- RE-ITERATE Buy Entry – 40.5 Target – 45.0 Stop Loss – 38.2
- 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.
- Automobile production to accelerate from June onwards. Previously, the authority announced an auto purchase tax cut, and major cities started to ease the lockdown measures. The expected improving demand for automobiles will drive producers to accelerate production as supply chain disruptions mitigate. The global EV leader, Tesla planned to manufacture more than 71,000 units of both Model 3 and Model Y in June. Due to Shanghai’s lockdown from March to May, Tesla’s Shanghai factory halted production for three weeks, and its daily production was 1,000 units in 2HApril. Therefore, Tesla has boosted its capacity utilization rate to 100% since the lockdown measures were lifted. Auto part manufacturers are expected to benefit from the turnaround of the sales and production of the sector.
- Consensus estimates per the 12-month target price are at HK$45.45. EPS is forecasted to grow at 26.1%/24.4% for FY22F/23F, which would bring forward P/Es down to 22.9x/18.4x for FY22F/23F. The current PER is 28.9x.
(Source: Bloomberg)