XINYI GLASS(00868) 第一上海证券·2024-08-09 08:31Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted to HKD 10.40, representing a potential upside of 35.1% from the current price of HKD 7.77 [2][4]. Core Insights - The company demonstrates strong profitability resilience despite a revenue decline, with a 6.4% year-on-year decrease in total revenue to HKD 11.81 billion in the first half of 2024, primarily due to falling float glass prices. However, the gross margin improved by 5.3 percentage points to 34.3%, benefiting from lower raw material and energy costs, as well as improved margins in the automotive glass segment. Net profit increased by 27.1% year-on-year to HKD 2.73 billion, driven by significantly reduced financial expenses and contributions from joint ventures [2]. - The company has effectively controlled costs and diversified its product offerings. Revenue from float glass, automotive glass, and construction glass was HKD 6.98 billion, HKD 3.26 billion, and HKD 1.56 billion respectively, with year-on-year changes of -12.9%, +8.9%, and -2.8%. The decline in float glass revenue is attributed to weak domestic real estate performance, with a nearly 22% year-on-year drop in completed area. Despite this, profitability remained stable due to lower prices of soda ash and natural gas, with gross margins rising to 28.4%, 49.6%, and 28.5% for float glass, automotive glass, and construction glass respectively [2]. - The float glass price is nearing its low point from the first half of 2020, with current industry production capacity close to 170,000 tons per day and inventory levels at historical highs. The oversupply situation has led to a continued decline in prices, now around HKD 1,400 per ton, putting pressure on the profitability of secondary enterprises. An acceleration in industry maintenance and potential capacity reductions are anticipated [2]. - The report projects revenue for 2024-2026 at HKD 24.0 billion, HKD 24.1 billion, and HKD 25.8 billion, with net profit estimates of HKD 5.4 billion, HKD 5.5 billion, and HKD 6.5 billion respectively. The target price corresponds to forecasted P/E ratios of 8.0, 7.8, and 6.8 for 2024-2026 [2]. Financial Summary - For 2024, the company is expected to generate revenue of HKD 23.95 billion, a decrease of 10.6% from 2023, with net profit projected at HKD 5.38 billion, reflecting a slight increase from the previous year. The earnings per share (EPS) is forecasted to remain stable at HKD 1.29 [5][6]. - The gross margin is expected to stabilize around 33.3% for 2024, with an EBITDA margin of 29.2% and a net margin of 22.5% [6]. - The company’s total assets are projected to grow from HKD 50.81 billion in 2023 to HKD 52.97 billion in 2024, while total liabilities are expected to decrease from HKD 14.95 billion to HKD 14.36 billion over the same period [6].