Bank of America Securities released a research report stating that it reaffirms Fuyao Glass (03606)'s “buy” rating and is optimistic about the average price expansion and moderate sales growth of its products, as well as a resilient business model and industry leading position and market share. Fuyao Glass's revenue forecast for 2024 to 2026 was also raised by 4%, 5% and 6% to reflect higher automotive glass shipments; the net profit forecast was also raised by 9%, 11% and 11%, and the target price was raised from HK$45 to HK$52.
According to the report, the company's first-quarter results beat expectations and recorded revenue of 8.8 billion yuan, a year-on-year increase of 25%, but a quarterly decrease of 5%; sales volume and average product prices both increased during the quarter. The gross profit margin exceeded expectations by 36.8%, up 3.6 percentage points year on year, and increased 0.3 percentage points from quarter to quarter, mainly due to cost control and efficiency improvements; operational leverage; product portfolio optimization; increase in high value-added products; and falling natural gas prices. High-value-added products accounted for 55.2% of total sales, an increase of 4.4 percentage points over the previous year. Net profit was 1.4 billion yuan, up 52% year on year, but fell 8% from quarter to quarter. Management said it maintains a positive attitude towards the company's gross margin trend and expects a downward trend in raw material costs and transportation costs as the average price of products rises.