Citigroup: Lowers Fuyao Glass (03606) H-share target price to HK$66 to maintain “buy” rating and downgraded profit forecast for 2026 to 2028

The Zhitong Finance App learned that Citi released a research report stating that it has lowered the target price of Fuyao Glass (03606) H shares from HK$81 to HK$66, and the target price for A shares (600660.SH) from RMB 79 to RMB 63, maintaining a “buy” rating. After attending the company's analyst meeting for the third quarter of 2026, the bank lowered the 2026-2028 revenue forecast by 5% to 12%, and the net profit forecast by 17% to 20%, to 8.033 billion yuan, 9.784 billion yuan and 11.293 billion yuan to reflect weak global automobile production and continued high freight costs. The bank expects the company's profit to grow at a compound annual rate of 19% from 2026 to 2028. H shares and A shares are valued at 1 times and 1.1 times price-earnings growth rates, respectively.

According to the report, Fuyao Glass's revenue share of high-value-added products in the first three quarters of this year reached 59.95%, up 7 percentage points year on year, driving the average sales price to increase 6.39% year on year; after excluding US tariff refunds in the second quarter, the average sales price increased 7.18% year on year; after excluding exchange losses, the average sales price increased 8.1% year on year. The proportion of dimming glass, soundproof glass and head-up display glass increased by 3.69, 1.85 and 1.17 percentage points, respectively, to 6.2%, 7.85% and 12.32% during the period.

Citi pointed out that Fuyao Glass's third-quarter results were dragged down by one-time projects, including a 0.8 percentage point drop in gross margin due to an increase in shipping costs, 78 million yuan of quality compensation included in sales expenses, and a total of 14.3 million US dollars in fire costs, which had a negative impact on net profit of about 150 million yuan, and some losses can be recovered through insurance.

Management expects the operating profit margin of the US business to increase by about 1 percentage point each in 2026 and 2027, and reaffirms the goal of a compound annual growth rate of 6% to 7% in average sales prices over the next ten years.

Looking ahead to the fourth quarter, Citi expects Fuyao Glass's net profit to be roughly the same as RMB 2,027 billion and core net profit of RMB 2.28 billion, down 5% from quarter to quarter; it also conservatively assumes that gross margin for the fourth quarter will be 36.7%, down 1.3 percentage points from quarter to quarter, while also assuming exchange losses of around RMB 293 million for the fourth quarter.