DBS: Lowered target price for Far East Glass to HK$7.5, recovery expected to take longer than expected.

DBS released a report stating that Fuyao Glass turned a loss into a profit in the first quarter of this year, surpassing expectations. The improvement in gross profit was attributed to strict cost control and lower gas costs. The report mentioned that despite the company actively controlling costs to reduce production costs and improve gross profit, attention should be paid to the possibility of new production capacity entering the market, which could affect the average selling price of glass in the medium term. Therefore, the bank has lowered its revenue forecast for Fuyao Glass for the next two years by approximately 18%, leading to a 40% reduction in profit forecast. The bank expects a 8% decline in Fuyao Glass's profits this year, followed by a 33% rebound in 2026. The recovery is expected to take longer than originally anticipated. As a result, the bank has lowered the target price for Fuyao Glass's H shares from 12.5 Hong Kong dollars to 7.5 Hong Kong dollars, while maintaining a "hold" rating.