Fuyao Glass 1H25 Interim Results Review: Performance Exceeds Expectations with Continued Business Synergy Enhancement

Deep News
Aug 21

**1H25 Performance Surpasses Expectations:** Fuyao Glass achieved total operating revenue of RMB 21.45 billion in 1H25, representing a year-over-year increase of 16.9% (accounting for approximately 47% of full-year projections). Net profit attributable to shareholders reached RMB 4.81 billion, up 37.3% year-over-year (representing roughly 54% of annual forecasts). Specifically, 2Q25 operating revenue grew 21.4% year-over-year and 16.4% quarter-over-quarter to RMB 11.54 billion, while net profit attributable to shareholders increased 31.5% year-over-year and 36.7% quarter-over-quarter to RMB 2.78 billion.

**2Q25 Gross Margin Performance Outstanding, 2H25E Expected to Continue Improving:** In 1H25, automotive glass sales volume increased 9.3% year-over-year, with average selling prices rising 6.2% (high value-added products' proportion increased 4.8 percentage points year-over-year to 50.7%). Automotive glass revenue grew 16.2% year-over-year to RMB 19.5 billion, with domestic and overseas automotive glass revenue increasing 14.1% and 18.6% respectively year-over-year. The 1H25 gross margin decreased 0.2 percentage points year-over-year to 37.1%, while selling, general and R&D expense ratio declined 1.7 percentage points year-over-year to 14.2%. Notably, 2Q25 gross margin increased 0.8 percentage points year-over-year and 3.1 percentage points quarter-over-quarter to 38.5%, with the expense ratio decreasing 1.0 percentage point year-over-year and remaining flat quarter-over-quarter at 14.2%.

Analysis suggests that 1) 2Q25 gross margin improvements were primarily driven by cost reduction and efficiency enhancement, declining operating leverage, and falling natural gas and soda ash prices. For 2H25E, gross margins are expected to continue growing as the US factory's second phase ramps up (1H25 US factory operating profit margin already improved to 15.35%) and shipping costs decline.

**New Production Capacity Accelerating, Domestic and International Automotive Glass + Aluminum Trim Business Synergy:** The company invested RMB 2.86 billion in capital expenditures during 1H25, primarily for construction of the US factory's second phase and new facilities in Anhui and Fujian provinces. The US factory has begun ramping up production, while the Anhui and Fujian facilities are expected to accelerate completion within the year. The company has achieved synergy between domestic and international automotive glass and aluminum trim businesses: 1) In automotive glass, the company continues strengthening its OEM market share while accelerating expansion into the ARG market, consolidating its leading position; 2) For aluminum trim, domestic factory profitability has further improved while German FYSAM losses are expected to continue narrowing.

The company is positioned to continue achieving: 1) High dividends: Maintaining stable high dividend payout ratios since listing, with 1H25 interim dividend ratio at approximately 50%; 2) High growth: Benefiting from global capacity expansion and industry intelligence acceleration, the volume/price/profit growth logic is expected to continue. Volume: Competitor production pressures and the company's capacity advantages should drive steady increases in Fuyao's global market share; Price: Industry intelligence acceleration and new product categories like dimming sunroofs, AR-HUD, and in-vehicle connectivity will boost high value-added product revenue proportion and drive ASP increases; Profit: Cost control, scale effects, and lean operational management are expected to drive steady profit margin improvements.

The outlook remains positive for the company's scale effects, smart electrification driving business growth, and long-term synergies between automotive glass and aluminum trim businesses.

**Maintaining A-share "Buy" Rating and H-share "Buy" Rating:** Given the company's expected benefits from accelerating industry intelligence, net profit forecasts for 2025E/2026E/2027E have been raised by 15%/13%/14% to approximately RMB 10.14 billion/RMB 11.97 billion/RMB 13.94 billion respectively. A-share and H-share target prices have been increased to RMB 77.58 and HKD 84.97 respectively (corresponding to approximately 20x/20x 2025E PE), maintaining "Buy" ratings for both A-shares and H-shares.

**Risk Factors:** Downstream demand and capacity utilization ramp-up falling short of expectations; smart electrification progress and high value-added product application ratio increases below expectations; cost control underperforming expectations; gross margin ramp-up below expectations; continued drag from German SAM operations; global market share gains falling short of expectations; foreign exchange risks; market risks.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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