Investment Summary
Q3 Results Exceed Expectations According to Q3 report of Fuyao Glass, during the first three quarters, the Company recorded operating revenue of RMB13.78 billion, down by 11.9% yoy. Net profit attributable to the parent company was RMB1.72 billion, down by 26.6% yoy. The operating revenue of Q3 was RMB5.66 billion, up by 5.8% yoy. Net profit attributable to the parent company was RMB760 million, down by 9.8% yoy. The foreign exchange loss in the first three quarters was RMB180 million, and the profit in the same period of last year was RMB254 million. The foreign exchange loss in Q3 was RMB310 million (the profit in the same period of last year was RMB220 million). Excluding the impact of foreign exchange, the Company’s actual profit in Q3 increased by 56.7% yoy, better than the market expectation, and the results in the first three quarters only decreased by 0.4%. Significant Increase of Gross Margin and Well-established Leading Position Thanks to reduction of SAM losses, improvement of capacity utilization, rising price of float glass and reduction of external sales, as well as improvement of product mix, the Company’s gross margin in Q3 increased significantly by 4.1% yoy and 4.3% qoq, respectively, to 41.4%, which is the highest single quarter since 2019. At the same time, the Company strengthened expense control while maintained R&D input, with the sales expense rate of 6.9% (-0.1pct yoy), the administration expense ratio of 9.4% (-0.4pct yoy) and the R&D expense ratio of 4.1% (+0.5pct yoy). Due to the fact that the foreign exchange loss increased by RMB530 million yoy, the financial expense ratio was 5.4% (+8.7pct yoy). During the first three quarters, the decline of the Company’s domestic automotive glass revenue was better than the industry, reflecting the increase of the Company’s domestic market share. The overseas epidemic has caused the competitors to suffer more severely, and the Company is expected to take advantage of the resumption of production to expand its overseas market share, and further strengthen its position as a global glass leader. The upgrade path of the Company’s products is quite clear. During the first three quarters, the share of high value-added products, such as insulation, head-up display and switchable glass, increased by approximately 2.6 ppts compared with the same period last year. As HUD glass and awning glass are leading the trend of automobile specification improvement, the product mix and market coverage of the intelligent glass application company will usher in a broader development space and promote the sustainable growth of subsequent result. Overseas Business Bottomed Out and Interior Business Is About To Make Profit The two major overseas businesses of Fuyao Glass have improved significantly. The US factory made a turnaround in Q3 with a profit of USD13.7 million, and its profitability is expected to increase further in Q4. The German SAM factory reduced its losses, with losses of EUR12.22 million in Q1, EUR13.95 million in Q2 and EUR5.7 million in Q3, respectively. The factory is expected to be close to break-even, when its losses fell sharply qoq in Q3. The matching value of single vehicle is 2-3 times that of automotive glass. We believe that SAM acquired by the Company in 2019 will have great performance flexibility in the future after one and a half years of integration.
Important Information
This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.
By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.
The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.
This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.
Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.
Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.
To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.
The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.
This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.
IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE
Where the report contains research analyses or reports from a foreign research house, please note:
Bachelor Degree in Tongji University of Engineering; Master Degree in East China Normal University of finance. Currently covering the automobile and air sectors. She has years of experience in investment research and is good at combining analysis for the companies with industry prospects.
