On Friday, UBS analysts adjusted their outlook on Xinyi Solar (HK:0968) Holdings Ltd. (968:HK) (OTC: XNYIF), reducing their price target to HK$4.60 from the previous HK$5.70, while still endorsing the stock with a Buy rating. The revision reflects anticipated earnings contractions for the years 2024 to 2026, attributed to a combination of margin compression and diminished volume due to an oversupply and lackluster demand in the market.
UBS analysts have revised their earnings per share (EPS) projections for Xinyi Solar, expecting a 70% reduction for 2024, 42% for 2025, and 27% for 2026. This recalibration of earnings estimates has led to a decrease in the discounted cash flow (DCF)-based price target, which has been adjusted accordingly. The analysts have also shifted the model currency from Hong Kong dollars to Renminbi (RMB) to more closely match the reporting currency of Xinyi Solar Holdings Ltd.
Despite the near-term challenges that have necessitated a cut in earnings estimates and the price target, UBS remains optimistic about the long-term prospects for the solar glass industry. The analysts note that a potential upswing in demand following the Chinese New Year could serve as an important catalyst for the sector. This anticipated demand recovery could help to reduce inventory levels and mitigate some of the current pressure on margins.
UBS's analysis indicates that while the immediate future may present hurdles for Xinyi Solar, the underlying industry dynamics continue to offer a positive outlook. The firm's maintained Buy rating suggests confidence in the company's capacity to navigate through the present market conditions and capitalize on future growth opportunities.
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