EBSCN·2025-12-12 11:36Investment Rating - The report maintains a "Buy" rating for the non-metallic building materials sector [6]. Core Insights - The glass industry is characterized by heavy asset attributes and continuous production, leading to rigid supply dynamics. The report highlights the structural differentiation between float glass and photovoltaic glass, indicating that the float glass sector is experiencing a downward cycle while photovoltaic glass is entering a growth phase [8][10]. Supply and Production Characteristics - The float glass production process is the mainstream method, accounting for 80%-90% of total production. The industry is heavily reliant on raw materials such as silica sand and soda ash, with fixed assets and construction in progress representing approximately 60% and 40% of total revenue for float and photovoltaic glass leaders, respectively [1][2]. - The glass production lines have a design lifespan of 8-10 years, necessitating continuous operation once ignited, which creates supply rigidity. The report notes that the supply side is influenced by policies that restrict new capacity and require capacity replacement [2][42]. Demand Analysis - Demand for float glass is primarily driven by the real estate sector and automotive industry, with real estate construction area being the leading factor. The report predicts a contraction in float glass demand over the next two to three years, although the decline will narrow [2][3]. - Photovoltaic glass demand is driven by the growth in photovoltaic installations and the penetration rate of double-glass modules, with expectations for continued growth in global and Chinese photovoltaic installations until 2030 [2][3]. Cost Structure and Profitability - The cost structure of the glass industry is dominated by raw materials and energy, accounting for over 80% of total costs. Float glass is sensitive to raw material prices, while photovoltaic glass is more sensitive to energy prices [3]. - The report indicates that the gross margin gap between leading and lagging companies in the float glass sector has widened from 14 percentage points to 20 percentage points from 2015 to 2024, reflecting increased profitability for leading firms [3]. Competitive Advantage Analysis - Scale advantages and vertical integration are key factors for leading companies to maintain low-cost advantages. The report highlights that leading firms like Xinyi Glass and Qibin Group have significantly outperformed their peers in revenue scale, further widening the gap [4]. - Leading companies are increasing their self-supply ratio of raw materials to reduce production costs, with Qibin Group's self-supply ratio of silica sand increasing from 48% in 2019 to 70% in 2024 [4]. Investment Recommendations - For the float glass sector, the report suggests focusing on leading companies such as Xinyi Glass and Qibin Group, as the trend of increasing concentration among leading firms is expected to continue [4][10]. - In the photovoltaic glass sector, the report anticipates a wave of small and medium-sized enterprises exiting the market, leading to increased concentration among leading firms like Xinyi Solar and Flat Glass [4][10].