"Large Banks" Research: Good progress in renewable energy subsidy settlement, gives "Buy" rating to CHINA LONGYUAN, EB ENVIRONMENT, Xiexin Technology, and Xinyi Solar

HSBC Global Research published a report indicating that the settlement of renewable energy (RE) subsidies for wind, solar, and biomass utilities has long been overdue by the Ministry of Finance's "Renewable Energy Development Fund," but recent progress has been shown. Several renewable energy utility companies announced that they have recovered receivables from the government from July to August, including China Everbright International (01257.HK) receiving RMB 2.1 billion; Longyuan Power (00916.HK) receiving RMB 1.9 billion, with RMB 250 million expected in the first half of 2025.

HSBC stated that the "Renewable Energy Development Fund" has been in a budget deficit since the 2010s, as subsidy commitments (expenditures) have significantly increased with the expansion of wind and solar energy, exceeding the related surcharges (revenues) from retail electricity users. The Ministry of Finance allocated over RMB 300 billion in 2022 as a one-time settlement for unpaid subsidies, primarily to state-owned utility companies, and required reinvestment in renewable energy.

The report pointed out that the settlement of renewable energy subsidies has been delayed and inconsistent over the years, regardless of intensity or speed, which has kept market expectations low. Assuming that the government will take renewable energy investment more seriously after the continuous contraction of wind and solar installations since June 2025, it is believed that utility companies will receive more cash settlements from the government; and it is believed that the recent increase in bond issuance by the State Grid Corporation may accelerate this process.

HSBC stated that among the stocks it covers, the subsidy receivables for Longyuan and Everbright Environment (00257.HK) account for a large proportion of equity value, believing there is greater leverage for potential revaluation. In terms of the supply chain, the bank prefers GCL-Poly Energy (03800.HK) and Xinyi Solar (00968.HK), as the upstream solar equipment capacity surplus is being adjusted, and any subsidy settlement for Xinyi Energy (03868.HK) would bring additional benefits to Xinyi Solar.

The following are HSBC's ratings and target prices for renewable energy companies:

Stock | Investment Rating | Target Price (HKD)

Longyuan Power (00916.HK) | Buy | 9 HKD → 8.8 HKD

Everbright Environment (00257.HK) | Buy | 4.7 HKD → 5.7 HKD

GCL-Poly Energy (03800.HK) | Buy | 1.8 HKD

Xinyi Solar (00968.HK) | Buy | 4.4 HKD