BOC International anticipates that the Xinyi Energy (03868) stock project will continue to be at risk of falling electricity prices.
The Zhitong Finance App learned that BOC International released a research report stating that maintaining Xinyi Energy's (03868) “neutral” rating, the target price was lowered by 24% from HK$1.53 to HK$1.16. Although the sharp drop in component prices is beneficial to increasing the yield of the company's new projects, the profit uncertainty of the company's stock projects is high and will continue to suppress valuations, and the current high dividend rate (6.2% in 2024) will support the stock price.
The bank pointed out that electricity sales were poor due to weather and light abandonment, and the company's performance fell short of expectations. Last year, it achieved net profit of 993 million yuan, up 2.2% year on year, of which the second half of the year was 426 million yuan, up 22.3% year on year, down 24.8% month on month, 25% lower than expected, mainly because electricity sales fell short of expectations due to factors such as weather and light abandonment. Gross margin decreased 2.7 percentage points year over year to 67.9%, with a year-on-year decline of 2.6 in the second half of the year and 4.7 percentage points month-on-month to 65.5%. The annual dividend per share was reduced by 60% to $0.06, and the dividend ratio was 50%.
According to the report, the company acquired only 637 megawatts of projects from the parent company last year, which is lower than the previous 0.7-1 gigawatt guideline. The company plans to acquire a 0.7-1 gigawatt project this year, which is still below the forecast. Due to the US interest rate hike, the company's average loan interest rate reached 6.05% at the end of last year, up 0.5/1.0 percentage points year over year. The share of RMB loans with lower interest rates fell from 14% at the end of June to 13%, and it has not been possible to continue to increase the share of RMB loans as previously indicated. Last year, the company's subsidy receipts were $530 million, a year-on-year decrease of 75%. Receipts accounted for 43% of subsidy revenue. At the end of the year, subsidy receivables increased by HK$630 million to $3.75 billion year-on-year.
Furthermore, the number of new photoelectric installations in mainland China reached 216 gigawatts last year, far exceeding market expectations, leading to consumption pressure. The national light abandonment rate increased 1.7 percentage points per year to 2.9% in December. The company's projects are distributed in the central and eastern regions. Previously, consumption pressure was low, but last year, light was discarded for the first time, and the light abandonment rate of 2.5% was higher than 2% in the country. The bank expects to continue to rise in the future, or close to 5%. Since the second half of last year, many provinces have introduced policies to increase the market-based trading ratio of new energy sources. The bank expects that electricity prices will continue to fall in stock projects.