Fuyao Glass's 2Q26 order momentum turns positive, with high-value-add products continuing to support ASP growth

Overview

This report is J.P. Morgan's company research and earnings review following Fuyao Glass's 1Q26 earnings call. The report notes that although 1Q26 volume and net profit were below JPMe expectations, management remains positive on 2Q26 order trends, high-value-add product penetration, and full-year industry demand. J.P. Morgan lowers its 2026E earnings forecast by 5% but maintains a Neutral rating on both Fuyao Glass A-shares and H-shares.

Core views

The core view is that Fuyao Glass's leading global position in automotive glass, EV and ADAS penetration, functional glass upgrades, and changes in the competitive landscape in Europe and the U.S. continue to support its medium- to long-term market share and ASP improvement; however, slower near-term industry growth, price rebates, depreciation and amortization, export tax rebate changes, and slower-than-expected ramp-up in aluminum trim limit valuation upside. The report therefore presents the judgment of 'improving operating momentum but a neutral investment rating.'

Analysis framework

The report is primarily based on 1Q26 results, the management earnings call, J.P. Morgan forecasts, company data, Bloomberg, IHS Automotive, and cost and freight indicators. It focuses on breaking down the contribution of volume, ASP, and product mix to revenue growth, while also assessing the impact of U.S. plants, FYSAM, raw materials, natural gas, and ocean freight costs on margins.

Methodology notes

• Valuation methodsP/E valuation

  Target price is based on a 2026E P/E multiple

  The Dec-26 A-share target price of Rmb62 is based on 15x 2026E P/E. The target multiple is below the historical average because industry growth has slowed relative to the company's earlier development stage.

• Operating analysisVolume-ASP-product mix breakdown

  Use changes in volume, price/ASP, and high-value-add product mix to explain revenue performance

  1Q26 volume declined 3.7% YoY, but ASP rose 11.01% YoY, while the share of high-value-add products increased by about 7.6ppt, making these the key variables explaining why revenue outperformed the industry.

• Industry cycleAuto production and export tracking

  Use global and China auto production and China's auto exports as the basis for demand-side judgment

  Management maintains its view of 1-2% full-year growth for the global auto industry and about 3% for China, and believes China's full-year auto export target of 9mn units is achievable.

• Cost analysisTracking raw materials, energy, and ocean freight prices

  Track the impact of soda ash, float glass, natural gas, ocean freight, and aluminum prices on margins

  Lower soda ash prices remain a cost tailwind for the full year, natural gas is mostly locked in through long-term contracts and is relatively stable, but periodic rises in ocean freight and aluminum prices may create cost volatility.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Fuyao Glass A-shares 600660.SS

  Core covered asset

  Strengths

  Leading global position in automotive glass, accelerating penetration of high-value-add products, strong ASP growth, potential for rising market share in the U.S. and Europe, and margin support from lower soda ash costs.

  Weaknesses

  1Q26 volume declined YoY, net profit was affected by FX losses, industry growth is not fast, and valuation is considered reasonable.

  Comparison

  Compared with European peers, Fuyao Glass benefits from China's more stable and more cost-competitive energy and manufacturing environment; compared with smaller competitors, the company is stronger in scale, customer base, and functional glass capabilities.

  Risks

  Auto glass sales coming in below expectations, pricing pressure higher than expected, FYSAM operating performance below expectations, rising depreciation and amortization, and a cut in export VAT rebates.

• Fuyao Glass H-shares 3606.HK

  H-share covered asset of the same company

  Strengths

  Shares the same company fundamentals as the A-shares and benefits from higher global automotive glass market share and high-value-add product upgrades.

  Weaknesses

  Also constrained by industry growth, sales rebates, and margin pressure.

  Comparison

  The report assigns an H-share target price of HK$68.00 versus the current price of HK$63.35, implying higher upside than the A-shares.

  Risks

  Same as for the A-shares, including automotive glass demand, price competition, FYSAM improvement progress, and overseas cost volatility.

Key data

• Report date2026-04-23Price data is as of 2026-04-22.
• A-share current price and target priceRmb60.39; target price Rmb62.00Implies about 2.7% upside; rating maintained at Neutral.
• H-share current price and target priceHK$63.35; target price HK$68.00The report also covers Fuyao Glass H-shares.
• 1Q26 auto glass revenueRMB9.65bn, up 6.9% YoYDomestic revenue grew 3.17% YoY, while overseas revenue grew 11.23% YoY.
• 1Q26 volume and ASPVolume YoY -3.7%; ASP YoY +11.01%ASP growth offset pressure from industry production and company volume.
• Share of high-value-add products57.57% to 57.6%, up about 7.6ppt YoYManagement maintains long-term ASP CAGR guidance of 6-7%.
• Main high-value-add productsPanoramic fixed roof 14.32%, HUD glass 12.53%, acoustic glass 7.86%, dimmable glass 1.56%These were up about 2.91, 1.94, 2.21, and 1.29ppt YoY, respectively.
• Core margin20.93%, up 49bps YoYPBT excluding FX losses was RMB2.467bn, up 9.63% YoY.
• Gross margin37.38%, up 198bps YoYLower soda ash prices and product mix improvement provided support.
• U.S. business operating margin12.74% in 1Q26Expected to remain broadly stable for the full year or slightly better than FY25's 13.27%.
• Sales rebate guidanceAbout 2% for FY26Higher than FY25's 1.61% and 1Q26's 1.17%, reflecting industry pricing pressure.
• Medium-term target for aluminum trimRMB5bn revenue in about 5 yearsNew orders exceeded RMB4bn in FY25, but 1Q26 domestic revenue was basically flat, below the previous 25% growth guidance.
• Earnings forecast revision2026E earnings cut by 5%Rating unchanged, mainly because valuation is considered reasonable.

Impact & implications

The report's investment implication is fairly balanced: operationally, Fuyao Glass continues to benefit from higher glass value per vehicle driven by EVs, ADAS, and smart features, while penetration of high-value-add products is expected to support sustainable ASP growth; competitively, China's manufacturing and cost environment remains more advantageous than that of European peers, continuing to support project wins and export opportunities in Europe and the U.S.; in valuation terms, upside is limited after the recent share price rebound, so J.P. Morgan maintains Neutral rather than upgrading the rating.

Risks

• Auto glass volume or sales revenue may come in above or below expectations.
• Industry pricing pressure and sales rebates may be higher or lower than expected.
• Improvement, restructuring, and breakeven progress at FYSAM's aluminum trim business may fall short of expectations.
• Depreciation and amortization from new capacity may come in higher than expected.
• A reduction in export VAT rebates may create margin pressure.
• Recovery progress at the second U.S. plant, insurance compensation, or operating stability may fall short of expectations.
• Cost volatility in ocean freight, natural gas, aluminum prices, and other inputs may pressure margins.
• Global or China auto production growth may come in below management guidance.

What to watch

• Whether 2Q26 orders continue to improve both YoY and QoQ.
• Whether the share of high-value-add products can continue to rise and validate the long-term ASP CAGR guidance of 6-7%.
• Whether dimmable glass can expand from luxury models further down into the above-RMB200k price band.
• Whether FY26 sales rebates can be kept at around 2%.
• Whether the U.S. business can maintain a full-year operating margin that is stable or slightly better than FY25.
• Whether the second U.S. plant can fully resume production as planned in early August.
• Whether FYSAM and the domestic aluminum trim business can achieve FY26 breakeven and revenue recovery.
• Cost trends in soda ash, natural gas, ocean freight, and aluminum prices.
• Whether China's full-year auto export target of 9mn units is achieved.