- RE-ITERATE Buy Entry – 34 Target – 38 Stop Loss – 32
- 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.
- 1Q22 earnings review. Operating revenue grew by 14.75% YoY to RMB6.5bn. Net profit attributable to company shareholders grew by 1.86% YoY to RMB871.2mn. Three negatives resulted in mediocre results, including appreciation of RMB, high raw material costs, and high freight rates. The appreciation of RMB led to a decrease of RMB50.4mn in the gross profit. The high material costs and freight rates led to a decrease of RMB70.2mn and RMB53.1mn in total profit respectively. The company announced a final dividend of RMB10 (tax inclusive) (equivalent to HK$11.6) in cash per 10 shares.
- Headwinds are priced in. Rising covid cases and ensuing lockdowns of cities in China, rising materials costs resulting from Russia-Ukraine conflicts and ongoing supply chain disruptions have been factored in the previous sell-off. We believe the next catalysts such as lifting lockdown measures and reopening ports will provide a short-term relief rally as automobile sales are expected to rebound, and supply chain issues will be mitigated.
- Consensus estimates per the 12-month target price are at HK$43.97. EPS is forecasted to grow at 25.2%/22.0% for FY22F/23F, which would bring forward P/Es down to 19.3x/15.9x for FY22F/23F. The current PER is 24.3x.
(Source: Bloomberg)