XINYI GLASS(00868) 华泰证券·2024-08-02 03:03Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 11.57, reflecting a 13.5% decrease from the previous target price [3][10]. Core Views - The company reported a net profit of HKD 2.73 billion for 1H24, representing a year-on-year increase of 27.1%, exceeding consensus expectations by 11.7%. This growth was driven by a significant reduction in costs, which fell by 13.4% year-on-year, outpacing a 6.4% decline in revenue [3][4]. - Despite the strong performance in the first half of 2024, the company is expected to face challenges in profitability in the second half due to declining float glass prices and ongoing supply-demand imbalances [3][5]. - The company has optimized its product mix, with high-margin automotive glass revenue increasing its share to 27.6%, while float glass revenue decreased to 59.2% [4][6]. Summary by Sections Financial Performance - The company achieved a net profit of HKD 2.73 billion in 1H24, up 27.1% year-on-year, with costs down 13.4% and revenues down 6.4% [3]. - The revenue from float glass fell by 12.9% to HKD 6.99 billion, while automotive glass revenue rose by 8.9% to HKD 3.26 billion [4]. - The gross margin for float glass was 28.4%, reflecting a year-on-year increase of 6.8 percentage points [4]. Market Conditions - The average price of float glass has decreased by 25.5% since the beginning of 2024, with high inventory levels and weak orders from downstream processing companies contributing to ongoing price pressures [5]. - The report anticipates continued competitive pressures in the float glass market into 2H24, with prices expected to remain under pressure until significant capacity exits occur [5][6]. Valuation and Outlook - The company is currently trading at a price-to-book ratio of 0.9x, which is 10.7% lower than the previous cycle's bottom, indicating a favorable valuation [6]. - Despite anticipated challenges in profitability for 2H24, the report suggests that the company's valuation remains attractive due to its superior profitability compared to peers and the cyclical nature of the current industry challenges [6].