BOC International maintains its "Buy" rating on Fuyao Glass (03606.HK) while elevating the price target from HK$65 to HK$72. This adjustment, based on 20 times projected 2025 P/E, reflects confidence in the auto glass manufacturer's upcoming second-quarter performance potentially reversing its year-to-date stock underperformance.

The investment bank forecasts Q2 revenue growth of 13-14% year-over-year, reaching RMB10.7-10.8 billion. This surge stems primarily from accelerated domestic automotive glass sales, anticipated to exceed 15% expansion, complemented by steady overseas market gains.

Margin improvements appear imminent. Gross profit margins are projected to climb over one percentage point beyond Q1's 35.4% level. Driving this enhancement are three key factors: greater economies of scale, reduced OEM rebate pressures, and declining raw material costs—particularly soda ash—alongside lower freight expenses.

A significant tailwind emerges from currency movements. The euro's appreciation against the yuan is expected to generate over RMB300 million in foreign exchange gains. Combined with operational efficiencies, this positions Fuyao for a potential record quarterly net profit between RMB2.5-2.6 billion.

Overseas operations show promising momentum. In the United States, Phase I facilities benefit from heightened capacity utilization and operational refinement, while Phase II operations reduce losses. Consequently, Q2 operating margins should surpass Q1 levels. Full-year projections indicate 5.1 million automotive glass set shipments with operating margins exceeding the 13% annual target. European subsidiary SAM simultaneously narrows its operating loss, improving from Q1's €2.9 million deficit toward breakeven objectives.

While maintaining revenue forecasts, BOC International boosts 2025-2026 net profit projections by 5-11% to RMB8.8-9.2 billion. This revision factors in better-than-expected cost reductions, additional forex benefits, and enhanced overseas profitability.

Fuyao's strategic positioning distinguishes it within China's auto parts sector. Through flexible overseas capacity deployment and export channels—particularly its decade-long US manufacturing buildup—the company demonstrates superior operational resilience and risk mitigation capabilities amid current geopolitical tensions.