UBS Cuts FUYAO GLASS TP to HKD85, Expects 2Q26 Gross Margin Largely Flat YoY
I'm LongbridgeAI, I can summarize articles.UBS lowered FUYAO GLASS's target price to HKD85 from HKD93, maintaining a Buy rating. The cut reflects a 4%-5% reduction in 2026-2028 earnings forecasts due to weaker domestic passenger vehicle shipments and increased working capital needs. Despite expected gross margin stability and rising average selling prices driven by high-value products, UBS anticipates foreign exchange losses from RMB appreciation in Q2 2026. Operating performance is projected to improve progressively in H2 2026.
UBS published a report stating that although China's passenger vehicle sales continued to decline YoY in 2Q26, FUYAO GLASS (03606.HK) +1.850 (+3.689%) Short selling $40.28M; Ratio 35.350% 's existing domestic capacity utilization rate remained largely flat YoY and increased by 3-4 ppts QoQ, benefiting from the execution of new orders. The broker expected FUYAO's average selling price for automotive glass in 2Q26 to improve both YoY and QoQ, supported by optimized vehicle model mix and higher penetration of high value-added products, which continued to provide positive support to average selling prices.
Although the ramp-up of new capacity led to higher depreciation, amortization and labor costs, the broker expected gross margin in 2Q26 to remain largely flat YoY, considering stable natural gas procurement prices, limited impact from fluctuations in ocean freight rates, and higher gross margins from high value-added products. The broker expected resilient operating profit for FUYAO in 2Q26, benefiting from the company's proactive efforts to improve operational quality and efficiency. As the RMB continued to appreciate during 2Q26, FUYAO was expected to record foreign exchange losses, putting pressure on its reported earnings.
The broker expected FUYAO GLASS (03606.HK) +1.850 (+3.689%) Short selling $40.28M; Ratio 35.350% 's operating performance in 2H26 to improve progressively on a quarterly basis. On the demand side, the company indicated that domestic automotive OEMs had provided strong order guidance for 3Q26 due to robust export growth expectations, with domestic operations expected to recover. FUYAO also noted that sales volume in North America and Europe could maintain double-digit YoY growth, benefiting from deliveries of new orders. On the earnings side, the increase in average selling price of automotive glass for full-year 2026 was expected to exceed the company's initial guidance of 6%-7% YoY growth at the beginning of the year, mainly driven by a higher proportion of high value-added products.
UBS lowered its TP for FUYAO GLASS (03606.HK) +1.850 (+3.689%) Short selling $40.28M; Ratio 35.350% from HKD93 to HKD85, mainly reflecting a 4%-5% cut in its 2026-2028 earnings forecasts due to lower-than-expected domestic passenger vehicle shipments from 2Q26 onward and increased working capital investment. The broker maintained a Buy rating.(ha/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-07-02 16:25.)