2024 results are in line with market expectations

The company announced 2024 results: achieved revenue of 39.252 billion yuan in 2024, +18% year over year; net profit to mother was 7.498 billion yuan, +33% year over year. 4Q24 achieved revenue of 10.938 billion yuan, +17% YoY and +10% month-on-month; net profit to mother was 2.019 billion yuan, +34% YoY and +2%.

2024 results are in line with market expectations.

Development trends

Steady revenue growth, increased share of high value-added products, and global layout are the core driving forces. By business, automotive glass revenue in 2024 was 35.712 billion yuan (yoy +19.5%), float glass revenue was 5.961 billion yuan (yoy +4.4%), and high-value-added products (smart awnings, coated glass, etc.) accounted for +5.02pct to 59% year-on-year. Looking at the subregions, domestic revenue was +18.5% to 21.16 billion yuan, overseas market revenue was +18.7% to 17.56 billion yuan, and US factories contributed 6.31 billion yuan (yoy +15.3%). The revenue growth rate outperformed the industry, mainly due to 1) a further increase in global market share, and 2) ASP +7.5% year-on-year.

Accounting standards adjustments affected 4Q24 gross profit margins, and steady cash flow supported the expansion of production. Gross margin in 2024 was 36.2%, +0.8pct YoY. 4Q24 gross margin was 32.1%, -4.4pct year over year; -6.7pct month-on-month. The month-on-month decline in gross margin was mainly due to adjustments in accounting standards for packaging fees. After reducing packaging fees, the gross profit margin for the whole year was 37.63%, which achieved steady growth. Lean management drives the 2024 sales management and research expense ratio -1.7ppt to 14.6% year-on-year. Due to increased labor costs in US factories, 2H24's profitability declined, and net interest rates were -1.9pp/ -3.4ppt to 8% year-on-month, respectively. Looking ahead, as natural gas and ocean freight costs gradually fall and labor efficiency increases in North American factories, we expect there is still room for improvement in the company's profitability. In terms of cash flow, net operating cash flow for the whole year was +12.3% to 8.562 billion yuan, covering capital expenditure of 5.481 billion yuan (yoy +23.3%), and cash flow was abundant.

High dividends continue, overseas production expansion accelerates, and long-term competitiveness remains resilient. The company plans to pay out 1.8 yuan (tax included) per share, with a dividend rate of 62.65%. High dividends for many years have highlighted the quality of operations and shareholder returns. In terms of overseas production expansion, the company announced an increase of 0.4 billion US dollars in investment in the North American plant to increase production capacity for automotive glass and float glass. In addition, the Hungarian subsidiary landed in Eastern Europe to support European customers nearby and further improve the global production capacity network. We are optimistic that the company's global market share will increase and that its management will be resilient.

Profit forecasting and valuation

We slightly raised 2025 net profit by 2% to 8.73 billion yuan, and introduced 2026 net profit of 10.1 billion yuan for the first time. The current A share price corresponds to 18.1 times/15.6 times P/E in 2025/2026, and the H share price corresponds to 16.6 times/14.1 times P/E in 2025/2026. A-shares remain outperforming the industry rating and target price of 68.50 yuan, corresponding to 20.5 times the price-earnings ratio of 2025 and 17.7 times the price-earnings ratio of 2026, with 13.3% upside compared to the current stock price. H shares remain outperforming the industry rating and the target price of HK$66.50, corresponding to 18.7 times the 2025 price-earnings ratio and 15.9 times the 2026 price-earnings ratio, with 13.1% upside compared to the current stock price.

risks

The increase in raw material prices exceeded expectations, overseas automobile production fell short of expectations, and the increase in bicycle value fell short of expectations.