Goldman Sachs released a research report stating that XINYI SOLAR (00968) reported a net profit for the first half of the year of RMB 39 million, a 95% year-on-year decline, which is in line with its previous profit warning (net profit below RMB 50 million). This performance outperformed its peer Flat Glass (06865), which guided a net loss of RMB 300 million to RMB 400 million for the first half, benefiting from a buffer from its solar farm business and a higher share of overseas production capacity (approximately 20% in H1). The significant year-on-year drop in net profit was mainly due to a 20% year-on-year decline in average selling prices and a 6% year-on-year decline in shipment volumes.

Goldman Sachs has raised its 2026 EBITDA forecast by 57% and its average forecasts for 2027 to 2030 by 3%, reflecting higher shipment volumes and lower costs. The target price has been raised from HK$2.8 to HK$3, still based on a 0.8 times forecast price-to-book ratio for 2026, with a "Buy" rating maintained.

During the results briefing, management anticipated an improvement in the outlook for both domestic and overseas markets. Domestically, industry supply cuts are expected to drive Chinese pricing back above cost levels. Overseas, the extension of the ALMM exemption for solar photovoltaic cells in India until the end of 2026 is expected to drive a recovery in overseas shipment volumes in the second half of the year.

Management has lowered its guidance for effective melting capacity in 2026 by 3% to 8.13 million tonnes and emphasized that the widespread industry supply cuts since July are primarily driven by marginal players, who are facing liquidity pressure amid low prices and high inventory. According to Oilchem data, Chinese solar glass prices have fallen 27% year-to-date to RMB 8.8 per square meter, while producer inventory days have increased by 70% over the period to 57 days. Management believes the current low price level is unsustainable, and XINYI SOLAR is willing to cooperate with its peers to drive the average selling price back above cost levels through supply discipline.

Goldman Sachs expects producer inventory to fall from 51 days (or 70 GW) in July to 35 days (or 49 GW) in September, supporting a potential 22% increase in glass prices from the second half of 2026 to the first half of 2027.

Regarding the overseas business, management stated that overseas glass pricing remained stable in the first half of the year, but overseas shipment volumes fell quarter-on-quarter in the second quarter. This was due to a local shortage of solar cells affecting module assembly and glass demand after the ALMM exemption for Indian solar photovoltaic cells expired on May 31. With the extension of the ALMM exemption until the end of 2026, management expects a recovery in overseas shipment volumes in the second half of the year. They reiterated that their overseas capacity expansion plan remains unchanged, with a 1,200-tonne-per-day production line in Indonesia set to start production in the second half of the year. This will raise the share of overseas production capacity from 20% in the first half to 25% by the end of the year.