Why was third-quarter profit well below expectations?

  • Flat Glass reported third-quarter EBITDA of 159 million yuan, down 29% quarter on quarter and 84% year on year, below the 505 million yuan expected by Goldman Sachs and the Visible Alpha consensus, mainly because the average selling price was lower than expected.
  • Revenue was 2.9 billion yuan, down 3% quarter on quarter and broadly in line with Goldman Sachs’s expectations. The bank estimates that shipments rose 5% quarter on quarter to approximately 300 million square meters, above its previous forecast of 275 million square meters; however, the average selling price fell 9% quarter on quarter to 9.2 yuan per square meter, also below its previous forecast of 10.5 yuan.
  • Goldman Sachs believes the lower selling price may be related to transactions being concentrated from July to early August, when glass prices were lower, as well as a narrowing overseas price premium. The third-quarter gross margin was 6%, an improvement of 3 percentage points quarter on quarter.

Why does Goldman Sachs expect glass prices to stabilize?

  • According to Longzhong Information, China’s glass spot price reached 10.5 yuan per square meter in October. Goldman Sachs expects prices to remain at this level, based on continued inventory drawdowns.
  • The bank notes that current monthly glass production corresponds to approximately 38 gigawatts, below China’s scheduled module production of 41 gigawatts in November. Glass supply is lagging behind module production plans, supporting inventory drawdowns and prices; photovoltaic demand and the pace of industry capacity cuts are key variables affecting this assessment.

How have earnings forecasts and valuation views changed?

  • Reflecting the impact of lower third-quarter selling prices, Goldman Sachs cut its 2026 EBITDA forecast by 7% and left its forecasts for 2027 through 2030 largely unchanged.
  • Goldman Sachs expects the company’s return on equity to recover from negative 6% in 2026 to 2% in 2027–2028 as the glass industry recovers and its cost structure improves.
  • Goldman Sachs believes a turning point in glass prices will support the current valuation. It maintains Neutral ratings on the A-shares and H-shares, with unchanged 12-month target prices of 8.3 yuan and 5.7 Hong Kong dollars, respectively.