J.P. Morgan: Fuyao Glass - Management Sees Positive Order Momentum in 2Q26
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Fuyao Glass reported first-quarter 2026 results that fell below J.P. Morgan's expectations, with volumes declining 3.7% year-on-year and net profit impacted by foreign exchange losses. Despite this shortfall, management provided an encouraging forward outlook. They guided to positive order momentum for the second quarter, expecting sequential and year-on-year growth. The continuous penetration of high-value-add products remains the core structural driver, supporting a long-term average selling price (ASP) compound annual growth rate target of 6-7%. In 1Q26, ASP increased by 11% year-on-year.
High-value-add products accounted for 57.6% of total sales, up 7.61 percentage points year-on-year. Key growth contributors included panoramic sunroofs, HUD glass, acoustic glass, and dimming glass. The dimming glass segment is successfully expanding from luxury vehicles into the RMB 300,000-400,000 price band.
US operations demonstrated notable resilience, posting an operating margin of 12.7% in 1Q26, with full-year margins expected to remain stable or slightly improve compared to FY25's 13.3%. J.P. Morgan adjusted its 2026 earnings estimate downward by 5% due to the soft first quarter but maintains that current valuations are reasonable. The firm reiterated a Neutral rating on both share classes. Target prices are set at RMB 62.00 for the A-shares and HKD 68.00 for the H-shares, based on December 2026 estimates.