Key points of investment

Profit for the first half of 2024 was HK$0.395 billion, a year-on-year decrease of 30.4%:

2024H1 achieved revenue of HK$1.218 billion, or -5.4%; profit attributable to shareholders of HK$0.395 billion, or -30.4% year-on-year; basic profit per share of HK4.78 cents, with an interim dividend of HK2.3 cents per share, and a dividend of 48%. The company's mid-term results fell short of expectations, mainly due to the combined effects of declining electricity settlement prices, rising abandonment rates in some regions, and depreciation of the RMB against the Hong Kong dollar due to increased market-based transactions.

The electricity limit rate is expected to continue in the second half of the year, and the company's project acquisitions are more cautious:

The provinces affected by the company's electricity restrictions are mainly in Hebei, Henan, and Hubei, especially Hubei. Of the company's 3.8 GW projects, the Hubei project reached 1 GW. Because Hubei Province's policy requires all new energy projects to enter market-based transactions at once, it is expected that the electricity limit rate and settlement price will continue to be affected in the second half of the year. Currently, the company is making a more careful evaluation of the proposed acquisition project, using a 10% electricity limit rate and a 10% reduction in electricity prices. It is necessary to meet the required rate of return and based on the company's financial situation before proceeding with the acquisition. The company already acquired a 200MW photovoltaic project from the parent company in the first half of the year. Xinyi Solar currently has about 1.9 GW available for acquisition (1.6 GW is an affordable project), and the company has maintained its acquisition target of 0.7-1 GW throughout the year.

To increase the RMB loan ratio, there is still room for loan interest rates to decline in the second half of the year:

The company continued to increase RMB loans in the first half of the year. Currently, RMB loans account for more than 20%. On June 30, 2024, the company's effective loan interest rate fell to 4.7% from 6.1% at the end of 2023.

The company will continue to replace short-term loans with long-term loans in the second half of the year. It is expected that the RMB loan ratio will rise further in the second half of the year. Coupled with the US dollar entering a cycle of interest rate cuts, there is still room for further decline in the company's actual loan interest rate in the future.

Target price of HK$1.00, giving holding rating:

We updated the company's target price to HK$1.00, which is equivalent to 7.5 times and 6.4 times PE in 2024 and 2025. The target price has room to increase 14% from the current price, giving it a holding rating.

Risk warning:

Project acquisition delays

Electricity restrictions on light disposal have increased

Subsidy repayment is not as fast as expected

Market-based trading electricity prices are declining