UBS raises XINYI ENERGY's target price to 1.25 yuan with a "Neutral" rating

UBS research report pointed out that it maintains a "Neutral" rating on XINYI ENERGY (03868.HK), but raises the target price from HKD 1.03 to HKD 1.25 to reflect its higher-than-expected dividend payout in the first half of last year; financial expenses and tax expenditures have decreased, but this is partially offset by the slower-than-expected growth in production capacity. The bank has raised its earnings forecasts for the company for 2025 to 2027 by 9%, 1%, and 1%, respectively, which is generally in line with market expectations. The dividend payout ratio is expected to remain at 56% to 59%, significantly lower than the average level of 88% from 2017 to 2024, reflecting the company's continued adherence to a prudent balance sheet management strategy.

The bank believes that XINYI ENERGY's valuation is reasonable, with an average annual compound growth rate of 7% in earnings from 2025 to 2027, but still sees downside risks from lower electricity prices and potential slow capacity expansion