Maintain an “Overweight” rating. Xinyi Glass released its 2023 annual report, achieving revenue of HK$26.8 billion, +4.1% year over year, and net profit to mother of HK$5.37 billion, +4.6% year over year, in line with expectations. The company's net profit for 2024-26 is expected to be HK$63, 68, 7.2 billion. According to comparable company estimates, the 24-year PE is 7 times higher, and the target price is HK$10.45.
Float glass production and sales restoration, leading the industry in profit. For the full year of 2023, the company's float glass revenue was HK$17.5 billion, and gross profit of HK$4.6 billion was HK$4.6 billion, or +4.7% year-on-year, corresponding to a gross profit margin of 26.5%. 23H2 was driven by the immediate handover of the building, inventory in the float glass industry fell and prices increased, and the company's float glass profit recovered month-on-month. We calculated that 23H2 had a gross float margin of over 30%, and continued to lead the way in profit. In terms of production capacity, the company launched merger and acquisition lines in Yingkou and Chongqing in '23, while the Jiangmen renovation line and overseas Indonesian production lines will continue to contribute to the increase in 24-25. The company is still the only company in the industry with an increase in production capacity.
The gross margin of Auto Glass was basically stable, and the profit from construction glass revenue rebounded month-on-month. In 2023, the company's automotive glass revenue was HK$5.98 billion, with a gross profit margin of 47.9%, and -2.4 pct. It was mainly affected by high inflation and exchange rate fluctuations. Considering the company's strong ability to bargain in the aftermarket for automotive glass, and the company's simultaneous support in Malaysia, Indonesia and floats to build automotive glass processing lines to withstand shipping and tariff fluctuations, we judge that future automotive glass will continue to be a stabilizer of the company's profits. In 2023, the company's construction glass revenue was HK$3.35 billion, with a gross profit margin of 33.4% (23H1 gross profit margin of 33.1%). Against the backdrop of generally high repayment pressure on real estate terminals, the company achieved a month-on-month improvement in construction glass revenue/gross profit, indicating that the ability of large manufacturers to accept orders and small processing plants is gradually diverging.
Shareholders continue to increase their holdings, dividends remain high, and dividend ratio advantages are prominent. Since the second half of '23, the company's core management and shareholders have continued to increase their holdings. At the same time, the company maintained a dividend ratio of 49%, corresponding to profit dividend rates of 8% and 9% for 23 and 24, respectively.
Risk warning: Housing completion falls short of expectations, and the increase in raw fuel prices exceeds expectations