UOB Kay Hian
Date of Report: Thursday, 21 August 2025

Fuyao Glass Industry Group Delivers Robust 2Q25 Results: Earnings Surge Spurs Target Price Upgrade and Bullish Outlook

Overview: Strong Growth Momentum for Fuyao Glass Industry Group

Fuyao Glass Industry Group (HKEX: 3606 HK), a leading manufacturer and distributor of automotive and industrial glassware, continues its impressive growth trajectory with a robust beat in its 2Q25 core earnings. UOB Kay Hian maintains a BUY rating and raises the target price to HK$85.00, reflecting a potential 25.9% upside from the last close. The report underscores the company’s accelerating top-line growth, superior margin expansion, and operational excellence, positioning Fuyao Glass as a top pick among industrial stocks.

Key Stock Data and Shareholder Structure

2Q25 Results: Earnings and Margins Surge Past Expectations

Fuyao Glass’s 2Q25 net profit came in at RMB 2,775 million, up 31.5% year-on-year and 36.7% quarter-on-quarter. This result brought 1H25 net profit to RMB 4,805 million, representing a 37.3% year-on-year increase. The stellar performance was driven by both higher revenue and improved margins.

Detailed Earnings Highlights

• Revenue Drivers: Automotive glass sales revenue rose 16.2% year-on-year to RMB 19.54 billion in 1H25, propelled by 9.3% sales volume growth and a 6.2% average selling price (ASP) increase. High value-added products now account for 50.7% of revenue, up 4.8 percentage points year-on-year.
• Margin Expansion: Gross margin shot up to 38.5% in 2Q25, driven by lower input costs (notably natural gas and soda ash) and improved operational efficiency. EBIT margin expanded to 24.4%.
• Cash Generation: Operating cash flow outpaced net profit due to effective working capital management, including a significant drawdown of inventories and receivables. Free cash flow was robust, even with increased capex.
• Dividend Resumption: An interim dividend of RMB 0.90/share was declared for 1H25 (48.9% payout ratio), marking the first interim dividend since 2018.
• Segment Performance: Fuyao Glass US posted an EBIT margin of 15.35% in 1H25 (up from 13.1% in 2024) on 18% revenue growth. The German subsidiary, FYSAM Auto Decorative, narrowed its net loss by 80% year-on-year.

Growth Catalysts: Electrification, Intelligentization, and Market Share Gains

Industry Tailwinds: The push toward vehicle electrification and intelligentization is amplifying demand for high value-added glass products such as smart windshields, HUD windshields, sunroofs, laminated, and electrochromic glass.
Market Share Gains: Fuyao Glass continues to win share from peers in the US, Europe, and Japan, benefiting from superior operational efficiency and capitalizing on challenges faced by competitors.
Capacity Expansion: New production lines for laminated and coated glass in the US are ramping up. Two new Chinese plants in Anhui and Fuqing (3 million sets per annum each) are expected to start operations earlier than projected, by November 2025.

Upgraded Outlook and Financial Forecasts

UOB Kay Hian has revised its 2025-2027 net profit forecasts upward by 15%, 14%, and 17% respectively, now expecting a 20% CAGR. These estimates are 14%-11% above consensus, driven by higher sales volume and margin assumptions.

Guidance and Forecast Revisions

Sales Volume Growth: Upgraded to 9% for 2025, 7% for 2026 and 2027, reflecting strong 1H25 sales and rapid ramp-up of new plants.
ASP Growth: Maintained at 6% annually, supported by a rising share of high-end, value-added products.
Gross Margin: Assumptions lifted to 37.9% (2025), 38.5% (2026/2027), up from previous 36.2%, underpinned by lower costs and operational efficiencies.
Earnings Estimates: Now 14% to 11% above consensus for 2025-2027.

Valuation, Recommendation, and Risks

The target price is raised from HK$68.00 to HK$85.00, reflecting an 18x target P/E (aligned with the five-year historical forward mean), rolling valuations to 2026, and higher EPS estimates. The recommendation remains a strong BUY.

Conclusion: Fuyao Glass Industry Group Positioned for Sustained Outperformance

Fuyao Glass’s outperformance in 2Q25, supported by surging sales, improving margins, and robust cash generation, underlines its status as a sector leader. The company is riding structural trends in vehicle electrification and intelligentization, benefiting from market share gains and operational excellence. With an upgraded target price and strong forecast revisions, Fuyao Glass is well positioned to deliver continued value for shareholders.

Appendix: Key Financial Metrics