Core Viewpoint - Xinyi Glass reported a decline in revenue and net profit for 1H25, primarily due to weak demand in the float glass and architectural glass sectors, although automotive glass earnings showed resilience [1][2]. Financial Performance - Revenue for 1H25 decreased by 9.7% YoY to Rmb9.8 billion, with net profit attributable to shareholders falling 59.6% YoY to Rmb1 billion [1]. - Automotive glass revenue increased by 10.6% YoY to Rmb3.3 billion, with gross margin rising by 5.0 percentage points YoY to 54.5% [2]. - Float glass revenue dropped by 16.4% YoY to Rmb5.4 billion, with the industry average selling price (ASP) declining by 28% YoY to Rmb1,329 per ton [3]. Cost and Expenses - The firm's expense ratio increased by 2.4 percentage points YoY to 18.6%, with selling expenses rising by 1.6 percentage points YoY to 6.7%, attributed to higher US import tariffs [4]. - The effective tax rate rose by 5-6 percentage points YoY, linked to a decrease in earnings from associates [4]. Capital Expenditure and Dividends - Capital expenditure fell by 81% YoY to Rmb1 billion, primarily for investments in new industrial parks in China and Indonesia [5]. - An interim dividend of HK$0.125 per share was proposed, with a payout ratio of approximately 49% and a dividend yield of 3.3% [5]. Industry Outlook - The float glass industry is expected to adjust supply through cold repairs, with potential cost increases for highly polluting fuels possibly improving earnings [5]. - The company's focus on deep engagement in the automotive glass aftermarket and expansion into the OEM segment may provide stability to overall earnings [5]. Financial Forecasts - The 2025 EPS forecast was cut by 21% to Rmb0.52, while the 2026 EPS forecast remains at Rmb0.68, reflecting pressures on the float glass business [5]. - The target price is maintained at HK$8.5, implying a 15x 2025e and 11x 2026e P/E ratio, with a 5% upside potential [5].

Summary of Conference Call on Float Glass Industry Industry Overview - **Industry**: Float Glass - **Region**: Greater China Materials, Asia Pacific Key Takeaways 1. **Price Movement**: Float glass prices have increased due to improved market sentiment, with future prices rising from Rmb980/ton in early July to Rmb1307/ton as of July 24, 2025, driven by expectations of anti-involution actions [11][1][2] 2. **Inventory Changes**: Total inventory at future-spot traders rose from 0.7 million weight cases in late May to 2.16 million weight cases currently, while traditional float glass inventory decreased from 60.6 million weight cases in mid-June to 53 million weight cases [11][1][2] 3. **Market Dynamics**: Despite the price increase, demand remains muted, with order days from processing plants at a multi-year low of 9.3 days, indicating a mismatch between supply and demand [2][3][1] 4. **Profit Margins**: The slight recovery in spot glass prices has led to a marginal improvement in margins for glass producers, although fundamental pressures persist due to high supply levels [1][2][3] Company-Specific Insights 1. **Major Players**: Companies such as Xinyi Glass and Zhuzhou Kibing Group are expected to face earnings pressure due to the ongoing supply-demand mismatch and potential downside in float glass prices [2][1] 2. **Maintenance Impact**: Improved profits have led to the postponement of maintenance plans for some production lines, which could further exacerbate supply issues [2][1] Risks and Considerations 1. **Downside Risks**: The industry faces risks from weaker-than-expected demand in the property segment, potential sharp decreases in float glass prices, and margin squeezes from rising costs of natural gas and soda [19][1] 2. **Upside Risks**: Potential improvements in downstream demand, particularly from the property and automotive markets, could positively impact the industry [16][1] Conclusion - The float glass industry is currently experiencing a complex interplay of rising prices driven by sentiment and inventory dynamics, against a backdrop of muted demand and fundamental pressures. Major producers are likely to face challenges in maintaining profitability amidst these conditions.

Investment Rating - The industry view for China Materials is rated as Attractive [6] Core Insights - Cement is preferred due to supply discipline, price coordination, lower costs, and no impact from trade wars. The building materials sector is recovering from improved secondary property sales [1][2] - The cement industry is experiencing margin expansion and has formed new alliances to focus on profit rather than volume. A 5-10% year-over-year decline in demand is expected, but margin recovery is anticipated due to lower coal prices and effective supply control measures [2][3] - Late-cycle building materials are recovering, supported by better secondary home sales and government initiatives. However, demand remains soft due to declining property starts and completions [3] - The float glass segment is facing weak fundamentals, with low demand from property developers and high supply levels continuing to pressure earnings [4] Summary by Sections Cement - Major cement players have agreed to prioritize profit over market share, leading to a healthier price recovery despite weak property demand. The industry is expected to see a margin recovery due to lower coal prices and effective supply control policies [2] - Top producers like Conch, CNBM, and CR Cement are likely to benefit from new supply control measures aimed at reducing overproduction [2] Building Materials - The late-cycle building materials sector is expected to see mild growth in new infrastructure and industrial investments, with demand improving from better secondary home sales and government programs [3] - Companies such as Yuhong, Weixing, and Lesso are identified as potential beneficiaries of this recovery [3] Float Glass - The float glass market is currently weak, with low order days at processing plants and high supply levels continuing to exert pressure on earnings [4] Price Targets and Ratings - Price targets for key companies include Anhui Conch (A) at RMB 37.40 with a 47% upside, Anhui Conch (H) at HKD 29.80 with a 35% upside, and China Resources Building Materials at HKD 2.30 with a 39% upside [7][11] - Ratings for companies in the cement sector are predominantly Overweight (OW), while Xinyi Glass and Zhuzhou Kibing Glass are rated Underweight (UW) due to weak fundamentals [11][12]