The company plans to ignite and produce four 1,000-ton and one 900-ton production lines that underwent maintenance this year, as well as the newly constructed production line in Wuhu, depending on market conditions and the company's own situation, at an appropriate future time.
According to the Zhitong Finance APP, Zhongtai International released a research report stating that it maintains a "neutral" rating on XINYI SOLAR (00968). The company's adjustment of production line operations will undoubtedly impact short-term revenue but can alleviate the problem of excessive market supply, aiding the industry's mid-term recovery. The FY25 target PE has been adjusted from 8.0 times to 9.0 times to reflect the recent stabilization of macro risks. Correspondingly, the target price has been lowered from 3.85 Hong Kong dollars to 3.22 Hong Kong dollars.
The main points of Zhongtai International are as follows:
Production capacity is expected to temporarily decline, with weak glass prices; the effective annual melting volume for FY24 is forecasted to decline by 3.1% year-on-year.
As of the end of November, the company has cumulatively maintained nine Photovoltaic Glass production lines this year, with a daily capacity totaling 7,000 tons (2,000 tons in the first half, 5,000 tons in the second half). Among them, the two 1,000-ton production lines that underwent maintenance in the first half have completed engineering but have not yet restarted production; other maintenance projects are still ongoing. In terms of new capacity, the company has completed the construction of six Photovoltaic Glass production lines this year, among which (1) two 1,200-ton lines in Malaysia were ignited and put into production in June and August; (2) two 1,000-ton lines in Anhui Wuhu were ignited and put into production in March; (3) the remaining two 1,000-ton lines in Wuhu did not operate as originally planned. The company plans to ignite and produce four 1,000-ton and one 900-ton production lines that underwent maintenance this year, as well as the newly constructed production line in Wuhu, at an appropriate future time, depending on market conditions and the company's own situation.
The bank expects the daily capacity by the end of FY24 to be 23,200 tons, a decline of 10.1% compared to 25,800 tons at the end of FY23 (Note: there was no maintenance in FY23). Since much of the maintenance work has occurred in the second half of the year, the bank estimates that the effective annual melting volume for FY24 will only decline by 3.1% year-on-year to 7.6 million tons. Considering that some production lines are expected to commence production, the bank anticipates a rebound in the effective annual melting volume for FY25-26 of 15.5% and 3.0% year-on-year to 8.78 million tons and 9.04 million tons, respectively.
Photovoltaic Glass prices remain weak.
In the second half of the year, the price of Photovoltaic Glass continued to decline. As of December 11, the market average price of Photovoltaic Glass (3.2mm coated) was 19.25 yuan RMB/square meter, down 27.4% and 9.4% from the 26.5 yuan at the beginning of the year and 21.25 yuan at the end of September respectively. Nevertheless, the recent decline in raw material soda ash and Henry Hub Natural Gas prices helps reduce the impact of the glass price drop on the company's profits.
Lowered profit forecasts.
In summary, the bank has adjusted its forecasts for FY24-26 Net income for shareholders downward by 16.9%, 24.4%, and 28.2% to 2.98 billion, 3.24 billion, and 3.58 billion Hong Kong dollars respectively. The profit for FY24 is down 28.9% year-on-year, but in FY25-26, it is expected to rebound by 8.9% and 10.5% year-on-year respectively.
