Xinyi Solar’s first-half net profit declined by 27% year over year to HK$1.4 billion, which is about 20% lower than the JPMorgan’s estimate, the broker said in a note.
The lower-than-expected results was likely due to higher-than-expected cost of natural gas due to gas supply contracts signed earlier and the impact of the yuan’s depreciation, with most of the negative news coming mainly from the first quarter of 2023, it said.
Xinyi Solar’s gross profit margin for glass business improved by 5 – 10 percentage points in the second quarter from the previous quarter, mainly due to the absorption of some of the earlier gas contracts, it noted.
The broker expected demand dynamics for solar glass to improve in the second half and the price outlook is positive.
JPM maintained its Overweight rating on Xinyi Solar, but lowers its 2023-2025 earnings forecast by 3% to 11% to reflect the trend and slowdown in production capacity in the first half. The target price is cut from HK$10.6 to HK$9.8.