1.578 billion yuan). The reduction in total solar installed capacity (due to asset sales) and high financing costs combined led to a net loss in 2021. As a result of continued solar asset sales, the company's total installed solar capacity at the end of the reporting period was 1051 megawatts (year-on-year-84.2%), while grid-connected solar capacity was 996MW (- 79.2% year-on-year). The decline in solar installed capacity also led to a 44% year-on-year decline in electricity sales during the period. The average electricity price in 2021 is about 0.70 yuan per kilowatt-hour, down 6.7% from the same period last year. The composite gross profit margin fell 1.6 percentage points year-on-year to 62.5%. Thanks to asset sales, total debt fell 77.1 per cent year-on-year to 7.076 billion yuan at the end of 2021, effectively reducing financing costs during the period. In 2021, the company accelerated the sale of solar assets and announced the sale of solar assets with an installed capacity of about 2.9 gigawatts this year, reducing the debt by 11.2 billion yuan and reducing the asset-liability ratio to 56% at the end of the year (- 25 percentage points compared with the same period last year). 298 megawatts of solar assets have been contracted for sale but have not yet been delivered, and the company's total installed capacity will be reduced to about 753 megawatts when these projects are delivered in 2022. The company sold most of its solar assets to state-owned enterprises and said it would gradually transform itself into a green hydrogen producer over time.

We maintain our "neutral" rating and adjust our target price to HK $0.15. Asset sales will undermine the company's growth prospects, and the company's solar power sales revenue will decline further in the coming years as solar assets continue to decline. Asset disposal will bring great uncertainty to the company's operation. At the same time, the company announced the establishment of a hydrogen energy business department at the end of July 2021 to actively carry out research and development of hydrogen energy and its related business. The move marks the company's transformation from a solar power project holding company to a hydrogen production and distribution company. After the company has fully received the proceeds from the disposal of solar assets (i.e. assets to be liquidated in 2022) and repaid its debts, the company intends to use the remaining funds to develop its newly established hydrogen energy business. The company will focus on blue hydrogen and its ancillary products, green electricity hydrogen production and other directions. Hydrogen energy business will become the new focus of the company in the future. However, there is still a lot of uncertainty about the specific action plan for the new business. We are optimistic about the company's plan to set up a hydrogen business, but until we get more information, we cannot accurately predict the specific contribution that the business will bring to the company. Until then, we will maintain a "neutral" investment rating on the company. Without considering the new hydrogen business, our revised earnings per share forecasts for Xiexin New Energy from 2022 to 2024 are-0.005 yuan / 0.001 yuan / 0.003 yuan respectively. We have adjusted the target price to HK $0.15. The new target price is equivalent to a price-to-earnings ratio of 39.6 times 2024 or a price-to-book ratio of 2022 to 2024, respectively.