GF Securities lowers target price of Xinyi Solar to HKD 5.07, first-half performance meets expectations.

The Jinshi data on August 1st stated that Jefri released a research report indicating that Xinyi Solar (00968.HK) performed as expected in the first half of the year. Although the gross profit margin of solar glass improved to 21.5% year-on-year, it has fallen from 26.4% in the second half of last year. Xinyi Solar has also reduced production and capital expenditure guidance. Despite the challenging business outlook, the group announced a mid-term dividend of 10 cents, with an expected dividend yield of about 5 to 6% for the 2024 fiscal year. The bank believes that Xinyi Solar will benefit from the long-term rise of solar energy, but industry capacity additions in the next two years will exceed demand. Therefore, the group will accelerate the addition of its own capacity and prioritize market share rise over short-term profits. The bank believes that with capacity expansion, price reductions may be unavoidable, leading to a decline in profits over many years, and profits may be weaker before the integration is completed. The bank has lowered the group’s target price from 6.25 Hong Kong dollars to 5.07 Hong Kong dollars and rated it as a buy.