Guoyuan International has issued a research report reiterating its 'Buy' rating on Xinte Energy (01799) and updating its target price to HK$6.38 per share. This target implies a potential upside of approximately 63% from the current price and corresponds to a 2027 price-to-earnings multiple of 16 times. The firm's assessment indicates the company is entering a phase of valuation recovery, supported by two key factors. Firstly, the smooth progression of the H-share full circulation initiative is expected to enhance trading liquidity and elevate the value of its capital platform. Secondly, the accelerated consolidation of polysilicon supply suggests that if the industry's average price gradually recovers from near cash-cost levels, the company's losses could narrow further. With its 2026 price-to-book ratio at a notably low level of around 0.16 times, the company is seen as having significant potential for valuation rebound.

Anticipated H-Share Full Circulation to Mitigate Liquidity Discount

Xinte Energy announced on June 30, 2026, that its board had approved a proposal to implement full circulation of its H-shares. This involves the conversion of 1,053,829,244 domestically held shares into H-shares, representing about 73.69% of the total share capital. While this move does not require shareholder approval, it is still subject to filing with the China Securities Regulatory Commission and approval from the Hong Kong Stock Exchange. As of the announcement date, the application had not yet been submitted. Concurrently, the controlling shareholder declared its intention to apply for the conversion of approximately 951 million domestically held shares into H-shares, accounting for roughly 66.52% of Xinte Energy's total equity. The company's current H-share float is relatively limited, with only 376 million H-shares listed. The proposed conversion of 1.054 billion domestic shares would expand the tradable share base by about 2.8 times the existing H-share float. Successful implementation is expected to alleviate the valuation discount historically associated with insufficient liquidity in the Hong Kong market and better utilize the H-share financing platform. It is noted that the process from board approval to final execution will take time, as the necessary regulatory filings and applications are pending.

Leading Position in Polysilicon to Benefit from Supply-Side Consolidation

The company's core operations encompass high-purity polysilicon production, new energy power plant construction and operation, and electrical equipment manufacturing. Xinte Energy maintains a solid position within the top tier of polysilicon producers. Its power plant and electrical equipment businesses provide a hedge against the cyclical volatility of silicon material prices, contributing to operational stability. Regarding pricing, data from the Silicon Industry Branch as of July 1, 2026, shows the average transaction price for N-type recycled materials was RMB 32,800 per ton. Compared to the industry's average cash cost of approximately RMB 34,000-35,000 per ton, it is estimated that about 70% of producers are incurring substantial losses. While the scope for further industry deterioration is narrowing, pressure for supply-side elimination is increasing. On the policy front, energy consumption and efficiency standards released on June 27, 2026, are set to take effect on January 1, 2027. This is expected to accelerate the phase-out of high-energy-consuming, outdated production capacity. Leading companies with low costs, scale, and technological advantages, such as Xinte Energy, are positioned to benefit from this industry shakeout.

Key Risk Factors

Potential risks include delays in the approval process for H-share full circulation; a continued decline in polysilicon prices; inadequate implementation of industry measures to curb excessive competition; and new capacity installations falling short of expectations.