Bank of America: Lowering target price for Xinyi Solar and Fuyao Glass, downgrading rating to "underperform"

Bank of America Securities published a research report stating that due to production cuts and anti-income inequality policies, the stock of solar glass companies has increased by about 30% since the end of June. However, the price of 2mm solar glass has continued to decline to 10.5 to 10.8 yuan per square meter in the past two weeks, a level at which the entire industry is expected to incur losses. The bank believes that even if demand returns to normal by 2026, potential oversupply will continue to hinder profit margins. Unless mandatory production cuts similar to those during the supply reform period of 2016-17 are implemented, it will be difficult to change the current oversupply situation. The bank believes that current measures to support the industry are limited, and catalysts to reverse the current situation are still far off, leading solar glass manufacturers to potentially continue to incur losses until mid-2026. Considering the high valuation, the bank has lowered its target price for Xinyi Solar Holdings by 12% to HK$2.3 and lowered its target price for Flat Glass by 42% to HK$7, with both ratings downgraded to "underperform".