Date of Report

October 21, 2024

Broker Name

UOB Kay Hian

Company Overview

Fuyao Glass Industry Group (FYG) manufactures and distributes automobile glass, decorated glassware, and other industrial glassware. The company sells its products to automakers in China, North America, Europe, and other countries.

Stock Data

• Share Price: HK$56.60
• Target Price: HK$68.00
• Upside Potential: 20.1%
• GICS Sector: Industrial
• Bloomberg Ticker: 3606 HK
• Shares Issued: 607 million
• Market Cap: HK$34,342 million (US$4,431 million)
• 3-Month Average Daily Turnover: US$19.1 million
• 52-Week High/Low: HK$58.45/HK$33.70

Recent Performance

3Q24 Results

• Core Net Profit: Rmb1,980 million (+53.5% YoY, -6.2% QoQ)
• Revenue: Rmb9,974 million (+13.4% YoY, +4.9% QoQ)
• Gross Profit: Rmb3,868 million (+21.1% YoY, +7.9% QoQ)
• Gross Margin: 38.8% (up 2.5 ppt YoY, 1.1 ppt QoQ)
• Net Profit (Adjusted): Rmb2,098 million (+36.8% YoY, +5.7% QoQ)
• Operating Cash Flow: Rmb2,959 million (+27.3% YoY)

Financial Highlights

Yearly Comparisons (Rmb million)

• 2024 Forecasted Net Profit: Rmb7,532 million (+33.8% YoY)
• 2023 Actual Net Profit: Rmb5,629 million
• 2022 Actual Net Profit: Rmb4,756 million

Key Drivers of Growth

• Market Share: Fuyao Glass has been gaining market share, particularly in overseas markets, for both new automotive glass and aftermarket replacement glass.
• Sales Volume Growth: Sales volume increased by 10.6%, significantly outpacing global automobile production volume growth.
• High-Value Products: The proportion of high-value-added products in total revenue increased to 58.18% in 9M24.

Stock Impact and Outlook

• Earnings Forecasts: The broker maintains net profit forecasts for 2024-26 at Rmb7,532 million, Rmb8,854 million, and Rmb9,921 million, respectively.
• Price Guidance: The average selling price (ASP) for automotive glass is expected to increase driven by a rising share of high-value-added products.

Valuation

• Target Price: HK$68.00, based on a target price-to-earnings (PE) ratio of 18x for 2025, aligning with the five-year historical mean one-year forward PE.