The hottest Guohao capital reaffirms the buy ratin

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Guohao capital: reiterated the "buy" rating of Xinyi Glass

in response to the expectation of rising glass prices, reiterated the buy rating of Xinyi Glass (868)

Xinyi Glass (868, $5.47) has risen by 8% so far this month, and its performance in the same period is better than that of the Hang Seng Index by 9%. Because construction activities will restart in March, the market has strong expectations of rising glass prices. Comment: the bank still believes that Xinyi Glass is one of the main beneficiaries of China's urbanization in the next few years. The company has four main products. Automotive glass (accounting for 32% of the turnover in the first half of 2012) is a relatively stable business, because in the case of the global economic slowdown, the replacement demand for automotive glass remains unabated. In addition, the performance of architectural glass (accounting for% of the turnover of two new dental 3D printing resin materials launched in the first half of 2012) is also satisfactory, because the sales of energy-saving Low-E glass is still strong, and according to the management, the orders of Low-E glass have also been scheduled to the middle of 2013. However, the sales price and gross profit margin of float glass (accounting for 36% of the turnover in the first half of 2012) and solar glass (accounting for 17% of the turnover in the first half of 2012) were severely hit from the second half of 2011 to the first half of 2012 due to the economic slowdown. The bank believes that these two businesses have weathered the worst environment. Among them, the demand for float glass began to increase in the second half of last year, and the gross profit margin gradually rose from 4% in the first half of 2012, as outlined by the American Society for testing and material, to double digits in the second half of 2012. In addition, the gross profit margin of solar glass (20% in the first half of 2012) has also stabilized

as the demand for glass lags behind the construction of new houses (various normative characteristics need to be tested before the application of many materials, because glass is only used in the later stage of construction), and many fine float glass manufacturers are closed due to poor profitability, the bank believes that the fundamentals of float glass will be significantly improved in 2013. At the same time, China announced earlier that the new installed capacity target of photovoltaic power generation in 2013 was 10million kW, much higher than the original market estimate of 6-8million kW. The bank believes that this news is also beneficial to Xinyi Glass, because the company's solar glass is mainly used on the panels of solar modules. According to the market consensus, the company's earnings in 2012 and 2013 will be 1.17 billion yuan (earnings per share 0.307 yuan) and 1.72 billion yuan (earnings per share 0.439 yuan), respectively, that is, the earnings per share in 2012 will decline by 16% year-on-year, while the earnings per share in 2013 will increase by 43% year-on-year. The current price is equivalent to 12.5 times the 2013 P/E ratio. The bank believes that based on the improved prospects of float glass and solar glass, the valuation is not expensive. Reiterated the buy rating, the six-month target price remains unchanged at 5.95 yuan, equivalent to 13.5 times 2013 P/E

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China glass () Department

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