XINYI SOLAR (00968) recently released its interim results for the six months ended June 30， reporting revenue of HK$8.43 billion， down 22.9% year-on-year， and profit attributable to equity holders of just HK$39 million， a 94.8% decline from HK$750 million in the same period last year. This profit level is nearly the lowest interim record since the company’s listing. As a leading player in the industry， XINYI SOLAR‘s performance was not entirely unexpected； it reflects a cyclical adjustment across the photovoltaic sector. Since the second half of 2024， prices across the photovoltaic supply chain have continued to fall， sharply compressing industry margins， making it difficult even for leading companies with scale advantages and cost control capabilities to remain immune in an environment of oversupply.
However， with the implementation of regulatory “anti-involution” policy measures， the introduction of mandatory national standards for the industry， and a marginal recovery in sentiment from some international investment banks toward the photovoltaic sector， the industry is at a critical crossroads， transitioning from “scale expansion” to “value restructuring.” Following the supply-side cleanup， can industry leaders like XINYI SOLAR be the first to navigate the cycle and see a breakthrough？
The interim results reflect the severe imbalance between supply and demand in the photovoltaic glass segment. During the reporting period， the gross margin of the company’s solar glass business fell sharply by 8.1 percentage points to 3.3%， nearing the breakeven point. This data reflects a dual blow of declining volumes and prices. The company’s photovoltaic glass shipments fell 5.8% year-on-year in the first half， while the average selling price experienced a more significant decline， with China’s solar glass price dropping approximately 27% year-to-date to 8.8 yuan per square meter. Weak demand is the primary cause. Domestically， new installed capacity in the first half fell sharply year-on-year， and weak demand from module manufacturers directly impacted the upstream glass segment. Overseas， in India， a key market， policy requiring the use of locally produced solar cells created supply chain bottlenecks， reducing module utilization rates and suppressing demand for photovoltaic glass.
Amid weak demand， industry inventories continued to rise. Producer inventory days once surged to a high of 57 days， and the immense inventory pressure forced companies to cut prices， further intensifying price competition. The cost side also failed to provide a buffer. Although natural gas prices have retreated， they remain at elevated levels， eroding already thin profit margins. With selling prices falling below the cash costs of many manufacturers， even leading companies like XINYI SOLAR have faced severe profit pressure. This earnings report clearly highlights the pain all participants must endure during the industry’s downturn.
Despite short-term earnings pressure， a series of positive signals have emerged at the industry level， indicating that supply-side reform is accelerating， offering hope for the sector to emerge from its trough. The most significant change comes from policy. On July 31， the State Administration for Market Regulation， along with multiple departments， held a guidance meeting on price compliance for the photovoltaic industry， clearly signaling a crackdown on “involution-style” competition and guiding companies to shift from “price competition” to “quality competition.” The regulatory authorities will use measures such as reminders and compliance talks to regulate price competition and legally address actions that disrupt market order. This series of measures has put the brakes on disorderly industry competition.
More impactful are the detailed rules for three mandatory national standards for the photovoltaic industry， which have been made public. These standards set rigid entry barriers for the four main chain segments—polysilicon， wafers， cells， and modules—with particularly strict limits on polysilicon energy consumption that exceeded market expectations. This means that a large amount of low-quality， high-energy-consumption capacity will be forced to exit by 2027， potentially fundamentally easing supply-side pressure. Market self-regulation has also begun. Since July， there have been widespread supply cuts within the industry， primarily driven by marginal manufacturers facing liquidity pressure. Management at XINYI SOLAR has indicated that the company is actively cooperating with industry adjustments， controlling output through measures like cold repairs. With the exit of some smaller players and proactive output controls by leading companies， industry inventories have shown a declining trend. Data from Zhuochuang shows that inventory days had fallen to 45 days by the end of July. Goldman Sachs expects producer inventories to drop from 51 days in July to 35 days in September. This marginal improvement in supply and demand has already been reflected in prices， with the price of 2.0mm glass rising from 8 yuan per square meter to 8.5 yuan per square meter in July and expected to continue rising in August. These signs collectively paint a picture of an industry bottom being formed.
In the midst of the industry downturn， leading companies face both resilience and challenges. XINYI SOLAR‘s performance illustrates this. On one hand， while its earnings weakness is pronounced， it still outperforms some peers. This is due to the company’s relatively higher proportion of overseas production capacity and the buffer provided by its solar farm business. Although the gross margin of the solar farm business has also declined due to factors like falling electricity prices， it still contributed over 50% of gross profit， serving as a key profit stabilizer. Additionally， the company’s net debt-to-equity ratio stands at 18.6%， and despite a significant weakening in profitability， its balance sheet remains healthy， providing a solid financial foundation to navigate the cycle. Looking ahead， XINYI SOLAR‘s path to a breakthrough will depend on both internal and external efforts. Internally， the company will continue to leverage its scale and cost advantages to consolidate and increase its market share during the industry reshuffle. Management expects that after the exit of some smaller players， the company’s market share may increase slightly. At the same time， the company is optimizing its production capacity layout， with the second line of Phase I in Indonesia， with a daily capacity of 1，200 tonnes， set to commence production in the second half of the year， potentially raising the share of overseas production capacity to 25%. Glass pricing and margins in overseas markets are typically better than in China， which could help improve the company’s overall gross margin.
In the view of financial analysts， the improvement of the industry environment will be key to the company’s earnings recovery. With domestic supply cuts driving price recovery and the extension of India’s ALMM exemption until the end of 2026 boosting overseas demand， the company’s shipments and profitability in the second half of the year are expected to recover. Several investment banks hold a cautiously optimistic view. Goldman Sachs expects that improved supply and demand will support a potential 22% increase in glass prices from the second half of 2026 to the first half of 2027 and has raised its target price for XINYI SOLAR to HK$3， maintaining a “Buy” rating. CICC， while lowering its earnings forecast， believes that the company， as a leading player， will be among the first to restore profitability and has set a target price of HK$3， implying a 36% upside from the current stock price.
In summary， XINYI SOLAR‘s interim results are a concentrated reflection of the deep adjustment in the photovoltaic industry. While short-term pain is unavoidable， with the deepening of supply-side reform and enhanced industry self-discipline， the supply and demand dynamics in the photovoltaic glass segment are at a turning point. As a leading company， XINYI SOLAR， leveraging its financial resilience and strategic layout， is well-positioned to consolidate its advantages at the bottom of this cycle and demonstrate greater earnings flexibility when the industry recovers. However， the ultimate recovery in demand remains to be seen， and the path to a full industry rebound may still be uneven.
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