Foster’s third-quarter volumes and prices under pressure; full-year guidance cut, but Goldman Sachs remains optimistic about a profit recovery
Growth in photovoltaic film shipments fell short of the company’s previous guidance, while prices fell more than Goldman Sachs expected, weighing on third-quarter earnings. Management lowered its 2026 targets and expects shipments and margins in its two main businesses to improve in 2027.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Foster’s near-term earnings are being weighed down by weaker photovoltaic film volumes and prices, but Goldman Sachs believes industry capacity exits and growth in the electronic materials business could support a profit recovery, and therefore maintains its Buy rating.
Why did third-quarter results fall short of Goldman Sachs’ expectations?
Foster’s EBITDA for the third quarter of 2026 was 510 million yuan, down 25% quarter on quarter and up 121% year on year, but 27% below Goldman Sachs’ previous forecast of 699 million yuan. The main reason was that both photovoltaic film shipments and prices fell short of the bank’s expectations.
Film shipments rose 13% quarter on quarter to 640 million square metres, below management’s previous guidance of 30% growth; prices fell 14% quarter on quarter to 5.2 yuan per square metre, a larger decline than the 10% Goldman Sachs had expected.
Changes in volumes and prices compressed unit profits: net profit per square metre of film fell from 0.7 yuan in the second quarter to 0.4 yuan in the third. The company’s third-quarter net profit was 289 million yuan, below Goldman Sachs’ previous forecast of 472 million yuan.
How much was full-year guidance cut, and what will drive improvement next year?
Amid weak demand in China, management lowered its 2026 photovoltaic film shipment guidance from flat year on year to a decline of 10%, and its gross margin guidance from about 20% to 15%. This year, the company shifted its priority to protecting profitability rather than pursuing shipment volumes.
Management expects film shipments to grow 10%–20% year on year in 2027, with margins improving. This is based on a higher share of overseas business and emerging encapsulation technologies driving sustained gross margin expansion from 2027 onward.
How much support can the dry film business provide?
Third-quarter dry film (DRF) shipments rose 5% quarter on quarter to 60 million square metres, with a gross margin of about 30%, below the second quarter’s 33%. Intensifying price competition in low-end consumer electronics prevented the improved share of high-end products from driving a significant quarter-on-quarter increase in overall selling prices and gross margin.
Management therefore lowered its 2026 dry film gross margin guidance from 30%–35% to about 30%. For 2027, the company expects shipments to grow 30% year on year and margins to improve; capacity utilisation in September had already exceeded 90%, and management expects the successful ramp-up of 2.1 million square metres of new capacity to drive sales volume and profit growth.
Why does Goldman Sachs maintain its Buy rating after cutting earnings forecasts?
Goldman Sachs believes the film industry’s relatively steep cost curve and the early exit of marginal capacity favour an earlier earnings inflection point for Foster; the structurally growing electronic materials business could also cushion pressure on the photovoltaic business.
Reflecting the lowered unit profit and shipment guidance, Goldman Sachs cut its 2026–2030 EBITDA forecasts by an average of 18% and lowered its 12-month target price from 21 yuan to 18.2 yuan, while maintaining its Buy rating. The target price is based on 17 times forecast 2027 EV/EBITDA, discounted to 2026 at a cost of equity of 10.7%.
