Xinyi Solar

Xinyi Solar
2020-21 EPS & PO lifted; potential market

share gain, ETM & GPM surprise; Buy
Reiterate Rating: BUY | PO: 17.70 HKD | Price: 14.26 HKD
‘20 net profit to jump >75%; likely mkt share gain surprise 16 December 2020
XYS announced its FY20 net profit will jump 75-95% YoY to HK$4.2-4.7bn due to higher
SG ASP (average selling prices) and sales volume. SG ASP was lifted 4x in 2H20 to Equity
Rmb42-45/sqm now. We retain ‘20/21 SG ASP estimates at Rmb30/28/sqm, with GPM
lifted to 46%/40% from the previous 42%/37%, with 2H SG production cost slightly < Key Changes
1H. We lift our ’20 sales volume growth estimate to +25% YoY vs the previous +15% (HK$) Previous Current
YoY. We maintain our ’21 sales volume estimate of 2.9 MT, but we reckon there is 5-9% Price Obj. 17.50 17.70
potential volume upside to our ’21 estimate. According to XYS, module producers’ 1Q21 2020E Rev (m) 11,572.7 12,362.0
order books are full. As 1Q is the traditional off-season for the SG industry, SG demand 2020E EPS 0.47 0.53
may drop slightly during spring festival but should pick up thereafter as PRC SF 2021E EPS 0.50 0.53
developers need to meet the Mar 31 subsidy collection deadline. We assume SG ASP will
trend down to Rmb26/m2 by ‘22. This compares to 2013-19 historical ASP range of Angello Chan >>
Research Analyst
Rmb25.9-35/m2 with an avg of Rmb31.6/m2 for XYS. We lift our ’20/21 EPS estimates Merrill Lynch (Hong Kong)
by 13.4%/6.3%, +17.9/-11.5% vs consensus. We lift our DCF-based PO to HK$17.7 from +852 3508 7187
[email protected]
HK$17.5 and reiterate our Buy with 17.9-16.2% ’21-22 RoIC. We estimate 2019-21 EPS
CAGR at 32%, with a current price implied PEG of 0.9. We estimate XYS may collect
Rmb100mn of ETM income through XYE, or 1.7% of EPS which we haven’t factored in.
Stock Data
14 FYP PV capacity add to far exceed 200GW; Buy XYS, FG
Price 14.26 HKD
On Dec 12, President Xi said at the Climate Ambition Summit that China will cut its CO2
Price Objective 17.70 HKD
emissions/GDP unit by > 65% vs the ‘05 level & ‘30 RE capacity to be >1,200GW. The
Date Established 16-Dec-2020
deputy director of the NEA RE department said on Dec 9 that the 14th FYP PV capacity
Investment Opinion B-1-7
add will far exceed 200GW, which will help to lower PV cost further. NEA will build
52-Week Range 3.72 HKD-15.22 HKD
multiple large-scale RE production bases in N & SW China, with >10GW capacity each.
Mrkt Val / Shares Out (mn) 14,866 USD / 8,081.9
NEA aims to develop >1GW distributed PV and grid parity PV projects under 14 FYP
Market Value (mn) 115,247 HKD
that’ll be supported by a new policy launch, including emissions /green certificate
Average Daily Value (mn) 87.21 USD
trading. CWEA expects c100GW RE addition/year will be needed to reach the carbon
Free Float 36.2%
neutral target by 2060. The PBoC governor also said on Dec 9 that finance sector SoEs
BofA Ticker / Exchange XNYIF / HKG
(state-owned enterprises) will help lower funding costs for RE sector capacity expansion.
Bloomberg / Reuters 968 HK / 0968.HK
Unauthorized redistribution of this report is prohibited. This report is intended for [email protected]
Estimates (Dec)
ROE (2020E) 24.4%
(HK$) 2018A 2019A 2020E 2021E 2022E
Net Income (Adjusted - mn) 1,863 2,416 4,297 4,441 4,701 Net Dbt to Eqty (Dec-2019A) 27.4%
EPS 0.247 0.303 0.528 0.533 0.557
EPS Change (YoY) -24.3% 22.5% 74.3% 1.1% 4.3% Key terms:
Dividend / Share 0.122 0.140 0.242 0.243 0.257
XYS: Xinyi Solar
Free Cash Flow / Share (0.100) (0.096) 0.016 (0.170) (0.178)
SG: solar glass
Valuation (Dec) UH: utilization hours
2018A 2019A 2020E 2021E 2022E GP: gross profit
P/E 57.71x 47.12x 27.03x 26.74x 25.62x GPM: gross profit margin
Dividend Yield 0.856% 0.982% 1.70% 1.70% 1.80% ETM: emissions trading market
EV / EBITDA* 38.62x 29.38x 17.73x 16.69x 15.39x RE: Renewable energy
Free Cash Flow Yield* -0.649% -0.667% 0.117% -1.25% -1.31%
CSG: China Southern Glass
* For full definitions of iQ method SM measures, see page 21.
SF: solar farm
FLAT: FLAT Glass
>> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under SCI: Sublime China Information
the FINRA rules.
XYE: Xinyi Energy
Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take
responsibility for the information herein in particular jurisdictions. PV: photovoltaic
BofA Securities does and seeks to do business with issuers covered in its research reports. As SF: solar farms
a result, investors should be aware that the firm may have a conflict of interest that could
FYP: Five-Year Plan
affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. CWEA: China Wind Energy Association
Refer to important disclosures on page 22 to 25. Analyst Certification on page 19. Price AR: account receivables
Objective Basis/Risk on page 19. 12225779
UHV: Ultra High Power Voltage
Timestamp: 15 December 2020 03:30PM EST
iQprofile Xinyi Solar
SM
Key Income Statement Data (Dec) 2018A 2019A 2020E 2021E 2022E Company Sector
(HK$ Millions)
Sales 7,672 9,096 12,362 14,415 17,923 Renewable Energy
Gross Profit 2,960 3,912 6,581 6,953 7,613
Sell General & Admin Expense (684) (709) (992) (1,167) (1,476) Company Description
Operating Profit 2,449 3,314 5,732 5,928 6,279
Net Interest & Other Income (246) (254) (243) (258) (284) Xinyi Solar (XYS) is the largest solar glass
Associates 43 33 46 53 66 manufacturer in the world. It has been expanding
Pretax Income 2,246 3,093 5,535 5,723 6,061
into the solar farm construction segment in China
Tax (expense) / Benefit (205) (294) (526) (544) (576)
Net Income (Adjusted) 1,863 2,416 4,297 4,441 4,701 by working with its subsidiary Xinyi Energy. By
Average Fully Diluted Shares Outstanding 7,540 7,984 8,144 8,327 8,448 further integrating upstream into silica mining and
Key Cash Flow Statement Data expanding its solar glass manufacturing capacity,
Net Income 1,863 2,416 4,297 4,441 4,701 XYS aims to maintain its profit margin leadership.If
Depreciation & Amortization 707 835 1,144 1,376 1,645 industry cost reductions continue, solar power
Change in Working Capital (358) (2,004) (1,688) (1,165) (1,988)
generation costs could reach grid-parity in more
Deferred Taxation Charge NA NA NA NA NA
locations globally and help increase solar glass
Other Adjustments, Net 98 335 (125) (1,226) (993)
Cash Flow from Operations 2,310 1,583 3,628 3,426 3,365 sales.
Capital Expenditure (3,059) (2,351) (3,493) (4,864) (4,870)
(Acquisition) / Disposal of Investments NA NA NA NA NA
Other Cash Inflow / (Outflow) 23 89 (83) 139 (133) Investment Rationale
Cash Flow from Investing (3,035) (2,262) (3,577) (4,725) (5,003)
Shares Issue / (Repurchase) 9 1,331 3,539 0 0 We rate Xinyi Solar a Buy for its fast-growing
Cost of Dividends Paid (641) (878) 0 0 0 expansion plan in solar farm development. Current
Cash Flow from Financing 174 2,127 3,489 1,066 656 feed-in tariff (FiT) and subsidy regime in China is
Free Cash Flow (748) (769) 135 (1,437) (1,505)
in favor of strong return for solar farm, where it
Net Debt 7,986 5,089 1,498 2,797 4,435
Change in Net Debt 1,403 (3,547) (3,590) 1,298 1,638 can earn fixed tariff for 20 years. Moreover, XYS
Key Balance Sheet Data can leverage its expertise in solar glass for
Property, Plant & Equipment 15,804 16,711 19,067 22,562 25,794 expansion in solar farm to ensure better quality of
Other Non-Current Assets 1,285 2,219 2,219 2,219 2,219 system and to lower degradation risk.
Trade Receivables 5,529 6,790 9,228 10,761 13,380
Cash & Equivalents 784 2,221 5,761 5,529 4,546
Other Current Assets 490 456 503 636 862
Total Assets 23,893 28,397 36,779 41,707 46,801
Long-Term Debt 4,997 4,465 4,434 5,085 5,486
Other Non-Current Liabilities 100 69 69 69 69
Stock Data
Short-Term Debt 3,773 2,845 2,825 3,240 3,495
Other Current Liabilities 2,964 2,445 3,243 3,744 4,600
Price to Book Value 5.5x
Total Liabilities 11,834 9,824 10,571 12,138 13,650
Total Equity 12,059 18,573 26,208 29,569 33,150
Total Equity & Liabilities 23,893 28,397 36,779 41,707 46,801
iQmethod SM - Bus Performance*
Return On Capital Employed 10.9% 12.9% 17.4% 15.0% 14.1%
Return On Equity 18.1% 19.6% 24.4% 19.8% 18.7%
Operating Margin 31.9% 36.4% 46.4% 41.1% 35.0%
EBITDA Margin 41.1% 45.6% 55.6% 50.7% 44.2%
iQmethod SM - Quality of Earnings*
Cash Realization Ratio 1.2x 0.7x 0.8x 0.8x 0.7x
Asset Replacement Ratio 4.4x 2.8x 3.1x 3.6x 3.0x
Tax Rate (Reported) 9.1% 9.5% 9.5% 9.5% 9.5%
Net Debt-to-Equity Ratio 66.2% 27.4% 5.7% 9.5% 13.4%
Interest Cover 9.6x 10.9x 22.4x 21.7x 20.7x
Key Metrics
* For full definitions of iQ method SM measures, see page 21.
2 Xinyi Solar | 16 December 2020

‘20 net profit to jump >75%; likely mkt share gain surprise
XYS announced its FY20 net profit will jump 75-95% YoY to HK$4.2-4.7bn due to higher
SG ASP and sales volume. SG ASP was lifted 4x in 2H20 to Rmb42-45/sqm now due to
strong domestic and overseas market demand. We maintain our ‘20/21 SG ASP
estimates at Rmb30/28/sqm, with GPM lifted to 46%/40% from the previous 42%/37%,
with 2H SG production cost slightly < 1H. We lift our ’20 sales volume growth to +25%
YoY vs the previous +15% YoY. We maintain our ’21 sales volume estimate of 2.9 MT,
but we reckon there is 5-9% potential volume upside to our ’21 estimate.
According to XYS, module producers’ 1Q21 order books are full. As 1Q is the traditional
off-season for the SG industry, SG demand may drop slightly during the spring festival
but pick up thereafter as PRC SF developers need to meet the Mar 31 subsidy collection
deadline.
We assume SG ASP will trend down to Rmb26/m2 by ‘22. This compares to the 2013-19
historical ASP range of Rmb25.9-35/m2 with an average of Rmb31.6/m2 for XYS.
We estimate XYS may collect Rmb100mn of emission trading market (ETM) income
through XYE, or 1.7% of EPS, which we haven’t factored in.
We lift our ’20/21 EPS estimates by 13.4%/6.3%, +17.9/-11.5% vs consensus. We lift our
DCF-based PO to HK$17.7 from HK$17.5 and reiterate our Buy rating with 17.9-
16.2% ’21-22 RoIC. We estimate 2019-21 EPS CAGR at 32%, with current price implied
PEG of 0.9.
New production capacity add advantage

XYS may further increase SG capacity through acquisition or construction and lift market
share, as it has done since 2013. As a low cost and more energy efficient SG producer,
we expect XYS to be in an advantageous position to win government approval to add
new SG production capacity given XYS’ proven track record of being less energy
intensive & polluting in producing SG compared to smaller, less efficient SG producers.
XYS is also the only major global SG producer that has so far been able to build large
scale profitable SG production lines outside of their home country base.
We will have two conference calls with XYS management on Dec 16, 4:00 p.m. HK time
(Mandarin) & 5:10 p.m. HK time (Mandarin/English).
Table 1: Historical XYS/FLAT Glass ASP and GPM and BofA forecasts
2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E
FLAT
ASP (Rmb/m2) 32.9 35.0 33.5 34.4 30.5 25.9 27.8 30.0 28.0 26.0 26.0
GP Margin (%) 28% 37% 35% 42% 31% 28% 33% 43% 37% 34% 34%
XYS
ASP (Rmb/m2) 34.4 34.4 33.9 35.3 28.4 26.9 27.8 30.0 28.0 26.0 26.0
GP Margin (%) 35% 33% 35% 43% 30% 26% 32% 45% 40% 34% 34%
Source: Company data, BofA Global Research estimates
Xinyi Solar | 16 December 2020 3

Chart 1: 12-22E ASP & GP Margin for XYS & FLAT
(RMB/m2) XYS ASP FLAT ASP

XYS GP Margin (Right Axis) FLAT GP Margin (Right Axis)
38 50%
36
45%
34
32 40%
30
35%
28
26 30%
24
25%
22
20 20%
2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E
2030 RE capacity to exceed 1,200GW, vs 485GW at YE20

On Dec 12, at the virtual Climate Ambition Summit, President Xi said China will lower its
carbon dioxide emissions per unit of GDP by over 65% from the 2005 level, by:
1. Lifting the share of non-fossil fuels in primary energy consumption to around 25%;
2. Lift its total installed capacity of wind and solar power to over 1,200GW; and
3. Increasing the forest stock volume by 6bn cubic meters from the 2005 level
The PRC government had previously said it would also reduce its coal consumption in
order to reach its goals to:
1. Have emissions peak by 2030;
2. Reach carbon neutral by 2060.
China is on track to exceed its 13th Five Year Plan (2016-2020) of solar power and wind
power capacity addition targets significantly by 123% (or 135GW) and 15% (or 35GW),
respectively. As solar and wind power generation costs continue to drop, we believe
China will likely exceed its newly set 2030 targets. Performance metrics for senior
government officials of local governments will be benchmarked to RE capacity additions
of the region under governance.
We believe this will favor solar and wind power equipment suppliers, especially if
significant further cost reduction can be achieved. We point out in this report some key
cost reduction trends and new government policies that have been under preparation
and are likely to be launched under the 14th FYP that’ll help reduce RE generation cost.
Can China achieve these targets

By 2018, China's carbon intensity, or emissions per unit of GDP, had declined by 45.8%
(more than the 40-45% target) from the 2005 level, while its forest stock volume
reached 17 billion cubic meters (exceeding the 13.6 billion cubic meter target) and non-
fossil energy in its total energy mix increased to 15.3% (exceeding the 15% target) in
2020.

China was able to reduce its emissions under the 13th Five Year Plan (2016-20) by
lowering its energy consumption per unit of GDP by 15% compared to the year-end
2015 level.
China will reach its 2030 and 2060 goals by:
1. Improving energy consumption efficiency;
2. Shifting away from energy-intensive sectors and towards service industries to drive
GDP growth;
3. Reducing fossil fuel consumption;
4. Adding more clean energy production systems to substitute for fossil fuel
consumption.
Table 2: PRC national power installed capacity and generation by fuel type and BofA forecasts
Installed capacity by fuel type (GW) 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E
Thermal 1,061 1,106 1,144 1,191 1,245 1,287 1,336 1,399 1,459 1,510
Hydro 332 341 352 356 365 380 390 392 394 396
Nuclear 34 36 45 49 51 60 73 76 79 85
Wind 148 164 184 210 240 271 295 320 345 370
Solar 77 130 175 205 245 291 341 395 453 515
Total 1,652 1,777 1,900 2,011 2,146 2,288 2,435 2,582 2,729 2,876
% change 9.6% 7.6% 6.9% 5.8% 6.7% 6.6% 6.4% 6.0% 5.7% 5.4%
Generation by fuel type (TWh)

Thermal 4,327 4,551 4,979 5,165 5,145 5,391 5,396 5,426 5,525 5,613
Hydro 1,175 1,195 1,103 1,153 1,230 1,270 1,313 1,339 1,344 1,348
Nuclear 213 248 294 348 372 413 495 557 578 611
Wind 242 306 325 358 406 468 526 580 632 685
Solar 67 118 178 224 270 326 390 462 536 617
Others 0 0 0 0 0 0 0 0 0 0
Total 5,025 6,418 6,995 7,249 7,423 7,869 8,120 8,364 8,615 8,873
% change 5.8% 6.5% 9.0% 3.5% 2.4% 6.0% 3.2% 3.0% 3.0% 3.0%
Source: BofA Global Research estimates, company data
Reducing reliance on coal

Despite being the world's largest coal producer (46% of global total) and consumer
(23.6% of global total), China aims to reduce its coal consumption to 2.6bn tons and the
share of coal fuel in its energy mix to 42.6% by 2030.
Fossil fuel substitution by renewable energy

The share of clean energy in China's total electricity consumption mix increased from
18% in 2015 to 23.4% in 2019. This is expected to reach about 28% by 2025 and close
to 37% by 2035. China plans to increase the installed power generation capacity mix for
clean electricity from 40.8% in 2019 to 56% in 2035.
In 2019, China's non-fossil fuel power generation capacity was 2.3 trillion kWh, which
reduced carbon emissions by more than 2 billion tons.

Chart 2: Clean electricity consumption mix Chart 3: Clean electricity installed capacity mix
40% 37% 60% 56%
35%
50%
30% 28% 41%
40%
25% 23%
30%
20% 18%
15% 20%
10%
10%
5%
0%
0% 2019 2035E
2015 2019 2025E 2035E
Source: China Daily
Source: China Daily
Efficient, less polluting SG producers to gain market share

As MOITT (Ministry of Industry & Information Technology) aims to cap emissions from
glass production increase, we reckon producers may be encouraged to add capacity
overseas or consolidate capacity from inefficient or more polluting producers. We
believe industry leaders such as XYS & FG will benefit and may gain production market
share because of their (1) low costs; (2) energy efficiency; (3) less pollution; (4) tech
advantages and (5) proven overseas production experience (XYS). To avoid creating a
concentrated market, we reckon industry consolidation will accelerate the exit of the
smaller producers. XYS/FG lifted their market share by 3/5ppt over past 5 years.
Inefficient, polluting power plants have sold output quotas to low cost, clean producers.
SG shortage likely in NT, oversupply unlikely over the MT

We reckon regulator won’t be well positioned to judge and approve significant SG
capacity additions because (1) it’s hard for central planners to gauge future global PV &
SG demand; (2) the goal to avoiding an emissions spike from SG output rise; and (3)
gov’t aims to move towards market-driven policies to determine product pricing &
capacity add across sectors. While new SG production line construction takes 1 year plus
a few months of planning for leading companies in China, securing approval and
construction may take 2-3 yrs overseas. Using LONGi & Tongwei’s ’21 global PV demand
rise forecast of 26-43%, coupled with bifacial module penetration rise, we forecast the
global SG shortage will worsen from 13.5% in ’20 to 16% to 26% in ’21. We believe this
is why LONGi said on our Nov 3 conference call that they reckon SG ASP may stay at a
“high” level throughout ‘21 despite XYS’ & FG’s SG capacity addition plans in ’21.
Depending on ’22 global demand, XYS’ & FG’s SG ASP, GPM may continue to stay high in
‘22. Supported by proprietary production tech, XYS & FG have sustained GPMs 10-
15ppt > tier 2 producers and 15-20ppt > tier 3 producers.
Wind & solar power to gain substantial market share

We estimate 270GW of solar power capacity addition during 14th Five Year Plan
The solar power sector has been successful in reducing generation cost/kWh by over
80% in the last decade. With on-going cost reduction reaching coal-fired power
generation cost (grid-parity level), we estimate PRC solar power capacity will rise to
515GW in 2025 from 245GW in 2020.

Chart 4: Average power generation cost (LCOE) trend in China
Coal USC Gas CC Utility PV Wind onshore Wind offshore
200
180
160
140
120
100
80
60
40
20
0
2010 2015 2020 2025 2030 2035 2040
Source: BofA Global Research, Wood Mackenzie
Market estimates of solar power capacity addition during 14th Five Year Plan
FLAT Glass: China’s solar power demand to range between 50GW - 90GW/year during
the 14th Five Year Plan.
LONGi Green: During early part of 14th Five Year Plan, China could install 50GW solar
farm (SF) capacity per year. During the later stage of the 14th Five Year Plan (2024-25),
new solar power capacity addition can reach 70-80GW/year.
Tongwei: 50-60GW of new solar power capacity addition in China in 2021 and 60-
80GW/year from 2022 onwards during the 14th Five Year Plan.
Asia Europe Clean Energy Association: Solar power capacity expected to reach
500GW by 2025 & 800GW by 2030, compared to 204GW in 2019.
Chart 5: Global solar power generation mix at 2.8% in 2019 Chart 6: China solar power generation mix at 1.6% in 2019
5.0% 1.6%
Non-renewable 2% 0%
6%
Hydropower 3%
16.1%
16% Non-renewable
Wind power
Hydropower
Solar PV Wind power
Bio-power Solar PV
73% 77.2%
Geothrmal, CSP and
ocean power
Source: Ren21, BofA Global Research Source: NBS, BofA Global Research

Chart 7: PRC national power generation by fuel type and BofA forecast Chart 8: Solar PV global capacity and annual addition, 2008-2022E
Thermal Wind Solar 1400
Thermal YoY Wind YoY Solar YoY (YoY)
(TWh) 1200
8,000 80% 151
70% 1000
7,000 138
6,000 60% 800 115
50% 120
5,000 600
40% 100
4,000 99
30% 400
76
3,000 51
20% 200 39
2,000 10% 31 30 37
0 7 8 17
1,000 0%
2020E
2021E
2022E
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
- -10%
Previous year's capacity (GW) Annual addition (GW)
Source: BofA Global Research, CEC, NBS Source: BofA Global Research
Chart 9: JinkoSolar’s history of world records of solar conversion efficiency
N-Type Mono Cell

24.79%
P-Type Mono Cell 2020.7
21.82% 13
N-Type Mono Cell 2020.1 12
24.58% 11
2019.6 N-Type Mono
N-Type Mono Cell 10 Bifacial Module
P-Type Mono Module - 24.2% 9 22.49%
60 Cell P-Type Mono Cell
2019.1 8 2020.1
378.8W 24.38%
7 158 size Mono Module - 2019.6
P-Type Mono Cell 2018.5
6 72 Cell
23.95% 5 P-Type Poly Cell 469.3W
Mono perc Cell 2018.5
4 22.12% 2019.5
22.78%
3 N-Type Mono 2018.12
2017.1
2 Module -60 Cell
1 Mono perc Cell 378.6W
23.45% 2018.5
2017.12
Source: Company data; BofA Global Research
14 FYP PV capacity add to far exceed 13 FYP; Buy XYS, FG

Deputy Director of NEA’s RE department Ren Yuzhi said on Dec 9 that YE20 national SF
capacity should reach 240GW, implying c200GW capacity add under 13th FYP. With >80%
PV drop cost reduction success, he said PV capacity add in 14th FYP will far exceed 13th
FYP add amount that’ll help lower PV cost further. NEA will add multiple large-scale RE
production bases in north & southwest China, with target capacity in excess of 10GW
each. NEA aims to develop >1GW distributed PV & grid parity PV under 14 FYP that’ll be
supported by new policy launch, including emissions /green certificate trading. Secretary
General of CWEA expects c100GW RE addition/year will be needed to reach carbon
neutral target by 2060. LY & MY will build 1GW hybrid WF + SF + storage projects in N.
China that are designed to provide low cost RE that’s supported by scale & high UH

advantage. Leading PV equipment suppliers have moved to secure multiple year of
material supplies including solar glass to match with their own capacity expansion.
According to Bloomberg News on Dec 10, PRC solar companies have spent >Rmb92bn
since Jan 1’ 20 to secure raw materials supply to support their production capacity
expansion. Contract value for silicon material/silicon wafer/solar glass worth Rmb29.3/
25.7/10.7bn. LONGi signed contracts to procure 125k tons of silicon material with Asia
Silicon over the next 5 years, which can support 48GW of silicon wafer production.
JinKo Solar singed to purchase 93k tons of silicon material with Tongwei over the next 2
years, which can support 33.7GW module production.
Multi and mono-crystalline silicon ASP dropped week on week on Dec 11. We believe on-
going raw material price & cost reduction will be positive to module & solar glass (SG)
demand. Due to relatively long lead time to add SG production capacity, SG ASP may
remain at high level for longer. Please refer to our sector report published on Nov 4, XYS,
FG may gain share under capacity add review; our ASP estimates 11%<LT avg.
Chart 10: Index of solar raw material price since Feb ‘20
140
130
120
110
100
90
80
70
60
26-Feb 26-Mar 26-Apr 26-May 26-Jun 26-Jul 26-Aug 26-Sep 26-Oct 26-Nov
Silicon material Silicon wafer Solar cell Solar module
Source: The Capital Group
SOEs & IPPs to lift investment in renewable energy sector

Oil & Gas, coal suppliers, coal-fired IPPs and wind farm developers will increase
investment to build solar & wind farms with some going into manufacturing of solar
module materials/components. We believe SoE funding clean energy production and
capacity addition will significantly increase, by Rmb20bn or more per year. As installed
capacity increases, we reckon some companies will benefit with sales and EPS increase,
such as solar glass and component producers.
According to our oil & gas team’s report: Expects lower import loss in 2H20;
fundamentals improving. PetroChina plans to focus on transition and new energy such as
hydrogen, capex discipline. The budget for PetroChina’s new energy project capex is
about Rmb2bn per annum under its 14th Five-Year Plan vs over Rmb200bn total capex
per annum.
According to China Securities News on Aug 25, Sinopec group will participate in thin solar
glass business. Sinopec will invest in Fengyang Guigu Intelligent, a company which
produces solar glass and display screen. Fengyang Guigu Intelligent is a subsidiary under
Changzhou Almaden, one of the major solar glass producers in China.
CNOOC entered offshore wind power sector since 2006 and established a subsidiary
focusing on wind, biomass, coal, solar, hydrogen business.

Table 3: BofA by company forecast of renewable energy (RE) capacity addition during 14th FYP
(MW) 2021 2022 2023 2024 2025 % of RE capacity by YE25
IPPs
HNP
-Wind 3,000 3,000 3,000 3,000 3,000
-Solar 1,500 1,500 1,500 1,500 1,500
- RE (wind+solar) 4,500 4,500 4,500 4,500 4,500 34%
HDP
-Wind 1,300 1,300 1,300 1,300 1,300
-Solar 700 700 700 700 700
- RE (wind+solar) 2,000 2,000 2,000 2,000 2,000 35%
CRP
-Wind 3,121 1,500 1,500 1,500 1,500
-Solar 1,000 1,000 1,000 1,000 1,000
- RE (wind+solar) 4,121 2,500 2,500 2,500 2,500 40%
CPID
-Wind 400 500 600 700 800
-Solar 600 700 800 900 1,000
- RE (wind+solar) 1,000 1,200 1,400 1,600 1,800 53%
Wind
LY
-Wind 2,000 2,000 2,000 2,000 2,000
-Solar 2,000 2,000 2,000 2,000 2,000
- RE (wind+solar) 4,000 4,000 4,000 4,000 4,000 96%
DTR
-Wind 500 750 750 750 750
-Solar 500 750 750 750 750
- RE (wind+solar) 1,000 1,500 1,500 1,500 1,500 100%
Solar
XYS
-Solar 950 900 700 700 700
- RE (wind+solar) 950 900 700 700 700 100%
Source: BofA Global Research estimates
Wind & solar could overtake gas & coal by 2024

According to Wind Power News on Nov 10, IEA forecasts 198GW RE capacity addition in
’20, including 65GW from Wind. If the prediction is realized, renewables will account for
c90% of total global power additions in 2020. IEA expects RE capacity addition to
increase 10% in ’21 as delayed project will shift to ’21. India will be the largest
contributor to the upswing, with annual addition doubling as large amount of delayed
wind & PV projects are brought on line. IEA expects total wind & PV capacity will surpass
natural gas in ’23 & coal in ’24. Offshore wind will account for one-fifth of total wind
installations by ’25. RE will account for one-third of the world’s total power output by
’25. Wind will account for 30% of all RE capacity additions through to ’25, with solar
accounting for 60%.
14th FYP capacity add guidance lifted

LY guides that it aims to add 20GW of RE capacity during 14th FYP, which implies 4GW
RE /year vs HNP’s target of 5GW p.a. LY has established power grid access on existing
WF or SF sites & hence have cost & time advantage to add new RE capacity vs firms
aiming to significantly add new RE capacity on new sites that do not have grid
connection lines or road access, which will incur higher capex/kW to add RE capacity,
such as HNP, which guides to add new WF capacity at around Rbm10,000/kW during
2021-23.

DTR guided that it aims to add >1GW RE capacity in ’21 & 1.5GW RE capacity on ’21
onwards.
Finance sector to help fund RE add & carbon neutral plan

Depending on pace of emissions offset, it is estimated that US$5-7tn will be needed for
China to achieve carbon-neutral goal. Yi Gang, governor of the PBoC, said on Dec 9 that
finance sector SOEs should work together to fund China’s shift toward RE. As discussed
in our Nov 25 sector report Partial AR payment, capacity add pace rise likely, 4Q SG GPM
rise; DTR, LY POs lifted. CWEA Secretary General said the PRC government may ask
SOEs or policy banks may be asked to raise money to help settle subsidy AR. PRC banks
had extended over Rmb11tn green loans & Rmb1.2tn green bonds issued by end June
’20, 2nd most in the world. A 25bp funding cost cut will lift LY ’21 EPS by 3.1% & DTR
’21 EPS by 6.6%.
In the US solar power market, solar sector loan providers are offering high-credit
borrower 10-year loan at 0.99% interest rate. The historic low interest rate make solar
loan product an attractive investment.
Under PBoC plan, low cost loans may be extended to PRC SF/WF developers.
MoF to speed up review for RE project subsidy list

According to FINET News on Nov 25, the Ministry of Finance (MoF) asks grid companies
to speed up subsidy review for RE projects. Qualified projects should be grid-connected
after 2006. Projects will first be reviewed by grid companies and then by provincial level
energy bureau and finally by CNREC.
Rmb6bn MoF RE subsidy approved for ’21; more to come

MoF said on Nov 20, 2020 that it approved RE subsidy of Rmb5.95bn for 14 provincial
grids in ’21 vs Rmb5.68bn in ’20, +4.9% YoY. The Rmb5.95bn includes Rmb3.4bn for
solar, Rmb2.3bn for wind & Rmb59.78mn for biomass projects. According to MoF, the
approved subsidy will be prioritized to pay poverty support PV projects, < 50kW PV
distributed projects, projects with tariff bids in ’19 & ’20 newly added projects. The 14
provinces including Inner Mongolia, Jilin, Zhejiang, Hunan.
According to XYS & LY, this batch of Rmb5.95bn subsidy is only for local power grids
only. Subsidies for State Power Grid Corp & China Southern Power Grid will be
determined and announced later. This batch of Rmb5.95bn subsidy is for existing
projects, new projects in ’21 will not be granted subsidies.
Rmb140bn AR settlement being reviewed, potential upside

Based on our checks with China Waste to Energy & Biomass Association, China Wind
Energy Association (CWEA) and China Longyuan management, NDRC & Ministry of
Finance (MoF) have been discussing settlement of Rmb140bn tariff subsidy account
receivables (AR) for PRC wind and solar farm operators, in line with our discussion in our
LY report titled 9M EPS +11% YoY; EPS lifted on capacity add guidance; cost/kWh, A/R
cut key driver. AR settlement would significantly improve CF position & reduce interest
expense for wind farm (WF) & solar farm (SF) operators. Magnitude of improvement will
depend on pace of subsidy A/R settlement. Wind and solar farm developers getting
reimbursement for their A/R will be able to pay for more solar and wind power
equipment and thus propel order books for Goldwind and solar glass or component
suppliers.
With significant CF improvement, WF, SF developers/operators can continue operation,

reinvest in value accretive projects when grid-parity is reached & lift DPS. With sharp
cost/kWh reduction for solar & for wind, we reckon reaching this positive scenario is
likely. Hence, stocks with improved CF could re-rate upwards further towards & above
1xPB. This would provide the next wave of positive re-rating catalysts for LY and
DTR. Rising RoIC upon A/R settlement would support above 1x PB valuation.

What we learned from our Nov ’20 China Conference
Longyuan power (LY)
• LY stated the reasonable PRC government’s latest wind/solar farm utilization hours
(UH) policy will have limited impact on the company. Though total tariff subsidies to
be received will be cut, this new policy signals the PRC government is trying to
settle subsidy delay issue by defining the total subsidy amount that needs to be
paid. LY expects the final settlement policy to be launched by the government
before Mar’21 National Peoples’ Congress.
• LY confirmed the annual national wind power capacity addition during 14th Five
Year Plan (FYP, 2021-25) may reach 50GW or more. LY is confident wind turbine
producers & grid companies have the capability to support equipment demand and
grid interconnection. It targets to add 3-5GW/year during 14th FYP.
• Construction cost for wind farms will be lower YoY in 2021 as wind turbine ASP has
dropped from RMB3,900/kW during rush installation to the current RMB3,000-
3,300/kW. Wind turbine purchase price accounts for >=50% of total construction
cost.
• LY will restart solar power project development during 14th FYP. It expects solar
farm capacity to significantly increase during the later stage of 14th FYP.
Datang Renewable (DTR)

• DTR guided that RE addition to be >1GW in ’20 & 1.5GW on ’21 onwards. Among
the new addition, half will be wind and half will be solar.
• DTR signed 36% MPS volume 10 provinces in ’20 but expect actual execute MPS
volume to be 25% in ’20. MPS mix may continue to increase, with stable MPS tariff.
• DTR has collected Rmb1.6bn subsidy by Sep ’20 & expects to collect Rmb2.3bn
subsidy in FY20. DTR’s subsidy AR was Rmb103bn by Sep ‘20
• DTR guided construction to be Rmb6,000-6,500/kW in north China, but Rmb6,500-

7,500/kW in South China in ’21.
• Wind UH achieved 1,500hrs in 9M20, with curtailment ratio of 3.57%, -1.82ppt.
Xinyi Solar (XYS)

• Small solar glass (SG) producers have lifted the ASP to RMB45/m2 due to strong
demand. XYS’ ASP for Nov may be lifted to RMB42/m2 as the inventory level is
extremely low. XYS expects strong demand to sustain in 4Q and FY21.
• Regarding the PRC government’s consultation paper on SG production capacity

add/replacement, XYS indicated the proposed policy may limit PRC SG supply if it is
implemented. XYS’ 4x1,000 ton new SG production lines in Anhui in 2021 will not be
affected by the proposed replacement policy being reviewed. If implemented, XYS
may look for overseas capacity expansion. XYS and Flat Glass (FG) mentioned there
is limited glass production quota available in the market.
• XYS confirmed only FG and XYS will have meaningful SG capacity addition in the
next two years. Though China Southern Glass and Cai Hong also have capacity
addition plans, leading market share of SG producers will not be impacted. The
newly added capacity will likely squeeze out market share of small producers’,
whose production capacities account for 40% of total industry’s capacity.

• Bifacial glass accounts for 25% for the total industry demand in 2020. In the long
term, market share for bifacial glass could increase to 50%.
Flat Glass (FG)

• FG expects solar glass (SG) shortage to continue till 1H22. Average selling price
(ASP) will unlikely drop from current Rmb42/sqm in 4Q20. Regulator will not cap SG
ASP as the market is driven by demand and supply. 2021 SG ASP will depend on
supply and demand situation next year, which should remain tight.
• FG believes the PRC government may gradually relax SG capacity add restriction and
leading SG producers will more likely be allowed to be granted new capacity quota.
Even if the government strictly implements proposed capacity replacement policy,
FG reckons leading SG producers will build new production lines overseas. However,
FG reckons six PV module producers’ recent request to relax capacity expansion add
approval may have a limited impact on government-policy decision.
• FG’s two new SG production lines in Vietnam will be commissioned at the end
of ’20 & beginning of ’21. FG also plans to add 4x1,200 tons/day capacity in Anhui
in ’21 & ‘22.
• FG expects 150-160GW global demand in ’21. Demand will be mainly driven by

China/U.S/Europe/Australia. FG forecasts China’s demand range between 50GW -
90GW/year during the 14th FYP.
• Bifacial glass modules accounted for 15% of total industry sales in ’19 and climbed
to 35% in mid of ’20. Due to shortage of SG, market share for mainstream 3.2mm
thick SG may rise in 2H20. But when supply demand is balanced, FG expects bifacial
glass penetration rate to further rise to 60% over the next 3-5 years.
• FG expects large-sized glass panel to be the trend. FG’s new lines in Anhui and some
of the lines located in Jiaxing can produce 210mm size glass panels.
LONGi Green
• LONGi has secured 4Q20/1Q21 orders. Most of the 1Q21 orders are from overseas
market, LONGi is negotiating to fill orders for domestic PRC market & expects
domestic order to increase in Dec ‘20. LONGi is confident to reach shipment target
of 58GW for silicon wafer & 20GW for modules in ’20.
• LONGi expects 160-170GW of global solar power capacity add (demand) in ’21 &
200 GW in ‘22. During early part of 14th Five Year Plan (FYP), China could install
50GW solar farm (SF) capacity per year. During the later stage of the 14th FYP
(2024-25), new SF capacity addition can reach 70-80GW/year.
• LONGi expects limited room for module price to drop further in ’21. Power output
cost may drop another 5% in ’21, helped by module efficiency improvement, e.g.,
the deployment of larger-sized panels.
• Due to rapid capacity expansion, LONGi expects oversupply for silicon wafer in ’21.
Leading producers will intensify price competition to squeeze out small players, thus
wafer ASPs may drop further in ’21.
• Module price change by Rmb0.3/W will impact project IRR by 1%. The floor price
for module is Rmb1.5/W. If SG shortage persists, module price may stay at
Rmb1.75/W. Large-sized module ASP will be cRmb1.75/W. 70% of market demand
will be satisfied by the top 5-6 producers. Some SF developers may not be
profitable if module price rises to >=Rmb1.75/W. However, state-owned SF

developers will unlikely abandon SF construction projects to help the state achieve
clean energy consumption/emissions reduction targets.
• LONGi believes 166mm size wafers will still be mainstream product in ’20 & in
1H21 but LONGi expects share of 188/210mm wafers may significantly increase in
2H21 & ‘22. All of LONGi’s new production lines can produce 210mm and smaller
size wafer. 182mm module produces 7.5W vs 6.15W from 166mn module.
Tongwei
• Tongwei expects 50-60GW of new SF capacity addition in China in 2021 & 60-
80GW/year from 2022 onwards during the 14th FYP. Under a bullish scenario, SF
capacity addition can reach 100GW/year. Tongwei expects global solar power
installation/demand at 150-160GW in ’21 helped by module price and construction
cost drop.
• Tongwei said that energy conversion ratio for PERC cells has gradually risen since
2016/17 & has reached 23% at stage status vs 23.8% for Topcon & 24.8-25% for
HIT PV cell designs. Although HIT cells have higher energy conversion ratio, power
production cost/kWh is much higher than PERC cells. Tongwei closely monitors new
PV cell technology development & has purchased equipment to produce Topcon
cells.
• Tongwei targets to lift its silicon production capacity to 80,000 tons by YE20,
120,000 tons by YE21 & 290,000 tons by YE23. Tongwei’s current solar cell
production capacity is 27.5GW. Upon completion of its Meishan & Jintang
production lines, Tongwei’s solar cell production can reach 42.5GW. By YE23,
Tongwei target solar cell production capacity to be 80-100GW.
• Silicon price rose to Rmb90,000-100,000/ton in ’20. Tongwei expects silicon price

to stay > Rmb85,000/ton in ’21. However, silicon only accounts for 10% of module
cost, downstream demand will not be so sensitive to silicon price change.
• Module price rose from Rmb1.3-1.4/W in 1H20 to current Rmb1.6/W. If module

price rise > Rmb1.7/W, it may impact on profit margin of module manufacturers or
if module price is lifted, then overall module demand.
• Tongwei & other module producers ask for more relaxed SG capacity add criteria
compared to other types of glass. Tongwei believes government will not directly cap
SG ASP as ASP is driven by market demand and supply. But if the government
cannot properly solve the SG shortage issue, SG ASP may stay high in 2021 &
negatively impact on module producer margin.
AECEA (global solar sector consultant)

• China demand at 34-38GW in ’20. A total of 40-45GW approved pipeline project will
carry over from 2020 to 2021. China: solar power capacity at 204GW in 2019 and
expect to reach 500GW by 2025 & 800GW by 2030.
• Global demand at 127-133GW in ’21. Estimate is conservative comparing to LONGi

& Tongwei’s expectation of 150-170GW, because Europe and India market has not
fully recovered from COVID-19.
• Dramatic shift towards RE is unlikely, due to inertia prevailing in the power &
economic sector. Increase penetration of RE in the grid will cause challenges.
Utilization rates >95% & curtailment rate at 2-3% will be key indicator of how much
new addition to be installed in the future.
• Large producer to reduce price to wipe out smaller players in the future.

Sublime China Information (solar glass sector consultant)
• Demand from China will be around 40GW/50GW/62GW in ‘20/21/22. Overseas
demand in ’21 expect to be 90-100GW, overseas demand will be mainly contribute
by U.S. Europe, Korea and Japan.
• SCI expects SG ASP may further increase in Dec and stay at high point till Jan ’21.
Due to spring festival holiday, inventory level may increase and SG ASP may slightly
drop in Feb ’21. SCI expects 2021 3.2mm SG ASP to rise 20% YoY to Rmb36.5/sqm
in ‘21. SCI expects 2022-2023 SG ASP to remain generally flat or fluctuate within
certain range as supply & demand reaches equilibrium.
• For raw glass sheet, GPM was 12.6% in 10M20; GPM rose to 43.7% in Oct ’20 &
further to 50% likely in Nov. Due to leading producers’ cost & scale production
advantage, SCI expects leading SG producers’ GPM to remain > 10ppt higher than
industry average, which currently is up to 60% with current ASP level.
• Bifacial glass penetration rate estimated to be c20% in ’20 and may further
increase by 5ppt each year
• SCI expects the request from 6 PV module producers to ask PRC government to
relax SG production capacity cap approval to have no or little impact on PRC
government decision due to emissions concerns associated with glass production
capacity increase. SCI believes SG producers can purchase production capacity
quota from multiple small floating glass producers, consolidate and construct large,
efficient SG production lines.
• Large-sized SG is becoming the new SG product to fit larger size PV modules which
are more energy efficient. Due to improved energy conversion efficiency, SCI
expects penetration for large-sized SG panels will rise. All recently commissioned
large scale SG production lines are configured to produce large-sized SG products.
12 new UHV power lines to help lift UH & capacity add

According to State Grid News on Jun 4, ‘20 the construction of ±800kv UHV line between
Qinghai and Henan was completed on May 31. The UHV line cost total investment of
Rmb22.6bn and will only distribute clean energy. The line will transmit 40bn kWh
electricity each year & help transmission and consumption of wind, solar power
produced in Qinghai and Gansu provinces. The line will be commissioned in Dec this
year.
On Sep 7 , 2018, National Energy Administration (NEA) issued the "Notice on

Accelerating the Planning and Construction of Power Transmission and Transformation
lines" saying that China has planned a total of 12 new Ultra High Voltage (UHV) power
transmission projects that will help lift utilization hours and lift new solar (and wind)
farm capacity add going forward, including
1. Five UHV Direct Current (DC) lines (including Shaanbei-Wuhan DC UHV, Qinghai-
Henan DC UHV, Yazhong-Jiangxi DC UHV, Baihetan to Jiangsu, Baihetan to Zhejiang);
2. Seven UHV Alternating Current (AC) lines (including Nanyang-Jingmen-Changsha,

Zhangbei-Xiong) and
3. Five supporting short-distance AC UHV lines.
Potential benefit from UHV lines transmission increase

According to Longyuan (LY), the 6 existing UHV lines in Inner Mongolia (IM), two from
East IM and four from West IM. The 1st line from East IM to Northern China were put
into operation 5-6 years ago and have already achieved fully utilization rate.

The 2nd line from East IM to Shandong Qingzhou was put into operation in 2018. This
line is to help transmit power from Tongliao, Chifeng and Xinganmeng to Shandong.
However, this UHV line is still under testing and may not have reached full utilization. LY
believes that these UHV transmission lines will help lower wind and solar power
curtailment rate in East Inner Mongolia (IM) by 5%, if fully utilized, although not sure
when this will happen.
Table 4: PRC UHV lines in operation and under construction

Date of
No. Start location End location Type Capacity (GW) Transmission voltage (kV) Status
operation
1 Southeast of Shanxi Jinmen AC 12 1,000 Operation Jan-09
2 Huainan Shanghai AC 21 1,000 Operation Sep-13
3 North Zhejiang Fuzhou AC 18 1,000 Operation Dec-14
4 Huainan Shanghai AC 12 1,000 Operation Nov-16
5 Ximeng Shandong AC 15 1,000 Operation Jul-16
6 West Inner Mongolia South Tianjin AC 24 1,000 Operation Nov-16
7 Yuheng Weifang AC 15 1,000 Operation Aug-17
8 Ximeng Shengli AC n.a. 1,000 Operation Jul-17
9 Shaanxi North Shenmu Hebei AC 3.6 500 Partial operation n.a.
10 East Ningxia Zhejiang AC 16 800 Construction n.a.
11 Yuhuang Weifang AC n.a. 1,000 Construction n.a.
12 Xiangjiaba Shanghai DC 12.8 800 Operation Jul-10
13 Jinpin South Jiangsu DC 14.4 800 Operation Dec-12
14 South Hami Zhengzhou DC 16 800 Operation Jan-14
15 Xiluodu left shore Jinhua DC 16 800 Operation Jul-14
16 Lingzhou Shaoxing DC n.a. 800 Operation Nov-16
17 Jiuquan Hunan DC 4.2 800 Operation Jun-17
18 North Shanxi Nanjing DC 16 800 Operation Jul-17
19 Shanghaimiao Shandong DC 12.8 800 Operation Dec-17
20 Ximeng Jiangsu taizhou DC 14.4 800 Operation Oct-17
21 Zhalute Qingzhou DC n.a. 800 Operation Dec-17
22 Nuozhadu Jiangmen DC 5 800 Operation Sep-13
23 Liaoning North China DC 4.25 500 Operation Nov-15
24 Dian Northwest Guangdong DC 5 800 Operation Dec-17
25 Huaidong Anhui Wannan DC 12 1,100 Operation Mar-18
26 Changji Guquan DC n.a. 1,100 Operation Jun-18
27 Shanxi Mengxian Hebei South DC 2 500 Partial operation n.a.
28 Qinghai Henan AC n.a. 800 Operation Dec-20
29 Inner Mongolia Ximeng Shandong DC n.a. 1000 Construction n.a.
30 Huaidong Chengdu DC 12 1,100 Construction n.a.
31 West Beijing Shijiazhuang AC n.a. 1,000 Construction n.a.
32 Shandong Hebei AC n.a. 1,000 Construction n.a.
33 Shaanbei Wuhan AC n.a n.a construction n.a
34 Qinghai Henan AC n.a n.a construction n.a
35 Yazhong Jiangxi AC n.a n.a construction n.a
36 Baihetan Jiangsu AC n.a n.a construction n.a
37 Baihetan Zhejiang AC n.a n.a construction n.a
38 Nanyang Changsha AC n.a n.a construction n.a
39 Zhangbei Xiongan AC n.a n.a construction n.a
Source: BofA Global Research
There are 4 lines in West Inner Mongolia (IM), which are all being put into operation, still
under testing. LY is unsure when full utilization will be reached. Upon reaching full
utilization, LY reckons it will help lower wind power curtailment rate by around 1.5%.
The NEA has planned another 9 UHV lines to help to transmit the power from Northwest
of China, including Qinghai- Henan, Shanbei-Hubei, Yazhong- Jiangxi, Baihetan- Jiangsu,
Baihetan- Zhejiang, Nanping-Hubei, Nanping-Changsha.
DTR believes the curtailment ratio could be further lowered in three north areas. Wind
power curtailment issue has improved a lot since UHV lines were put into operation.
There are 5 UHN lines from IM to southern China have not been connected, partly due to
some sub-lines did not connected with the major lines.

If wind power can take 10% of coal-fired power market share post 2020, it implies
233GW more wind power capacity addition post 2020 which is sufficient for 12 years of
development assuming 20GW annual wind power capacity addition in China.
Exhibit 1: PRC Ultra High Voltage transmission lines in operation
Source: BofA Global Research
Chart 11: XYS historical PB chart Chart 12: XYS historical PE chart
8.0 50.0
7.0
6.0 40.0
5.0 30.0
4.0
3.0 20.0
2.0
1.0 10.0
0.0
0.0
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20
PB Avg PB =3 PE Avg PE = 15.8
Source: BofA Global Research; Bloomberg Source: BofA Global Research; Bloomberg

Table 5: Valuation of PRC Hydro, IPPs, Wind, Water, Gas, Solar and Overseas Nuclear Power Plant Operators
EPS
RoIC EV/EBITDA PE Dividend yield
CAGR
2018 2019 2020E 2021E 2022E 2019 2020E 2021E 2022E 2019 2020E 2021E 2022E 2019 2020E 2021E 2019-21E
HK Utilities
CKI 1038 HK 7.9% 7.8% 6.5% 6.7% 6.8% 10.6 13.3 12.9 12.7 9.4 12.2 11.7 11.4 6.3% 6.4% 6.5% -10.2%
CLP Holdings 2 HK 10.6% 4.4% 10.1% 10.7% 11.3% 16.4 9.7 9.2 8.8 39.4 15.6 14.6 14.0 4.2% 4.4% 4.5% 64.0%
PRC Nuclear
China General Nuclear 1816 HK 5.9% 6.6% 6.7% 6.5% 7.3% 10.2 9.7 9.6 8.7 7.4 7.4 7.3 6.2 5.5% 5.7% 4.6% -2.0%
Thermal IPPs
Huaneng Power 902 HK 2.8% 2.9% 4.2% 3.6% 3.5% 9.7 8.2 8.3 7.9 56.6 7.3 10.0 11.0 5.2% 9.7% 5.1% 131.7%
Huadian Power 1071 HK 3.3% 4.6% 4.4% 3.6% 3.6% 7.8 7.4 7.7 7.4 6.4 5.3 7.7 7.6 8.3% 9.5% 6.5% -11.3%
China Resources Power 836 HK 6.2% 6.4% 6.2% 6.8% 6.7% 6.3 5.9 5.3 5.2 6.1 5.4 4.6 4.5 6.6% 7.5% 8.8% 15.1%
China Power International 2380 HK 3.6% 4.0% 4.2% 4.8% 4.9% 10.2 9.3 8.6 8.1 10.5 8.2 6.9 6.2 10.0% 6.1% 7.2% 20.5%
Wind farms
Longyuan 916 HK 6.3% 6.3% 6.2% 6.6% 6.3% 8.1 7.4 7.1 6.9 11.4 11.2 9.4 9.2 2.0% 2.1% 2.7% 13.5%
Datang Renewables 1798 HK 5.2% 4.9% 4.8% 5.2% 5.3% 9.9 8.6 7.9 7.5 9.8 7.4 5.9 5.1 3.0% 3.5% 4.5% 32.5%
Water/waste treatment
China EverBright International 257 HK 12.3% 11.4% 11.0% 10.8% 11.6% 8.9 7.7 6.6 5.9 5.1 4.4 3.7 3.3 6.2% 7.3% 8.6% 18.3%
Beijing Enterprises Water 371 HK 9.4% 8.9% 8.3% 8.5% 9.4% 11.7 12.2 11.4 10.7 6.2 6.9 5.8 5.3 6.1% 5.5% 6.5% 3.5%
Guangdong Investment 270 HK 10.8% 11.8% 12.6% 16.0% 18.0% 11.6 8.3 9.2 8.0 17.2 17.3 14.6 12.9 4.4% 4.6% 5.0% 8.6%
SIIC Environment SIIC SP 5.5% 5.6% 5.9% 6.3% 6.7% 10.3 9.5 8.7 7.6 4.1 3.6 3.1 2.7 5.8% 6.1% 7.2% 11.7%
Gas distributors
ENN Energy 2688 HK 17.4% 17.4% 17.0% 13.9% 11.9% 13.5 11.6 11.9 12.3 18.6 16.6 17.7 19.1 1.8% 2.1% 2.3% -0.2%
China Gas 384 HK 14.9% 16.1% 16.2% 13.1% 9.2% 16.2 12.9 12.9 15.9 17.6 16.3 17.0 23.5 1.6% 1.9% 1.9% 1.7%
China Resources Gas 1193 HK 20.9% 22.3% 18.3% 15.5% 12.1% 9.3 9.6 9.5 10.6 16.0 18.2 18.9 22.7 2.4% 2.3% 2.3% -8.0%
Beijing Enterprises Holding 392 HK 7.9% 8.1% 6.3% 5.5% 4.7% 6.2 6.5 6.6 6.8 4.0 4.3 4.5 5.0 4.5% 4.4% 4.4% -4.9%
Solar
Xinyi Solar 968 HK 11.6% 13.7% 18.1% 16.9% 16.2% 29.2 20.0 17.4 15.3 46.7 31.5 28.2 25.4 1.1% 1.6% 1.7% 28.7%
Flat Glass 6865 HK 10.1% 13.6% 19.2% 18.9% 19.3% 6.9 4.2 3.3 2.8 46.8 31.9 25.4 126.0 0.2% 0.3% 0.3% 47.4%
Overseas nuclear
EDF Energy EDF FP 2.1% 2.1% 1.2% 1.8% 2.0% 7.1 7.8 6.9 6.8 9.7 15.8 12.3 12.2 1.3% 2.8% 3.8% -11.0%
Exelon Corporation EXC US 3.5% 3.4% 3.2% 3.0% 3.2% 15.2 15.7 15.3 14.8 13.0 14.0 14.8 14.1 3.4% 3.6% 3.8% -6.4%
KEPCO KPS 051600 KS 0.0% -0.4% 1.5% 1.6% n.a. 14.5 9.1 8.8 NM NM 9.9 9.2 19.3% 0.0% 2.8% 3.3% NM
Note: Data on A-listed companies are consensus estimates

Price objective basis & risk
FLAT Glass (FGSGF, HK$23.95, C-1-7)
We determine our price objective of HK$30 by DCF-based valuation. Our WACC
components consist of risk-free rate of 4.0%, beta value of 1.0, equity risk premium at
7.5% and terminal growth rate of 2%
Downside risks to our PO are (1) solar glass price decline, (2) raw material, energy cost
increase, (3) unfavorable trade policy, (4) industry oversupply risk (5) new project
development delay risk (6) competition and technology risk (7) unsuccessful share
placement approved on Oct 28
Xinyi Solar (XNYIF)

We derive our price objective of HK$17.7 by DCF-based valuation. We have assumed the
risk-free rate of 4.0%, industry beta at 1.0, equity risk premium at 7.5% and terminal
growth rate 2%
Downside risk to our PO are (1) Solar glass prices decline risk (2) Raw material price
increase risk (3) Trade policy risk -China vs the US, the EU (4) Industry oversupply risk (5)
Construction delay risk (6) Competition and technology risk
Analyst Certification
I, Angello Chan, hereby certify that the views expressed in this research report accurately
reflect my personal views about the subject securities and issuers. I also certify that no
part of my compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or view expressed in this research report.

APR - Utilities Coverage Cluster
Investment rating Company BofA Ticker Bloomberg symbol Analyst
BUY
Aboitiz Power Corporation ABZPF AP PM Julian Roxas
Beijing Enterprises Water BJWTF 371 HK Xiaobing Wang
CGN Power CGNWF 1816 HK Angello Chan
China Datang Renewable XGDRF 1798 HK Angello Chan
China Longyuan Power Group Corp. Ltd. CLPXF 916 HK Angello Chan
China Resources Power CRPJF 836 HK Angello Chan
China Yangtze Power Co., Ltd CYGZF 600900 CH Angello Chan
CK Infrastructure Holdings CKISF 1038 HK Angello Chan
CLP Holdings CLPHF 2 HK Angello Chan
CLP Holdings - A CLPHY CLPHY US Angello Chan
Everbright Environment CHFFF 257 HK Xiaobing Wang
First Gen Corporation FSGCF FGEN PM Julian Roxas
FLAT Glass FGSGF 6865 HK Angello Chan
Guangdong Investment GGDVF 270 HK Angello Chan
Guangxi Guiguan Electric Power Co Ltd XGPEF 600236 CH Angello Chan
KEPCO KPS XPKRF 051600 KS Jay Yoo
Manila Water MWTCF MWC PM Julian Roxas
NHPC Ltd XNTHF NHPC IN Amish Shah, CFA
NTPC Ltd NTHPF NTPC IN Amish Shah, CFA
Origin Energy OGFGF ORG AU Bruce Low
Power Grid Corporation of India Ltd XPPWF PWGR IN Amish Shah, CFA
Ratch Group PCL XEGEF RATCH TB Sirichai Chalokepunrat
SIIC Environment AWAEF SIIC SP Xiaobing Wang
Spark Infrastructure SFDPF SKI AU Bruce Low
Xinyi Solar XNYIF 968 HK Angello Chan
NEUTRAL
APA Group APAJF APA AU Bruce Low
AusNet Services SAUNF AST AU Bruce Low
Beijing Enterprises Holdings Limited BJINF 392 HK Angello Chan
CGN Power XALQF 003816 CH Angello Chan
China Power International CPWIF 2380 HK Angello Chan
Electricity Generating Company Ltd. EYGGF EGCO TB Sirichai Chalokepunrat
FLAT Glass XFLCF 601865 CH Angello Chan
Korea Electric Power Corp. KEPLF 015760 KS Jay Yoo
Korea Electric Power Corp.-A KEP KEP US Jay Yoo
Korea Gas Corp. KRAGF 036460 KS Jay Yoo
UNDERPERFORM
AGL Energy AGLNF AGL AU Bruce Low
Beijing Capital Co., Ltd BJCAF 600008 CH Xiaobing Wang
Beijing OriginWater Technology Co., Ltd XILUF 300070 CH Xiaobing Wang
China Gas Holdings Limited CGHOF 384 HK Angello Chan
China National Nuclear Power Co. XCPEF 601985 CH Angello Chan
China Resources Gas Group Limited CRGGF 1193 HK Angello Chan
ENN Energy Holdings Ltd XNGSF 2688 HK Angello Chan
Global Power Synergy XWODF GPSC TB Sirichai Chalokepunrat
Huadian Power International HPIFF 1071 HK Angello Chan
Huadian Power Intl Corp-A HPIZF 600027 CH Angello Chan
Huaneng Powe-ADR HNP HNP US Angello Chan
Huaneng Power International HUNGF 902 HK Angello Chan
Huaneng Power-A HUNWF 600011 CH Angello Chan
Manila Electric Co. MERVF MER PM Julian Roxas
SDIC Power Holdings XLGVF 600886 CH Angello Chan
Tata Power Company Ltd XNSGF TPWR IN Amish Shah, CFA

iQmethod SM Measures Definitions
Business Performance Numerator Denominator
Return On Capital Employed NOPAT = (EBIT + Interest Income) * (1 - Tax Rate) + Goodwill Amortization Total Assets – Current Liabilities + ST Debt + Accumulated Goodwill
Amortization
Return On Equity Net Income Shareholders’ Equity
Operating Margin Operating Profit Sales
Earnings Growth Expected 5-Year CAGR From Latest Actual N/A
Free Cash Flow Cash Flow From Operations – Total Capex N/A
Quality of Earnings
Cash Realization Ratio Cash Flow From Operations Net Income
Asset Replacement Ratio Capex Depreciation
Tax Rate Tax Charge Pre-Tax Income
Net Debt-To-Equity Ratio Net Debt = Total Debt, Less Cash & Equivalents Total Equity
Interest Cover EBIT Interest Expense
Valuation Toolkit
Price / Earnings Ratio Current Share Price Diluted Earnings Per Share (Basis As Specified)
Price / Book Value Current Share Price Shareholders’ Equity / Current Basic Shares
Dividend Yield Annualised Declared Cash Dividend Current Share Price
Free Cash Flow Yield Cash Flow From Operations – Total Capex Market Cap. = Current Share Price * Current Basic Shares
Enterprise Value / Sales EV = Current Share Price * Current Shares + Minority Equity + Net Debt + Sales
Other LT Liabilities
EV / EBITDA Enterprise Value Basic EBIT + Depreciation + Amortization
iQ method SMis the set of BofA Global Research standard measures that serve to maintain global consistency under three broad headings: Business Performance, Quality of Earnings, and validations. The key features of
iQmethod are: A consistently structured, detailed, and transparent methodology. Guidelines to maximize the effectiveness of the comparative valuation process, and to identify some common pitfalls.
iQ database ® is our real-time global research database that is sourced directly from our equity analysts’ earnings models and includes forecasted as well as historical data for income statements, balance sheets, and cash
flow statements for companies covered by BofA Global Research.
iQ profile SM, iQ method SM are service marks of Bank of America Corporation.iQ database ®is a registered service mark of Bank of America Corporation.

Disclosures
Important Disclosures
Xinyi Solar (XNYIF) Price Chart
The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key". Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey
shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of a date no more than one trading day prior to the date of the report.
FLAT Glass (FGSGF) Price Chart
The Investment Opinion System is contained at the end of the report under the heading "Fundamental Equity Opinion Key". Dark grey shading indicates the security is restricted with the opinion suspended. Medium grey
shading indicates the security is under review with the opinion withdrawn. Light grey shading indicates the security is not covered. Chart is current as of a date no more than one trading day prior to the date of the report.
Equity Investment Rating Distribution: Utilities Group (as of 30 Sep 2020)

Coverage Universe Count Percent Inv. Banking Relationships* Count Percent
Buy 79 51.63% Buy 59 74.68%
Hold 36 23.53% Hold 24 66.67%
Sell 38 24.84% Sell 25 65.79%
Equity Investment Rating Distribution: Global Group (as of 30 Sep 2020)
Coverage Universe Count Percent Inv. Banking Relationships* Count Percent
Buy 1749 54.79% Buy 1114 63.69%
Hold 677 21.21% Hold 415 61.30%
Sell 766 24.00% Sell 386 50.39%
* Issuers that were investment banking clients of BofA Securities or one of its affiliates within the past 12 months. For purposes of this Investment Rating Distribution, the coverage universe includes only stocks. A stock
rated Neutral is included as a Hold, and a stock rated Underperform is included as a Sell.

FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential
price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst’s assessment of a stock’s: (i) absolute total return potential and (ii)
attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total
return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than
Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12
month total return expectation for a stock and the firm’s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be
referenced to better understand the total return expectation at any given time. The price objective reflects the analyst’s view of the potential price appreciation (depreciation).
Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster*
Buy ≥ 10% ≤ 70%
Neutral ≥ 0% ≤ 30%
Underperform N/A ≥ 20%
* Ratings dispersions may vary from time to time where BofA Global Research believes it better reflects the investment prospects of stocks in a Coverage Cluster.
INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays
no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock’s
coverage cluster is included in the most recent BofA Global Research report referencing the stock.
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In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale: FLAT Glass, Xinyi Solar.
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2020-21 EPS & PO lifted; potential market

2 Xinyi Solar | 16 December 2020

New production capacity add advantage

Xinyi Solar | 16 December 2020 3

(RMB/m2) XYS ASP FLAT ASP

Source: Company data, BofA Global Research estimates

2030 RE capacity to exceed 1,200GW, vs 485GW at YE20

1. Have emissions peak by 2030;

2. Reach carbon neutral by 2060.

Can China achieve these targets

4 Xinyi Solar | 16 December 2020

China will reach its 2030 and 2060 goals by:

1. Improving energy consumption efficiency;

3. Reducing fossil fuel consumption;

Generation by fuel type (TWh)

Reducing reliance on coal

Fossil fuel substitution by renewable energy

Xinyi Solar | 16 December 2020 5

Efficient, less polluting SG producers to gain market share

SG shortage likely in NT, oversupply unlikely over the MT

Wind & solar power to gain substantial market share

6 Xinyi Solar | 16 December 2020

Coal USC Gas CC Utility PV Wind onshore Wind offshore

Source: BofA Global Research, Wood Mackenzie

Solar PV Wind power

Xinyi Solar | 16 December 2020 7

Previous year's capacity (GW) Annual addition (GW)

Chart 9: JinkoSolar’s history of world records of solar conversion efficiency

N-Type Mono Cell

14 FYP PV capacity add to far exceed 13 FYP; Buy XYS, FG

8 Xinyi Solar | 16 December 2020

Silicon material Silicon wafer Solar cell Solar module

Source: The Capital Group

SOEs & IPPs to lift investment in renewable energy sector

Xinyi Solar | 16 December 2020 9

Wind & solar could overtake gas & coal by 2024

14th FYP capacity add guidance lifted

10 Xinyi Solar | 16 December 2020

Finance sector to help fund RE add & carbon neutral plan

MoF to speed up review for RE project subsidy list

Rmb6bn MoF RE subsidy approved for ’21; more to come

Rmb140bn AR settlement being reviewed, potential upside

With significant CF improvement, WF, SF developers/operators can continue operation,

Xinyi Solar | 16 December 2020 11

Datang Renewable (DTR)

• DTR guided construction to be Rmb6,000-6,500/kW in north China, but Rmb6,500-

• Wind UH achieved 1,500hrs in 9M20, with curtailment ratio of 3.57%, -1.82ppt.

Xinyi Solar (XYS)

• Regarding the PRC government’s consultation paper on SG production capacity

12 Xinyi Solar | 16 December 2020

Flat Glass (FG)

• FG expects 150-160GW global demand in ’21. Demand will be mainly driven by

Xinyi Solar | 16 December 2020 13

• Silicon price rose to Rmb90,000-100,000/ton in ’20. Tongwei expects silicon price

• Module price rose from Rmb1.3-1.4/W in 1H20 to current Rmb1.6/W. If module

AECEA (global solar sector consultant)

• Global demand at 127-133GW in ’21. Estimate is conservative comparing to LONGi

14 Xinyi Solar | 16 December 2020

12 new UHV power lines to help lift UH & capacity add