We initiate coverage on Xinte Energy with a TP of HK$23.00 and an investment rating of "Accumulate". The TP corresponds to 2.1x/ 3.2x/ 6.0x 2022-2024 PER or 0.9x/ 0.7x/ 0.7x 2022-2024 PBR.
　　Global demand for solar materials will continue to surge. Newly installed solar capacity globally in 2030 is projected to reach between 1,500 GW-2,000 GW, which is to grow by at least 10-fold from the 168 GW installed in 2021.Approximately 0.35 million tons of polysilicon will be needed for every 100 GW of solar installations, thus the long-term demand for polysilicon remains quite strong. Only around 1.2 million tons of polysilicon production capacity will be in place in China at the end of 2022 before further climbing to around 2.2 million tons in 2023; the room for polysilicon market growth will be quite significant over the next few years.
　　Polysilicon sales volume set to grow at a 2021-2024 CAGR of 68.0%.Following the completion of the Inner Mongolia expansion and the Zhundong expansion, Xinte’s polysilicon capacity will surge from 100 kilotons in June 2022 to 200 kilotons in Dec. 2022 and further to 400 kilotons in Dec. 2024.Along with its capacity expansion, Xinte is well positioned to be the 3rd largest polysilicon maker in China with forecasted market share of 14.8% in 2024. Its polysilicon sales volume is set to rise from 74,669 tons in 2021 to 125.2 kilotons/ 246.0 kilotons/ 353.9 kilotons from 2022 to 2024, respectively, with a CAGR of 68.0% from 2021 to 2024. We expect polysilicon price to remain strong in the rest of 2022 and in most of 1H2023 before entering the price down cycle due to a sharp rise in polysilicon supply in the market from mid-2023 onwards.
　　Catalysts: Strong global investment in solar energy, slower-than-expected commissioning of new capacity in the industry.
　　Key risks: Oversupply of polysilicon will cause its price to plunge, around 3/4 of Xinte’s polysilicon capacity will be based in Xinjiang region by Dec.2024.