Xinyi to expand solar farm operations to ~200MW

That's over the next 12-18 months.

According to Citi Research, it forecasts Xinyi Solar to expand solar farm operations from 35MW to ~200MW over the next 12-18 months, as it utilizes experience from Golden Sun installs. XYS will construct and may operate parts of the projects.

Here's more

We forecast only construction profits, with revenue from engineering, procurement, and construction (EPC) of HK$2.5bn by 2015E, or 44% of total sales.

Rising demand for distributed solar — We initiate Xinyi Solar (XYS) with a Buy and a sum-of-parts TP of HK$2.65 (22x 15E earnings) as we expect an earnings spike in coming years driven by higher glass capacity and new solar farms.

Margins are high relative to peers, as XYS maintains its manufacturing cost advantages. Solar farms will account for 41% and 44% of pretax profits in 2014/15E, on our forecasts, as China becomes the largest end-demand market for solar projects.

Higher shipments, stable prices — XYS’ glass segment will benefit from higher volume shipments in solar modules, in our view. After a price trough in 2013, we expect ASP to be flattish and processed glass shipments to rise 24% in 2014E, as supply is tight and end-demand is rising in China and Japan.

On our forecasts, global solar end-demand will be 20% higher Y/Y in 2014, reaching over 42GW, which should allow componentsuppliers to benefit from more favorable pricing.