Comments:

Flat glass overcapacity, photovoltaic solar industry has been hit hard, profits have fallen sharply. The macro-control effect of the real estate industry is becoming more and more obvious, the downstream demand is shrinking, the price of flat panel products is declining; the growth of the automobile industry is slowing, the demand for automotive glass products is falling, and the price is falling; the "European debt crisis" has led to a decline in the market demand for photovoltaic solar products. As a result, the company's profits have fallen sharply this year.

Float glass projects have been put into production one after another, the sales revenue of sub-products has increased significantly, and the lower price of float glass products has led to a decline in operating profit margins. Affected by the national real estate regulation policy and the "European debt crisis", the company's sales revenue of processed glass declined, the price of the original glass fell and the company took measures to reduce costs, which increased the gross profit margin of processed glass. Classified by domestic and foreign business, export business decreased by 34.68%. The rate of expenses for the three items was 17.76%, an increase of 1.65 percentage points over the same period last year. Among them, the sales expense rate increased by 0.92 percentage points and the financial expense rate increased by 0.62 percentage points.

Take a two-pronged approach to actively deal with the difficult 2012-optimizing product structure and controlling costs. In the face of the national regulation and control of the real estate industry, the real estate recovery in Europe and the United States has just begun, and the shrinking market and industry overcapacity make the downward pressure on glass prices still exist. On the one hand, the company emphasizes the core position of technology research and development in the development, takes the market as the orientation, develops and implements projects with high added value, establishes a performance appraisal system and relevant incentive system with EVA as the core index, controls risks and increases the utilization rate of funds; on the other hand, it sets up the consciousness of cost control, does a good job in various expense budgets, maintains sensitivity and control over all kinds of business risks, and improves the company's profitability.

We estimate that the company's EPS in 2012 and 2013 will be 0.20 yuan and 0.4 yuan respectively, corresponding to the current stock price PE of 42 and 20.5, giving the company a "neutral" rating.