DBS Group Research trimmed its target price for Xinyi Solar (00968) to HK$13.9 from HK$17.9 and maintained its "fully valued" rating.
Despite a correction of more than 20% since early this year, the research house expects de-rating to continue as ASP has started to fall. Market expectation of gross margin of solar glass is too high. DBS expects margins to have peaked in 4Q 2020 and gradually fall
from >40% in 1Q 2021 to <35% in 4Q 2021.
It said that the government's removal of restrictions on solar glass capacity expansion triggers new supply, not just from solar glass manufacturers, but also from other glassmakers, possibly boosting operating capacity by 100% in 2021.
DBS fine-tuned its FY2021-22 earnings to factor in the deviation in gross margin in the results.
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