Bank of America Securities reiterated its "Underperform" rating on XINYI SOLAR, expecting continued oversupply this year

According to a research report by Bank of America Securities, XINYI SOLAR (00968.HK) saw its net profit after tax decline by 16% year-on-year to HKD 845 million last year, which was below the bank's expectations. Annual sales increased slightly by 4.2% year-on-year, but this was not enough to offset the revenue decline caused by falling solar glass prices; the gross margin for solar glass for the year was 14.1%, compared to the ideal level of 17.1% reached in the second half of last year, benefiting from lower costs and a higher proportion of overseas sales with better margins.

The bank expects XINYI SOLAR to make further impairments on its polysilicon projects due to structural oversupply in the market, with the projects unlikely to be put into production in the foreseeable future and lacking buyers. In terms of pricing, demand for solar modules in China is weak this year, and management has also indicated that the price of 2mm glass may be further reduced to below RMB 10 per square meter. Based on a pessimistic outlook, the bank reiterated its "underperform" rating with a target price of HKD 2.3