XYS announced positive profit alert with earnings guidance to increase 75%-95% YoY in FY20E. The strong earnings performance would be driven by 1) unexpected high PV glass ASP, 2) increasing PV glass output and sales, and 3) improving product mix. We lift FY20E earnings by 14.7% mainly on 5.1% increase on full year PV glass ASP outlook, and we expect XYS’ outstanding performance to sustain in FY21E on the back of ASP to increase by 12.7% YoY. We lift our FY21/22 earnings outlook by 26.4%/33.2% to HK$7,957/9,149mn. Our DCF TP is lifted by 21.3% to HK$18.80 per share. Reiterate BUY rating.
- Positive profit alert. XYS announced positive profit alert after market close on 15 Dec. Based on 11M20 performance, XYS expected FY20E net profit to increase 75%-95% YoY. The Company attributed the strong earnings growth mainly to PV glass sales volume increase and price hike in 2H20. XYS’ earnings guidance was substantially higher than consensus estimate for FY20E (consensus FY20E earnings: +59% YoY).
- Earnings outlook beat due to product mix. We estimate 2.0mm product to account for 35% of XYS’ total PV glass shipment, and we believe the significant surge of thin product penetration rate would be the key reason boosting earnings growth. We estimate GPM of the PV glass segment to exceed 48% in 2020E.
- Strong performance to sustain in 2021E. We expect PV glass supply to remain tight in 2021E. We expect PV glass price to decline 6% for each two months as new capacity to release, and estimate ASP at RMB32.5/sq m in 2021E, implying a 12.7% ASP hike. We also expect 2.0mm product proportion to increase to 55% as bifacial module to become more popular. Together with XYS’ effective capacity release, we estimate PV glass sales volume to increase by 33.5% YoY, and GPM to expand further to 56.7% in 2021E.
- Lift DCF TP by 21.3% to HK$18.80; reiterate BUY. Based on revised assumptions, we lift 2020-22E earnings forecast by 14.7%/26.4%/33.2% to HK$4,418/7,957/9,149mn respectively. Our DCF TP is also revised up by 21.3% to HK$18.80, reflecting 34.6x/20.1x FY20/21E PER. We think XYS’ positive earnings alert reaffirms promising earnings outlook, and market sentiment will be ignited again. We reiterate our BUY stance on XYS.
