CICC has released a research report stating that it is keeping its profit forecasts for Skyworth Group (00751) for 2025 and 2026 largely unchanged, while introducing its first profit forecast for 2027 of 918 million yuan. Considering the company's plan for a spin-off listing, the intrinsic value of its new energy business is expected to be fully realized, leading to a 100% increase in the target price to HK$8. This corresponds to a P/E ratio of 17/15 times for 2026/2027, implying a 12% upside potential from the current share price, which currently trades at 15/13 times the 2026/2027 P/E. CICC maintains its Outperform industry rating.
The report's primary viewpoints are outlined as follows: The company announced on January 20 its intention to distribute all of its shares in Skyworth Photovoltaic to all shareholders, with Skyworth Photovoltaic seeking a listing by introduction on the main board of the Hong Kong Stock Exchange. This process will not involve a public offering of new shares, and a share buyback will be conducted simultaneously to achieve privatization.
The planned spin-off listing of the photovoltaic segment is anticipated to highlight the intrinsic value of the new energy business. The transaction consists of two parts: 1) Distribution and Skyworth Photovoltaic Listing: For the spin-off, Skyworth Group plans to distribute all its shares in Skyworth Photovoltaic (in which it holds a 70% stake) to its shareholders. The distribution ratio is set at 0.37 shares of Skyworth Photovoltaic for each share of Skyworth Group held. 2) Share Buyback Plan: Concurrently with the spin-off, Skyworth Group proposes a share buyback via a scheme of arrangement. Scheme shareholders can choose one of two forms of consideration for each scheme share they hold: Cash Option: HK$4.03 in cash per scheme share; or Share Option: One new share of Skyworth Group post-withdrawal of listing per scheme share.
According to the company's announcement, if the cash consideration is chosen, the theoretical total value per scheme share, combined with the distributed Skyworth Photovoltaic shares, is approximately HK$4.03 + (0.37 * 16.57) = HK$10.16. CICC believes the spin-off listing is expected to fully reflect the asset value of Skyworth Photovoltaic's new energy business while establishing an independent financing platform to support the expansion of its solar and storage operations.
As a leading distributed photovoltaic developer, the company is positioned to transform into a global energy service provider. By the first half of 2025, Skyworth Photovoltaic had constructed 800,000 power stations, with operational and maintenance capacity exceeding 27GW. Looking ahead to 2026, CICC anticipates that as feed-in tariff mechanisms become clearer, domestic distributed residential and commercial & industrial installations could each reach 50GW, accompanied by rapid growth in energy storage. The company is well-positioned to capitalize on opportunities in the solar and storage market, facilitating a comprehensive transformation into a global energy service provider.
Risks include solar and storage demand falling short of expectations, rising equipment costs, and feed-in tariff mechanism outcomes being lower than anticipated.