20201216-招银国际-信义光能-00968.HK-FY20E_earnings_to_surge_75__-_95__YoY_6页

Xinyi Solar (968 HK) Company Update Summary

Core Content and Key Highlights

Xinyi Solar (968 HK) has announced a positive profit alert, with its FY20E net profit expected to increase by 75% - 95% YoY, significantly exceeding the market consensus of +59% YoY. This strong performance is attributed to three main factors:

1. Unexpectedly high PV glass ASP (Average Selling Price)
2. Increased PV glass output and sales
3. Improvement in product mix, particularly the surge in 2.0mm thin glass sales.

The company’s earnings guidance for FY20E reflects a 14.7% upward revision in its forecast, driven by a 5.1% increase in full-year PV glass ASP outlook. The analysis suggests that this performance is expected to continue into FY21E, with a 12.7% YoY increase in ASP and a 33.5% YoY increase in sales volume. As a result, the GPM (Gross Profit Margin) for the PV glass segment is projected to rise to 56.7% in FY21E.

Earnings Outlook and Forecast

The company's DCF Target Price (TP) has been lifted by 21.3% to HK$18.80, representing a 34.6x FY20E P/E and 20.1x FY21E P/E. This indicates a 31.8% upside from the current price of HK$14.26.

Key Drivers of Performance

• Product Mix Improvement: The increased penetration of 2.0mm PV glass is a key driver of higher gross margins.
• Supply Constraints: PV glass supply is expected to remain tight in FY21E, supporting ASP growth.
• Capacity Expansion: XYS is expected to effectively release more production capacity, boosting sales volume.

Financial Performance Summary

Revenue and Profit Growth

• Revenue is projected to grow significantly, from HK$7,672 mn in FY18A to HK$22,511 mn in FY22E.
• Net Profit is expected to increase from HK$1,863 mn in FY18A to HK$9,149 mn in FY22E.

Profitability Metrics

• Gross Margin is expected to rise from 38.6% in FY18A to 58.3% in FY21E.
• Pre-tax Margin is projected to increase from 29.3% in FY18A to 51.2% in FY21E.
• Net Margin is anticipated to grow from 24.3% in FY18A to 43.3% in FY21E.

Liquidity and Leverage

• Current Ratio improves from 1.0 in FY18A to 2.2 in FY22E.
• Quick Ratio increases from 0.9 in FY18A to 2.1 in FY22E.
• Net Debt/Equity Ratio is expected to decline from 76.5% in FY20E to 16.4% in FY20E and remain stable in subsequent years.

Valuation and Investment Recommendation

• DCF Valuation results in an Equity Value of HK$159,953 mn, with a Fair Value per Share of HK$18.80.
• BUY rating is reiterated, indicating potential returns of over 15% over the next 12 months.
• The Target Price (HK$18.80) reflects strong earnings visibility and improved valuation assumptions.

Analyst and Risk Disclaimer

• The report is prepared by CMB International Securities Limited (CMBIS), with the analyst Robin Xiao.
• The report contains forward-looking statements and is subject to market risks and uncertainty.
• CMBIS does not provide individual investment advice and disclaims liability for any reliance on the information contained in the report.

Market and Sector Context

• Solar glass remains the core revenue driver, with a sales mix of 81.3% in FY20E and expected to increase further.
• PV glass demand is expected to be strong, with ASP likely to decline gradually as new capacity comes online, but GPM to rise due to improved product mix.
• The solar power generation and EPC services segments are expected to contribute 17.6% and 1.1% of total revenue in FY20E, respectively, with a decline in their share as the company focuses more on solar glass.

Summary of Key Figures

• Current Price: HK$14.26
• Target Price: HK$18.80 (+31.8% upside)
• P/E (FY20E): 26.2x
• P/E (FY21E): 15.2x
• P/B (FY20E): 6.2x
• ROE (FY20E): 23.7%
• ROE (FY21E): 32.4%
• Net gearing (FY20E): 16.4% (Net Cash)
• WACC: 8.7%

Conclusion

Xinyi Solar is positioned for strong earnings growth in FY20E and FY21E, supported by rising ASP, increased sales volume, and product mix improvements. The BUY rating is maintained, with revised earnings and valuation assumptions reinforcing the positive outlook. The company's financial health and sector dynamics suggest continued profitability and growth potential.