Broker: UOB Kay Hian
Date of Report: Monday, 04 August 2025

Xinyi Solar Holdings: Policy Support and Supply Discipline Set the Stage for a Re-Rating

Overview: Xinyi Solar Holdings in Focus

Xinyi Solar Holdings Ltd (968 HK), the world’s largest photovoltaic (PV) glass manufacturer, stands at a critical juncture. Specializing in PV glass production and solar power station development, the company faces a turbulent but opportunity-filled market environment. UOB Kay Hian has upgraded its recommendation to “BUY”, citing a blend of policy tailwinds, disciplined supply management, and resilience amid sector-wide turbulence.

• Share Price (as of report): HK\$3.09
• Target Price: HK\$3.60 (16.5% upside)
• Market Cap: HK\$29.87 billion (US\$3.84 billion)
• Sector: Information Technology (Bloomberg: 968 HK)
• Major Shareholders: Xinyi Group Glass Co Ltd (23.2%), Lee Yin Yee (9.8%)
• 52-week High/Low: HK\$6.82 / HK\$2.73

1H25 Results: In Line Despite Sharp Profit Contraction

Xinyi Solar reported 1H25 earnings of Rmb745.8 million, down 58.8% year-on-year, aligning with earlier profit warnings. Key takeaways include:

• Revenue: Rmb10,931.8m (-6.5% yoy)
• Gross Profit: Rmb1,998.5m (-36.4% yoy)
• Operating Profit: Rmb1,295.6m (-51.0% yoy)
• Net Profit Attributable to Shareholders: Rmb745.8m (-58.8% yoy)
• Gross Margin: 18.3% (down 8.6ppt yoy)
• EPS: 8.21 Rmb cents (down 12.1 Rmb cents yoy)
• Interim Dividend: HK\$0.042 per share

Segmental Performance:

• Solar Glass Sales Revenue: Rmb9,474.1m (-7.3% yoy)
• Solar Farm Business Revenue: Rmb1,437.6m (+0.7% yoy)
• Other Revenue: Rmb20.1m (-54.9% yoy)
• Solar Glass Segment Margin: 11.4% (down 10.1ppt yoy)

Key Financial Highlights and Projections

Operational and Market Insights

Margin Pressure and Segment Dynamics

• Gross margin dipped to 18.3%, with solar glass segment margins narrowing to 11.4% due to lower average selling prices (ASPs), ongoing fixed cost pressure, and a Rmb313.7m impairment loss on certain facilities.
• Revenue drop was primarily domestic-driven, with domestic solar glass revenue down 16.6% to Rmb6,482.9m.
• North America proved a bright spot, with revenue surging to Rmb763.5m (+223.7% yoy), aided by shifts in US tariff policy sparking early customer orders.

Demand and Capacity Trends

• 1H25 demand was frontloaded by a “531 installation rush”, likely pulling forward activity from 2H25, with daily melting capacity stable at 23,200 tonnes.
• Inventory turnover days declined to 45 in 1H25 (from 49 and 47 in 1H24 and 2024, respectively), reflecting active inventory destocking.
• Management expects softer demand in July and a more muted 2H25.

Capacity Guidance and Supply Discipline

Xinyi Solar is responding to market headwinds with decisive supply management:

• 2025 effective annual melting capacity guidance was cut by 10.3%, from 9,080,000 tonnes to 8,137,000 tonnes.
• Two 900t/day production lines in China were suspended in July 2025; one Malaysia line remains in cold maintenance.
• Total idle capacity stands at approximately 10,000 tonnes.
• The company will maintain conservative supply ahead of its new 2,200t/day Indonesia plant, expected online in 1Q26.

Industry Trends and Policy Support

• Xinyi Solar is leading the industry in curbing oversupply, suspending lines to help rebalance the market and stabilize prices.
• Proactive liquidity management is in focus: the company raised Rmb800m through Panda bonds in June 2025.
• The Chinese authorities released a draft amendment to the Pricing Law, aimed at banning below-cost sales and cracking down on irrational pricing in overcapacity sectors.
• Xinyi Solar remains hopeful for industry-wide coordination but is prepared to withstand ongoing price wars if necessary.

Earnings Revision and Valuation

UOB Kay Hian has fine-tuned earnings projections:

• 2025 earnings revised down by 8%, but 2026 and 2027 adjusted up by 2% and 5% respectively, reflecting lower near-term sales volume expectations and anticipated price recovery from 2026 onward.
• DCF-based target price remains at HK\$3.60 (WACC: 11%, terminal growth: 3%).

Investment Thesis and Catalysts

Despite a sharp 1H25 profit decline, Xinyi Solar’s prudent management, growing overseas sales, and strong liquidity position highlight its resilience. The upcoming Indonesian capacity provides geopolitical diversification and medium-term growth potential.
Key Catalysts for Share Price Re-rating:

• Stabilization or rebound in ASPs during 2H25
• Effective enforcement of the new pricing law
• Ongoing sector-level production discipline

Profitability, Growth, and Leverage Metrics

Conclusion: Resilience and Opportunity Amid Turbulence

Xinyi Solar’s disciplined response to market adversity, strong overseas growth, and supportive policy environment position it for a potential re-rating. While near-term earnings remain under pressure, the company’s strategic capacity management and upcoming Indonesian expansion offer medium-term growth and geopolitical flexibility. Investors should watch for pricing stabilization, regulatory enforcement, and ongoing sector discipline as key drivers for the stock’s next leg.