Fuyao Glass (3606.HK) Overseas segment Partly Makes up for the Negative Impact of Domestic Downturn June 17, 2019

PSR Recommendation: BUY Status: Maintained
Target Price: HKDHKD27.30

Investment Summary
The Company Has High Growth + High Dividend in 2018 and Steady Growth in the First
Quarter of 2019
Fuyao Glass recorded a revenue of RMB20.23 billion in 2018, increasing by 8.1% yoy. The net
profit attributable to the parent company was RMB41.2 billion, up by 30.9% yoy, with net
profit attributable excluding non-recurring items reached RMB3.47 billion, a year-on-year
increase of 14.4%. The EPS was RMB1.64. The dividend per share was RMB0.75. Plus the
medium-term dividend of RMB0.4, the dividend payout ratio was 70%.
In the first quarter 2019 results report, the revenue of Fuyao Glass reached RMB4.93 billion
in 19Q1, a slight increase of 3.9% yoy, and the net profit attributable to the parent company
was RMB610 million, up by 7.7% yoy. The net profit attributable to the parent company
excluding non-recurring items was RMB520 million, down by 13.2% yoy.
Fuyao Glass`s brilliant profit performance in 2018 is mainly due to the boost from exchange
gains and one-time gains from asset disposal. Benefiting from the devaluation of the RMB,
the Company recorded exchange gains of RMB260 million in the whole year, compared with
exchange losses of RMB390 million in the same period last year. The company sold 75% of
Beijing Futong`s equity, and recorded an investment income of RMB664 million. If such
impact is excluded, the company`s revenue was barely equal, outperforming the clearly
declining industry average.
Q1 of 2019 saw an exchange loss of RMB130 million due to the appreciation of Renminbi,
which was RMB90 million less than the same period of last year. We expected that with the
depreciation of Renminbi, exchange loss would be significantly narrowed or even converted
into exchange gain.

About the author

Profile photo of Zhang Jing

Zhang Jing
Phillip Securities (HK)

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.

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