"Large Banks" Research: XINYI GLASS's automotive glass business supports valuation steadily, raising target price to 9.8 yuan

HSBC Global Research published a report indicating that XINYI GLASS (00868.HK) announced its performance for the fiscal year 2025, with a profit of RMB 2.73 billion, a year-on-year decrease of 19%, which was in line with expectations. The main reasons were the continuous decline in the area of completed real estate projects in China, a decrease in float glass prices leading to reduced revenue, and decreased profits from joint ventures such as XINYI SOLAR (00968.HK). However, the new production capacity has led to sales growth, with the automotive glass business maintaining strong performance, achieving a year-on-year revenue increase of 8.8%. Due to cost reductions in energy and soda ash prices, the profitability of this business continues to expand.

The research expects that XINYI GLASS's profits will stabilize in 2026, with float glass prices expected to remain low in the short term, and limited downside potential supported by costs. Although there is an expectation of "supply-side optimization" in the market under the trend of "anti-involution," weak demand continues to limit price rebounds.

In terms of costs, the firm expects soda ash prices to remain low due to ample supply but weak demand. Natural gas prices in China are expected to remain stable, but ongoing conflicts in the Middle East may pose upward risks and lead to more reconstruction needs for the group's production line investments in Saudi Arabia. Overall, HSBC Global Research anticipates weak prices but lower costs.

Given XINYI GLASS's cost advantages and product differentiation, the research expects the group's performance to outperform its peers, while the continuously growing automotive glass business should help limit stock price declines. The target price has been raised from HKD 7.7 to HKD 9.8; considering the structurally robust profitability of the group, a "Hold" rating is maintained.

HSBC Global Research has also lowered its profit forecast for XINYI GLASS in 2026 by 4%, but maintained its profit forecast for 2027. At the same time, it has introduced a profit forecast for 2028, expecting profits to grow by 11% year-on-year driven by the automotive glass business