A slow but steady recovery

  • Buy Entry – 49.5 Target – 57.9 Stop Loss – 45.5
  • Fuyao Glass Industry Group Co Ltd is a China-based company, principally engaged in the manufacture and distribution of float glasses and automobile glasses. The Company’s products portfolio consist of automobile glasses, such as coating glasses and others, which are applied in passenger cars, buses, limousines and others, and float glasses. The Company distributes its products within domestic markets and to overseas markets.
  • Impacted by shortage of automobile chips, the automobile production recovery has slowed down even as demand for passenger vehicles is rising.  Automobile glass is one of the parts in a vehicle, and hence, its sales are highly correlated to the auto production volume. 
  • As the automobile sector started to recover, the price performance of this counter is relatively lagging. The production issues of the auto sector will be mitigated in 2H21, which will favor the turnaround of the stock. 
  • Key financials highlight:
(RMB mn)1Q211Q10YoY change
Gross profit2,316.41,436.661.2%
GPM (%)36.834.42.4 ppt
Net profit850.5451.088.6%
NPM (%)14.910.84.1 ppt
  • Updated market consensus of the estimated growth of net profit in FY21 and FY22 are 51.9% and 22.2% respectively, which translates to 26.4x and 21.6x forward PE. The current PE is 40.3x. Bloomberg consensus average 12-month target price is HK$52.86.
3606 HK (Source: Bloomberg)