The Zhitong Finance App learned that Huatai Securities released a research report saying that maintaining the “buy” rating of Xinyi Glass (00868), the company achieved net profit of 5.37 billion yuan in 2023, +4.6% year on year; 2H23 achieved net profit to mother of 3.22 billion yuan, +77%/+50% month-on-month. The accelerated expansion of gross margin of the float glass business was the main reason for 2H23's significant profit improvement. The bank expects the float glass industry to face more challenges on both supply and demand sides in 2024. The company's gross margin is under contraction pressure. It will reduce the 2024-25 EPS by 23%/28% to HK$1.34/1.36, forecast the 2026 EPS to HK$1.42, and reduce the target price by 14.8% to HK$13.38. The bank believes that since July 1, 2023, the company's stock price has fallen 34%, behind HSCEI by about 22%, which already reflects expectations that the industry's supply and demand challenges will gradually intensify.

The report mentioned that after enjoying marginal recovery, the bank expects the supply and demand relationship of float glass to face quite a few challenges in 2024. The bank expects that the incremental demand for newly built commercial housing in 2024 (demand brought about by new projects under normal construction schedule) and the marginal acceleration of stock projects (release of backlog demand due to previous construction being slower than normal) may face downward pressure. Meanwhile, the gradual improvement in profits in 2023 has also brought about rapid supply growth. By the end of February, the industry's production capacity had reached 177,000 tons/day, which is at a high level in the same period in recent years. The speed at which projects such as real estate sales, urban villages, and guaranteed housing are progressing is the most important variable on the demand side.