Investment highlight

For the first time, China Glass (03300) rated the outperforming industry with a target price of HK $4.30m, corresponding to 2021e/22e 7.4x5.1x PUBG E, for the following reasons: high float boom in the short and medium term, and continued high prices of float glass. In the short term: the gap in the peak season in the second half of the year is expected to widen, supporting prices to continue to rise. We are optimistic that the next weekyear is expected to release with the improvement of demand in the peak season, while the supply-side pressure is fully released as the photovoltaic backplane turns back, and with the increase in supply and demand, the gap between supply and demand is expected to widen, driving the price of float glass to continue to rise in the peak season. In the medium term: the demand is carefree + the cold repair peak continues, and the price is expected to remain high. On the demand side, we are optimistic that the new construction demand for 2017-20 will gradually be completed, driving the glass demand to remain strong in the next 2-3 years. On the supply side, while the new production capacity is strictly controlled by the policy, we observe that at the present stage, there are more than 100 + production lines in the industry operating for a long time, close to the cold repair node, and most of the production lines may roll into cold repair in the next 3-5 years, and the supply margin may still contract. We are optimistic that the glass industry is expected to be in an increasing trend of tight supply and demand for a long time, and the price center will remain high.

Both volume and price rose in the short term, and the capacity of long-term assets expanded. Short-term: we believe that with the company actively promoting the resumption of production of the original cold repair production line and the production line acquired since June, sales are expected to maintain a high growth this year and next year, fully enjoying the high profit flexibility of rising volume and price of float glass. Long-term: the company is located in China Building Materials float glass platform, the future is expected to copy the group cement development path, the continuous integration of glass assets, the scale of production capacity is expected to continue to increase.

With the reversal of the predicament, float Gaojingqi promotes high-quality development. We believe that a few years ago, because the glass price was low, and the company made weak profits due to relocation, cold repair and other reasons, at the present stage, under the support of the high prosperity of the industry, the company opened the "five-unified" strategy, and the group headquarters managed and refined various expenses uniformly. Through divestiture of non-profit assets, collection of raw materials, upstream and downstream extension to reduce costs, endorsement to reduce financing costs and other ways to increase efficiency, reduce costs, control fees We are optimistic that the company is expected to move towards the road of high-quality development in the long run, with broad room for improvement.

The biggest difference between us and the market we conduct a sensitivity analysis of the company's net profit and price-to-earnings ratio under different price and cost assumptions, and find that the company has a deep margin of safety. At the same time, we are optimistic that the company will reduce costs and increase efficiency, gradually reduce costs, highlight profitability, and the valuation is expected to return to normal levels.

Potential catalysts: float glass prices continue to be expected to rise; the company has made positive progress in reducing costs and increasing efficiency.

Profit forecast and valuation

We estimate that the EPS of the company in 2021-22 is 0.50 yuan and 0.72 yuan respectively. The current share price is 5.2x max 3.6% for 2021 / 2022, respectively. For the first time, we cover China Glass and give it an "outperform industry" rating, with a target price of HK $4.30, corresponding to 7.4x/5.1x P Bank E in 2021 / 2022, respectively, implying 42% upside space.

Risk

The demand for completion is lower than expected; the production capacity on the supply side is higher than expected; and the cost control fee is lower than expected.