Hangzhou First (603806.SS): 4Q25 Miss on Higher Costs; Unit Profitability Expansion to Drive Valuation Re-rating, Reiterate Buy
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Goldman Sachs reiterates a Buy rating on Hangzhou First, lowering the 12-month target price from RMB 21 to RMB 20, based on 13x 2027E EV/EBITDA discounted to 2026 (10.5% cost of equity). Hangzhou First's 4Q25 EBITDA of RMB 313 million missed both Goldman Sachs' estimate of RMB 700 million and the Visible Alpha consensus of RMB 600 million. This shortfall was primarily driven by weaker-than-expected unit profitability in the solar film segment, which reached RMB 0.1/sqm versus an estimated RMB 0.4/sqm. This miss stemmed from a 1% sequential increase in unit costs, diverging from a 5% decline in resin costs due to timing gaps between procurement and shipment, alongside changes in resin usage.
Looking ahead to 2026, management expects solar film shipments to remain flat year-over-year. However, unit profitability is anticipated to expand, supported by rising global energy prices. Management has already fully passed on resin cost increases through three price hikes in March. For the DFR film business, shipments are projected to grow over 30% year-over-year. The target ASP has been raised from RMB 3.6/sqm in 2025 to RMB 4.0/sqm, with gross margin targets increasing from 24% to a range of 25% to 30%.
To reflect the slower DFR shipments in 2025, Goldman Sachs trimmed the 2026-2030 EBITDA forecasts by an average of 4%. As the world's largest solar film producer with over 50% market share, the company is well-positioned to benefit from a steepening cost curve and marginal capacity exits. Structural growth in electrical films provides a buffer against solar industry headwinds.