Huatai Research initiated coverage of Xinyi Solar (00968) with a "hold" rating and target price of HK$20.
The research house said Xinyi Solar has established its leading market status through strong management and years of devotion to this previously relatively small industry. With solar being an increasingly competitive power source, the company's growth path is becoming clearer.
However, Huatai expects the high solar glass price and strong margin currently enjoyed to be harshly challenged from 2022, with the unleashing of strong new supply triggering a new round of heated competition, even though demand growth should remain solid.
Huatai expects the supply-demand balance to stay largely tight in 2021, supporting a high solar glass price. Prompted by the attractive static investment return and removal of capacity swap policy restrictions, supply addition from 2022 will outstrip demand growth. it noted. As such, the industry utilization rate could fall to 65% in 2022 from 83% in 2021, resulting in a harsh correction in profit margin, even with PV installation averaging 200GW annually in 2021-25.
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