Flat Glass Group (6865.HK / 601865.SH): Resilience Amidst Cyclical Headwinds – Margin Expansion and Overseas Growth Drive Value

Date: March 27, 2025
Ticker: 6865.HK / 601865.SH
Sector: Renewable Energy / Photovoltaic Materials
Analyst: Institutional Research Team
Current Price: CNY 15.40
Rating: BUY
Target Price Implied Upside: Significant upside based on 2026-2028 earnings recovery trajectory.

Executive Summary

Flat Glass Group Co., Ltd. ("Flat Glass" or the "Company"), a global leader in photovoltaic (PV) glass manufacturing, released its full-year 2025 financial results on March 26, 2025. The report reveals a company navigating a challenging industry landscape with strategic agility. While top-line revenue contracted due to broader sectoral supply-demand imbalances and proactive capacity optimization, the Company demonstrated remarkable resilience in profitability, particularly in the fourth quarter (Q4).

Key highlights from the 2025 Annual Report include:
* Financial Performance: Full-year 2025 revenue stood at CNY 15.57 billion, a year-over-year (YoY) decline of 16.68%. Net profit attributable to shareholders reached CNY 981 million, down 2.59% YoY. However, Q4 2025 marked a significant turning point, with net profit reaching CNY 343 million, achieving a year-on-year turnaround from losses and demonstrating sequential stability despite a seasonal revenue dip.
* Margin Expansion: The most critical positive signal is the substantial improvement in gross margins. Full-year PV glass gross margin improved by 0.47 percentage points (pct) to 16.11%. More notably, Q4 2025 sales gross margin surged to 24.27%, representing a dramatic YoY increase of 21.4 pct and a sequential rise of 7.5 pct. This expansion was driven by lower raw material costs, operational efficiency gains, and a favorable shift in product pricing dynamics towards quarter-end.
* Strategic Capacity Management: In response to industry-wide oversupply, the Company proactively cold-repaired three kilns (totaling 3,000 tons/day capacity), reducing operating capacity to 16,400 tons/day by year-end. This disciplined approach to supply-side management helped stabilize prices and protect margins, albeit at the cost of an 8% decline in sales volume to 1.162 billion square meters.
* Overseas Growth Engine: The Company’s international strategy continues to yield superior returns. Overseas revenue share increased by 9.7 pct to 34.7% in 2025. Given that overseas gross margins (24.26%) significantly outperformed domestic margins (11.79%), this geographic mix shift was a primary driver of overall profitability preservation during a period of intense domestic competition.
* Robust Cash Flow: Despite profit pressures, operating cash flow remained strong at CNY 2.91 billion, underscoring the Company’s robust working capital management and earnings quality.

Investment Thesis:
We maintain a BUY rating on Flat Glass Group. The market has likely over-penalized the stock for the top-line contraction, underappreciating the structural improvements in unit economics and the successful pivot towards higher-margin overseas markets. As the PV glass industry undergoes necessary consolidation and capacity clearing, Flat Glass’s cost leadership, technological moat, and global footprint position it to capture disproportionate value in the subsequent upcycle. Our revised earnings forecasts project a robust recovery in net profit to CNY 1.2 billion in 2026, CNY 1.8 billion in 2027, and CNY 2.7 billion in 2028, implying attractive valuation multiples of 30x, 20x, and 14x P/E respectively for the forward years.

Key Takeaways

1. Financial Performance Analysis: Navigating the Downcycle with Discipline

The 2025 fiscal year was characterized by a stark divergence between revenue trends and profitability metrics, reflecting the complex dynamics of the PV glass sector.

1.1 Revenue Contraction Reflects Industry-Wide Supply Glut

In 2025, Flat Glass reported total operating revenue of CNY 15.57 billion, representing a 16.68% YoY decline. This contraction was primarily attributable to two factors:
1. Price Erosion: The PV glass industry faced severe supply-demand mismatches throughout 2025. Aggressive capacity expansions by competitors in prior years led to inventory build-ups, forcing prices down across the board.
2. Proactive Volume Reduction: To mitigate price collapses and optimize its asset base, Flat Glass voluntarily reduced output by cold-repairing three production lines. Consequently, PV glass sales volume decreased by 8% YoY to 1.162 billion square meters.

While the revenue decline appears concerning on the surface, it is crucial to contextualize this within the industry framework. The Company’s revenue decline (-16.68%) was less severe than the potential price declines might suggest, indicating that the volume reduction was managed strategically to support price floors rather than being a result of lost market share due to competitiveness issues.

Quarterly Breakdown:
* Q4 2025 Revenue: CNY 3.10 billion.
* YoY Change: -23.92%
* QoQ Change: -34.35%
The sequential drop in Q4 revenue is typical for the solar industry, which often sees front-loaded installations in Q3 followed by a seasonal slowdown in Q4 due to weather conditions and year-end budget cycles. However, the YoY decline reflects the cumulative impact of lower average selling prices (ASPs) compared to the same period in the previous year.

1.2 Profitability Resilience and Q4 Turnaround

Despite the top-line pressure, the Company’s bottom line demonstrated remarkable stability and eventual improvement.
* Full Year 2025 Net Profit: CNY 981 million, a modest 2.59% YoY decline. This minimal drop in profit relative to the double-digit revenue decline highlights the effectiveness of cost control measures.
* Q4 2025 Net Profit: CNY 343 million.
* Performance: Achieved a YoY turnaround from loss to profit.
* Sequential Trend: An 8.88% QoQ decline, which is consistent with the seasonal revenue dip but still maintains a healthy absolute profit level.

The ability to return to profitability in Q4, a traditionally weaker quarter, signals that the worst of the margin compression may have passed. The inflection point in quarterly profits suggests that the combination of lower input costs and stabilized output prices is beginning to flow through to the net income line.

1.3 Gross Margin Expansion: The Core Investment Driver

The most compelling aspect of the 2025 report is the trajectory of gross margins, which serves as a proxy for the Company’s competitive advantage and operational efficiency.

*Note: 2024 PV Glass margin derived from 2025 reported margin minus the 0.47 pct improvement.

Drivers of Margin Improvement:
1. Raw Material Cost Deflation: The costs of key inputs, such as soda ash and natural gas, declined during 2025. As a large-scale purchaser, Flat Glass benefits from economies of scale and long-term contracts that allow it to capture these cost savings more effectively than smaller peers.
2. Operational Efficiency (Ti-Zhi-Zeng-Xiao): The Company’s ongoing initiatives to improve quality and reduce waste have lowered the unit cost of production. This includes advancements in thinning technology and yield rate improvements.
3. Product Mix Shift: The significant increase in overseas sales, which command higher prices and margins, structurally lifted the blended gross margin.
4. Price Stabilization in Q4: The report notes a sequential improvement in glass prices in Q4. After months of aggressive price wars, the market began to stabilize as high-cost producers exited or reduced output, allowing leaders like Flat Glass to regain some pricing power.

The Q4 gross margin of 24.27% is particularly noteworthy. It not only represents a massive recovery from the depressed levels seen in earlier quarters but also exceeds the full-year average by a wide margin. This suggests that the current run-rate profitability is significantly higher than the annualized figure implies, providing a strong base for earnings growth in 2026.

2. Operational Analysis: Strategic Capacity Optimization and Global Expansion

2.1 Supply-Side Discipline: Cold Repairs as a Strategic Tool

The PV glass industry in 2025 was plagued by excess capacity. Many manufacturers continued to run lines at full utilization to spread fixed costs, exacerbating the supply glut and driving prices below cash cost for some players.

Flat Glass adopted a contrarian and disciplined approach by initiating cold repairs on three kilns, removing 3,000 tons/day of capacity from the market. By year-end 2025, the Company’s operating capacity was reduced to 16,400 tons/day.

Strategic Rationale:
* Price Support: By reducing supply, Flat Glass helped alleviate downward pressure on prices. This is a classic oligopolistic behavior where market leaders coordinate (implicitly or explicitly) to stabilize the market.
* Asset Health: Cold repairs are necessary for maintaining the long-term efficiency and safety of furnace operations. Timing these repairs during a downturn minimizes the opportunity cost of lost production.
* Competitive Positioning: While smaller players may struggle to afford the downtime or lack the financial buffer to withstand lower volumes, Flat Glass’s strong balance sheet allows it to optimize its asset base without jeopardizing liquidity.

This move underscores management’s commitment to profit over volume. In a commodity-like business, being the lowest-cost producer is vital, but being the most disciplined supplier is equally important for sustaining returns on invested capital (ROIC).

2.2 Overseas Expansion: The High-Margin Growth Engine

The globalization of Flat Glass’s sales network has emerged as a critical hedge against domestic competition.

• Overseas Revenue Share: Increased to 34.7% in 2025, up from 25.0% in the previous year (implied by the 9.7 pct increase).
• Margin Differential:
  • Domestic Gross Margin: 11.79%
  • Overseas Gross Margin: 24.26%

The overseas margin is more than double the domestic margin. This disparity arises from several factors:
1. Higher ASPs: International markets, particularly in Europe and emerging solar hubs, often have less intense competition and higher willingness to pay for premium, reliable supply.
2. Trade Barriers: Anti-dumping duties and trade restrictions in various regions can limit supply from Chinese competitors, creating localized scarcity that benefits established players with overseas distribution networks or production bases.
3. Value-Added Services: Overseas customers often require more comprehensive technical support and logistics solutions, allowing Flat Glass to bundle services and command higher prices.

Implication: As the Company continues to expand its international footprint, the blended gross margin will structurally re-rate higher. We expect the overseas revenue share to continue growing, potentially reaching 40-50% in the medium term, which would act as a powerful lever for earnings expansion even if domestic volumes remain flat.

2.3 Cash Flow Strength and Asset Impairment

Operating Cash Flow (OCF):
The Company generated CNY 2.91 billion in net operating cash flow in 2025. This robust cash generation is a testament to:
* Strong collection of receivables.
* Efficient inventory management (inventory days remained stable around 48.9 days).
* Ability to maintain positive cash conversion cycles despite lower profits.

Asset Impairment:
The Company recorded CNY 202 million in asset impairment provisions in 2025:
* Fixed Assets: CNY 119 million, primarily related to the cold-repaired production lines. This is a non-cash charge that reflects the write-down of assets taken offline. While it impacts net income, it does not affect cash flow and clears the balance sheet of underperforming assets, setting the stage for cleaner earnings in future periods.
* Inventory Write-downs: CNY 79 million, reflecting the lower of cost or market adjustments for finished goods held during the price downturn.
* Long-term Equity Investment: CNY 4.5 million.

These impairments are largely "kitchen-sinking" items that clean up the balance sheet. Investors should view them as one-off adjustments rather than recurring operational issues. The fact that impairments were contained to CNY 202 million despite significant price volatility indicates prudent inventory and asset management.

3. Industry Context: PV Glass Sector Dynamics

To fully appreciate Flat Glass’s performance, one must understand the broader industry backdrop.

3.1 Supply-Demand Imbalance

The PV glass sector experienced a classic boom-bust cycle. Following the solar boom of 2023-2024, numerous players expanded capacity. However, downstream module demand growth, while positive, did not keep pace with the aggressive supply additions. This led to:
* Inventory Build-up: High channel inventories forced manufacturers to cut prices to clear stock.
* Profit Compression: Industry-wide margins collapsed, with many second-tier players operating at losses.

3.2 Consolidation Phase

2025 marked the beginning of a consolidation phase. High-cost producers are being squeezed out, and capacity growth is slowing. Flat Glass’s decision to cold repair lines aligns with this industry-wide correction. The exit of marginal capacity is a bullish signal for remaining leaders, as it restores supply-demand balance and pricing power.

3.3 Technological Trends

The industry is shifting towards thinner, larger, and more efficient glass panels (e.g., dual-glass modules, larger formats like 210mm wafers). Flat Glass’s R&D investments (CNY 431 million in 2025, 2.8% of revenue) ensure it remains at the forefront of these technological shifts. Companies that cannot produce high-yield, advanced glass will face further margin erosion, widening the gap between leaders and laggards.

Risks / Headwinds

While the outlook is positive, investors must consider the following risks that could impact the Company’s performance and valuation.

1. Deterioration of PV Glass Supply-Demand Balance

• Risk: If new capacity entries exceed expectations or if downstream solar installation demand slows significantly (due to policy changes, grid constraints, or economic downturns), the supply glut could persist or worsen.
• Impact: This would lead to further price declines, compressing gross margins and potentially forcing additional write-downs. The current margin recovery is predicated on a stabilizing market; a renewed price war would invalidate this thesis.

2. Intensification of International Trade Risks

• Risk: Flat Glass’s profitability is increasingly reliant on overseas sales (34.7% of revenue). Trade protectionism, including anti-dumping duties, tariffs, or local content requirements in key markets (EU, US, India), could restrict access or reduce margins.
• Impact: Higher tariffs could erode the price advantage of Chinese glass, forcing the Company to absorb costs or lose market share. Geopolitical tensions could also disrupt supply chains or lead to sanctions.

3. Volatility in Raw Material and Energy Costs

• Risk: The cost structure of PV glass is heavily dependent on soda ash and natural gas/energy. While costs declined in 2025, they are subject to global commodity cycles.
• Impact: A sharp increase in soda ash or energy prices would directly impact gross margins. Given the competitive nature of the industry, passing these costs onto customers may be difficult in the short term, leading to margin compression.

4. Technological Disruption

• Risk: Emerging technologies such as perovskite solar cells or alternative encapsulation materials could potentially reduce the amount of glass required per watt or replace traditional glass substrates in the long term.
• Impact: While this is a longer-term risk, any shift away from traditional crystalline silicon modules using dual-glass configurations could impact long-term demand growth for PV glass.

5. Exchange Rate Fluctuations

• Risk: With a significant portion of revenue denominated in foreign currencies, fluctuations in the RMB exchange rate can impact reported earnings.
• Impact: A strengthening RMB could reduce the value of overseas earnings when repatriated, while a weakening RMB could increase the cost of imported raw materials (if any).

Rating / Sector Outlook

Sector Outlook: Cautiously Optimistic with Leader Bias

The PV glass sector is transitioning from a phase of irrational expansion to rational consolidation. We believe the worst of the price war is behind us, supported by:
1. Capacity Clearing: Cold repairs and shutdowns of high-cost lines are reducing effective supply.
2. Demand Resilience: Global solar installations continue to grow, driven by energy transition goals, despite short-term policy hiccups.
3. Cost Support: Raw material prices have stabilized, providing a floor for glass prices.

However, the recovery will be uneven. Market leaders like Flat Glass, with superior cost structures, global diversification, and financial strength, will gain market share and enjoy margin expansion. Smaller, high-cost players will continue to struggle, facing potential bankruptcy or acquisition. Therefore, we maintain a positive outlook on the sector leaders while remaining neutral on the sector as a whole.

Valuation and Rating: BUY

We maintain a BUY rating on Flat Glass Group.

Valuation Methodology:
We utilize a Price-to-Earnings (P/E) multiple approach, benchmarked against historical averages and peer comparisons, adjusted for the company’s growth trajectory and market leadership.

Earnings Forecasts:
Based on our analysis of industry trends, the Company’s capacity utilization, and margin trajectory, we have updated our earnings estimates:

Source: Guojin Securities Research Institute Estimates

Analysis of Valuation:
* Current Valuation: At the current price of CNY 15.40, the stock trades at approximately 37.4x 2025E P/E. This multiple appears elevated relative to the modest 2025 earnings, reflecting the trough nature of the current earnings power.
* Forward Valuation: The investment case rests on the rapid earnings recovery expected in 2026-2028.
* 2026E P/E: 30.3x. As profits recover by 21%, the multiple compresses.
* 2027E P/E: 20.0x. With a 51% profit jump, the stock becomes attractively valued relative to its growth rate (PEG < 0.5).
* 2028E P/E: 13.5x. By 2028, the stock trades at a single-digit-to-low-teens multiple, which is highly attractive for a market leader in a growing industry.

Justification for BUY Rating:
1. Earnings Inflection: The Q4 2025 margin expansion confirms that earnings have bottomed. The projected 21% growth in 2026 and >50% growth in 2027 offer significant upside potential.
2. Structural Margin Improvement: The shift towards higher-margin overseas sales and the discipline in capacity management suggest that future margins will be structurally higher than the 2023-2024 average.
3. Market Leadership Premium: In a consolidating industry, leaders deserve a valuation premium due to their ability to survive downturns and capture share in upturns. Flat Glass’s strong balance sheet and cash flow justify this premium.
4. Risk-Reward Profile: The downside is limited by the Company’s strong asset base and cash flow, while the upside is significant given the leverage to operating profit as prices stabilize and volumes recover.

Target Price Implication:
While a specific target price is not explicitly restated in the summary, the maintenance of the "Buy" rating with forward PEs of 30x/20x/14x implies a significant upside from the current level. Assuming a target multiple of 25-30x on 2027 earnings (a reasonable multiple for a high-growth phase), the implied share price would be substantially higher than the current CNY 15.40.

Investment View

1. Core Investment Logic: The "Quality Flight" in a Consolidating Market

The primary investment thesis for Flat Glass Group is rooted in the concept of "Quality Flight" within the PV glass sector. As the industry matures and faces cyclical headwinds, capital is fleeing from high-cost, undifferentiated producers towards low-cost, technologically advanced leaders. Flat Glass is the quintessential beneficiary of this trend.

Why Flat Glass Wins:
* Cost Leadership: Through scale, vertical integration, and technological innovation, Flat Glass maintains one of the lowest cost curves in the industry. This allows it to remain profitable even when competitors are bleeding cash.
* Global Diversification: Unlike peers heavily reliant on the domestic Chinese market, Flat Glass has successfully built a global sales network. This not only diversifies revenue risk but also provides access to higher-margin segments.
* Financial Fortitude: With strong operating cash flows and a manageable debt profile, the Company can withstand prolonged downturns, invest in R&D, and seize opportunities (such as acquiring distressed assets or expanding into new markets) when others are retreating.

2. Key Drivers for Future Growth

A. Margin Re-rating via Overseas Mix Shift

We project that the overseas revenue share will continue to climb, potentially reaching 40%+ in the next 2-3 years. Given the ~12.5 pct margin differential between overseas and domestic sales, every 1% increase in overseas mix adds approximately 0.125 pct to the blended gross margin. This is a powerful, predictable driver of earnings growth that is largely independent of spot glass prices.

B. Capacity Utilization Recovery

As the industry clears excess capacity, demand growth will eventually outstrip supply, leading to higher utilization rates for remaining players. Flat Glass’s cold-repaired lines can be brought back online or replaced with newer, more efficient kilns, allowing volume growth to resume without triggering a price collapse. We expect sales volumes to grow in tandem with global solar installations, which are projected to grow at a CAGR of 15-20% over the next decade.

C. Technological Moat

The shift towards larger wafers (210mm+) and thinner glass requires advanced manufacturing capabilities. Flat Glass’s high yield rates in producing these advanced products create a barrier to entry for smaller players. As the industry standard evolves, Flat Glass’s R&D pipeline ensures it remains the supplier of choice for top-tier module manufacturers.

3. Financial Forecast Deep Dive

Revenue Trajectory

• 2026: We forecast a slight revenue decline of 4.64% to CNY 14.84 billion. This reflects a conservative assumption that average selling prices (ASPs) may remain subdued in the first half of the year as the market fully clears inventory. However, volume growth should begin to offset price pressures.
• 2027-2028: Revenue is expected to rebound strongly, growing 8.32% in 2027 and 17.55% in 2028. This acceleration is driven by:
  1. Volume Growth: Global solar demand acceleration.
  2. Price Recovery: As supply tightens, ASPs should rise.
  3. New Products: Higher-value added products (e.g., specialized coatings, integrated glass solutions) contributing to revenue.

Profitability Trajectory

• Net Profit Growth: We forecast net profit to grow by 21.35% in 2026, 51.42% in 2027, and 47.88% in 2028.
• Margin Expansion: The net margin is projected to expand from 6.3% in 2025 to 8.0% in 2026, 11.2% in 2027, and 14.1% in 2028. This expansion is driven by:
  1. Gross Margin Improvement: From 16.9% in 2025 to 22.9% in 2028.
  2. Operating Leverage: As revenue grows, fixed costs (SG&A, R&D) are spread over a larger base, improving operating margins.
  3. Lower Impairments: As the asset base is optimized, impairment charges should normalize, boosting net income.

Cash Flow and Balance Sheet

• Operating Cash Flow: Expected to surge to CNY 3.7 billion in 2026 and CNY 6.0 billion in 2028. This robust cash generation will support dividend payments, debt reduction, and strategic investments.
• CapEx: Capital expenditures are forecast to remain significant (CNY 3.2-3.7 billion annually) to maintain technological leadership and expand high-efficiency capacity. However, with strong OCF, the Company should remain free cash flow positive or neutral, avoiding excessive leverage.
• Debt Ratio: The asset-liability ratio is projected to decline from 46.65% in 2025 to 42.13% in 2028, indicating a strengthening balance sheet.

4. Comparative Advantage vs. Peers

While the report focuses on Flat Glass, it is useful to contextualize its position against its main competitor, Xinyi Solar.
* Scale: Both are duopolists, controlling a significant majority of the global market.
* Cost Structure: Flat Glass has historically demonstrated slightly better cost control in certain regions due to its proximity to raw material sources and efficient logistics.
* Global Footprint: Flat Glass has been more aggressive in expanding its overseas sales network and establishing overseas production bases (e.g., in Vietnam), which provides a hedge against trade barriers.
* Valuation: Historically, Flat Glass has traded at a slight premium to Xinyi due to its perceived higher growth potential in niche segments and better margin resilience. Our analysis supports this premium given the stronger Q4 margin recovery.

5. Strategic Recommendations for Investors

For Long-Term Institutional Investors:

• Accumulate on Weakness: The current valuation, while not cheap on trailing earnings, is attractive on forward earnings. Any market pullback driven by short-term macro fears or sector sentiment should be viewed as a buying opportunity.
• Monitor Quarterly Margins: The key metric to watch is the quarterly gross margin. Sustained margins above 20% would confirm the structural re-rating thesis.
• Track Overseas Mix: Monitor the quarterly breakdown of domestic vs. overseas revenue. A continuing shift towards overseas sales is a strong positive signal.

For Tactical Traders:

• Catalysts: Look for catalysts such as announcements of further industry capacity closures, positive policy developments in key solar markets (EU, US), or upward revisions in global solar installation forecasts.
• Technical Levels: The stock has likely formed a bottom in the CNY 14-15 range. A break above CNY 16-17 with volume could signal the start of a new uptrend.

6. Conclusion

Flat Glass Group’s 2025 Annual Report tells a story of resilience, discipline, and strategic foresight. In a year marked by industry-wide distress, the Company not only survived but strengthened its competitive position. The significant improvement in Q4 margins, the successful expansion of high-margin overseas sales, and the proactive management of capacity demonstrate that management is well-equipped to navigate the cyclical nature of the PV industry.

We believe the market is currently undervaluing the Company’s earnings power recovery. As the PV glass sector enters a phase of rationalization and growth, Flat Glass is poised to deliver superior returns. The projected earnings growth of 21% in 2026 and >50% in 2027-2028 provides a compelling foundation for share price appreciation.

Therefore, we reaffirm our BUY rating. Investors should look beyond the transient revenue contraction and focus on the structural improvements in profitability and the Company’s dominant market position. Flat Glass represents a high-quality exposure to the global energy transition, with a clear path to value creation in the coming years.

Appendix: Detailed Financial Analysis & Data Tables

A. Income Statement Analysis (RMB Millions)

Commentary:
The income statement illustrates the dramatic compression in margins from 2023 to 2025, followed by a projected recovery. The decline in EBIT margin from 16.2% in 2023 to 10.5% in 2025 reflects the industry downturn. However, the forecasted expansion to 17.0% by 2028 indicates a return to historical profitability levels, driven by both gross margin improvement and operating leverage. Note the significant reduction in R&D expenses in 2025 (-431mn vs -605mn in 2024), which may reflect a temporary optimization, but forecasts assume a steady R&D spend to maintain technological leadership.

B. Cash Flow Statement Analysis (RMB Millions)

Commentary:
The cash flow statement highlights the Company’s transition from a heavy investment phase (2023-2024) to a more balanced phase. Operating cash flow remains robust, comfortably covering capital expenditures in 2025 (OCF 2,917 vs CapEx 2,799). This free cash flow positivity is a key strength. In future years, as CapEx remains elevated for expansion, the strong OCF growth ensures financial flexibility without excessive reliance on external financing. The negative financing cash flow in recent years indicates debt repayment and/or dividend payments, contributing to a healthier balance sheet.

C. Balance Sheet Highlights (RMB Millions)

Commentary:
The balance sheet remains solid. The debt-to-equity ratio peaked in 2025 at 40.9% but is projected to decline steadily to 25.5% by 2028. This deleveraging trend is supported by strong retained earnings (equity growth) and controlled debt issuance. The asset base is growing moderately, reflecting efficient capital allocation.

D. Key Financial Ratios

Commentary:
ROE bottomed in 2025 at 4.36% but is projected to more than double to 9.46% by 2028. This recovery in return on equity is a key driver for valuation re-rating. The stability in inventory and receivables turnover days indicates efficient working capital management, with no signs of bloating inventory or collection issues.

Final Remarks

Flat Glass Group stands at a pivotal juncture. The challenges of 2025 have been met with strategic discipline, resulting in a stronger, more resilient company. The convergence of margin recovery, overseas growth, and industry consolidation creates a compelling investment opportunity. We encourage institutional investors to position themselves for the anticipated earnings upcycle, leveraging the Company’s strong fundamentals and market leadership.

Disclaimer: This report is based on information available as of March 27, 2025, including the Company’s 2025 Annual Report and data from Guojin Securities Research Institute. The views expressed are those of the analysts and do not constitute a guarantee of future performance. Investors should conduct their own due diligence and consult with financial advisors before making investment decisions. Past performance is not indicative of future results.