Equity Research: Flat Glass Group (601865.SH / 6865.HK)

Date: October 28, 2025
Sector: Renewable Energy / Photovoltaic Materials
Analyst: Yao Yao, Zhang Jiawen (Guojin Securities)
Current Price (A-Share): CNY 16.71
Rating: BUY (Maintained)

Executive Summary

Flat Glass Group (hereinafter referred to as "the Company" or "Flat Glass") reported its Third Quarter 2025 financial results on October 27, 2025, delivering a performance that significantly exceeded market expectations. While the year-to-date (YTD) figures reflect the lingering effects of industry-wide destocking and price volatility earlier in the year, the third quarter (Q3) marked a decisive inflection point. The Company demonstrated robust operational resilience, characterized by a sharp rebound in revenue, a return to profitability, and accelerated inventory reduction.

Key Highlights of Q3 2025 Performance:
* Revenue Rebound: Q3 revenue reached CNY 4.73 billion, representing a year-over-year (YoY) increase of 21% and a quarter-over-quarter (QoQ) surge of 29%.
* Profitability Turnaround: Net profit attributable to shareholders amounted to CNY 376 million in Q3. This marks a significant turnaround from losses in the previous corresponding period and a substantial 143% QoQ growth.
* Inventory Optimization: The Company successfully executed an aggressive destocking strategy, with inventory balances dropping by CNY 751 million QoQ to CNY 1.207 billion by the end of September.
* Margin Expansion: Gross margin improved to 16.75% in Q3, up 10.8 percentage points (pct) YoY and 0.1 pct QoQ, driven by rising photovoltaic (PV) glass prices and stable cost controls.

Investment Thesis Update:
The core investment logic for Flat Glass remains anchored in its status as a dual-oligopoly leader in the global PV glass market, coupled with superior cost advantages. The industry is currently undergoing a critical phase of supply-side clearing. With capacity utilization remaining low despite recent price hikes, and落后 (backward)产能 (capacity) exiting the market, the supply-demand dynamics are shifting in favor of leading manufacturers. Flat Glass’s ability to maintain positive operating cash flow (CNY 860 million in Q3) amidst this transition underscores its financial health and competitive moat.

We have adjusted our earnings forecasts for 2025-2027 to reflect the updated market pricing environment and the Company’s cold repair (shutdown for maintenance) schedule. We now project net profits of CNY 800 million, CNY 1.757 billion, and CNY 2.541 billion for 2025, 2026, and 2027, respectively. At the current A-share price of CNY 16.71, the stock trades at approximately 49x, 22x, and 15x forward P/E for 2025-2027. Given the accelerating market clearance, the Company’s solidified head position, and significant cost advantages, we maintain our "BUY" rating.

Key Takeaways

1. Financial Performance Analysis: A Strong Q3 Recovery

The third quarter of 2025 served as a pivotal period for Flat Glass, demonstrating the effectiveness of its strategic adjustments and the benefits of improving industry fundamentals.

1.1 Revenue Growth Driven Volume and Price Recovery

In Q3 2025, the Company generated revenue of CNY 4.73 billion. This figure represents a 21% YoY increase and a remarkable 29% QoQ increase.

• Volume Driver: The substantial QoQ revenue growth is primarily attributed to a significant increase in PV glass shipment volumes. As demand picked up in the traditional peak season (September-October) and the Company accelerated its delivery schedules, throughput increased markedly.
• Price Driver: Concurrently, the average selling price (ASP) of PV glass began to recover in August and strengthened in September. The combination of higher volumes and stabilizing/rising prices created a powerful multiplier effect on top-line growth.

For the first nine months of 2025, total revenue stood at CNY 12.46 billion, a decline of 15% YoY. This YTD decline reflects the challenging market conditions in H1 2025, where intense competition and oversupply pressured prices. However, the strong Q3 performance indicates that the worst of the revenue contraction is likely behind the Company.

1.2 Profitability Inflection: From Loss to Gain

The most notable aspect of the Q3 report is the dramatic improvement in bottom-line performance.

• Q3 Net Profit: The Company reported a net profit attributable to shareholders of CNY 376 million in Q3.
  • YoY: Turned profitable from a loss in Q3 2024.
  • QoQ: Increased by 143% compared to Q2 2025.
• YTD Net Profit: For the first three quarters of 2025, the net profit was CNY 638 million, a decrease of 51% YoY. While the YTD figure still shows a decline, the trajectory is clearly upward, with Q3 contributing more than half of the YTD profit.

Table 1: Flat Glass Group Financial Highlights (Q3 2025 vs. Previous Periods)

(Note: Q2 2025 revenue and profit are derived based on Q3 QoQ growth rates and YTD totals provided in the source text. Q3 2024 revenue is estimated based on YoY growth rate.)

1.3 Margin Expansion and Unit Economics

The restoration of profitability was driven by both top-line growth and margin expansion.

• Gross Margin: Q3 gross margin reached 16.75%. This is a significant improvement from the low single-digit margins seen in early 2025. The 10.8 pct YoY expansion highlights the severe margin compression the Company faced last year and the extent of the current recovery.
• Unit Profitability: Based on our calculations, the Company’s profit per square meter of PV glass in Q3 approached CNY 1.0/sqm. This metric is crucial for tracking the health of the PV glass sector. A return to ~CNY 1/sqm indicates that prices have risen above the cash cost break-even point for most producers and are approaching the full-cost break-even for tier-2 players, while generating healthy returns for leaders like Flat Glass.

Drivers of Margin Improvement:
1. Price Hikes: Starting in August, PV glass prices began to rise. By September, the price of 2.0mm thin glass increased by 18% QoQ to CNY 13/sqm. This price adjustment was transmitted quickly to the bottom line due to the Company’s rigid cost structure.
2. Cost Control: Despite inflationary pressures on raw materials (soda ash, natural gas), the Company’s scale advantages and technological efficiencies (larger kilns, higher yield rates) allowed it to keep unit costs relatively stable, thereby capturing the majority of the price increase as gross profit.

2. Operational Efficiency: Inventory Destocking and Cash Flow

One of the key concerns for investors in the PV supply chain has been the buildup of inventory during periods of weak demand. Flat Glass’s Q3 report addresses this concern directly with impressive operational metrics.

2.1 Accelerated Inventory Reduction

The Company actively managed its inventory levels in Q3, aligning production with sales to prevent overhang.

• Inventory Balance: As of the end of Q3 2025, the inventory balance stood at CNY 1.207 billion.
• QoQ Reduction: This represents a decrease of CNY 751 million from the end of Q2 2025.
• Implication: This rapid destocking suggests that the Company’s sales velocity exceeded its production output in Q3. It also implies that channel inventory is being cleared, which reduces the risk of future price wars driven by excess stock. A leaner inventory position positions the Company well for potential demand upticks in Q4 and beyond, without the burden of writing down obsolete stock.

2.2 Robust Operating Cash Flow

Despite the volatile earnings profile over the past year, Flat Glass has maintained strong cash generation capabilities, a testament to its working capital management and market power.

• Q3 Operating Cash Flow: The net cash flow from operating activities in Q3 was CNY 860 million.
• Significance: Positive and substantial operating cash flow ensures that the Company can fund its ongoing operations, service debt, and invest in necessary technological upgrades without relying heavily on external financing. This financial flexibility is a key differentiator from smaller, less efficient competitors who may face liquidity crunches during downturns.

2.3 Impact of Asset Impairment Reversals

An additional contributor to Q3 profitability was the reversal of asset impairment losses.

• Impairment Reversal: The Company recorded a reversal of asset impairment losses amounting to CNY 82 million in Q3.
• Source: This reversal is primarily attributed to the recovery in the value of inventory. As PV glass prices rose in August and September, the net realizable value of inventory held on the books exceeded its carrying cost, necessitating a reversal of previously recognized impairment provisions. This is a non-cash accounting gain but accurately reflects the improvement in the underlying asset values.

3. Industry Dynamics: Supply Clearing and Price Stabilization

To understand Flat Glass’s performance, one must contextualize it within the broader PV glass industry landscape. The sector is currently experiencing a classic cyclical bottoming process, characterized by capacity exit and price stabilization.

3.1 Capacity Reduction via Cold Repairs

The PV glass industry saw a significant acceleration in "cold repairs" (shutting down furnaces for major maintenance or permanent closure) during June and July 2025. This was a direct response to sustained losses and negative cash flows experienced by many producers in H1.

• Capacity Data: According to Zhuochuang Information (a leading industry data provider), in July 2025 alone, the volume of cold-repaired production lines reached 7,750 tons/day.
• Total Operating Capacity: Consequently, the domestic operating capacity dropped to 89,000 tons/day. This represents a significant contraction from the peak levels seen in late 2024 and early 2025.
• Strategic Pause: Crucially, even as prices began to rise in August and September, there was no large-scale resumption of production or ignition of new lines. This discipline among producers indicates a heightened awareness of the risks of oversupply and a collective willingness to prioritize profitability over market share in the short term.

3.2 Price Trends and Market Sentiment

The supply contraction has had a direct and positive impact on pricing.

• Price Recovery: After hitting multi-year lows in mid-2025, PV glass prices began to firm up in August. The 18% QoQ increase in 2.0mm glass prices to CNY 13/sqm in September is a clear signal that the market balance is shifting.
• Sustainability: The fact that prices rose without triggering immediate capacity restarts suggests that the current price level is still below the comfort zone for high-cost producers, thereby limiting the threat of supply flooding. This creates a supportive environment for prices to remain stable or rise further in Q4.

3.3 Relative Position of PV Glass in the PV Supply Chain

Among the various segments of the PV supply chain (silicon, wafers, cells, modules, and auxiliary materials), PV glass is currently one of the least oversupplied segments.

• Comparison: While silicon and module sectors continue to grapple with massive capacity overhangs and severe price wars, the PV glass sector has seen a more pronounced reduction in effective supply due to the high fixed costs and technical barriers associated with furnace operations.
• Clearing Acceleration: As backward (high-cost, small-scale) enterprises continue to exit the market, the rate of market clearing is expected to accelerate. This consolidation benefits industry leaders like Flat Glass and Xinyi Solar, who can capture the market share vacated by exiting players while enjoying better pricing power.

4. Competitive Moat: Cost Leadership and Scale

Flat Glass’s ability to outperform during the downturn and capitalize on the upturn is rooted in its structural competitive advantages.

4.1 Cost Advantage

The Company maintains one of the lowest cost structures in the industry. This is achieved through:
* Large-Scale Kilns: Operation of larger, more energy-efficient furnaces (1,000+ tons/day) which lower unit energy and labor costs.
* Vertical Integration: Partial integration into upstream raw materials (such as silica sand mining) provides cost stability and security of supply.
* Technological Yield: Higher yield rates in the production of thin glass (2.0mm and 1.6mm), which commands a premium and is increasingly demanded by module manufacturers for lightweight applications.

4.2 Customer Stickiness and Dual-Oligopoly Status

The PV glass market is effectively a duopoly dominated by Flat Glass and Xinyi Solar. This structure provides:
* Pricing Power: The two leaders have significant influence over market pricing, especially when they coordinate production levels.
* Long-term Contracts: Strong relationships with top-tier module manufacturers (e.g., Longi, Jinko, Trina) ensure stable offtake agreements, reducing revenue volatility.
* Barrier to Entry: The capital intensity and technical expertise required to build and operate PV glass furnaces create high barriers to entry, protecting the incumbents’ market share.

Risks / Headwinds

While the outlook is positive, investors should be aware of the following risks that could impact the Company’s performance and valuation:

1. Demand Growth Below Expectations

• Global PV Installation Slowdown: The primary driver of PV glass demand is the installation of solar modules. If global solar installations grow slower than anticipated due to macroeconomic headwinds, trade barriers (e.g., tariffs in the US or Europe), or grid connection delays, demand for PV glass could soften.
• Seasonality: Q4 is typically a strong season, but any disruption in project completions could lead to inventory buildup again.

2. Intensified Industry Competition

• Capacity Restart Risks: If prices rise too sharply, there is a risk that idle capacity or new lines scheduled for commissioning might come online faster than expected, reintroducing supply pressure.
• Price Wars: Although the current trend is towards rationality, historical behavior in the PV sector suggests that competition can escalate quickly if market share becomes the primary objective for some players.

3. Cost Volatility

• Raw Material Prices: The cost of soda ash and natural gas constitutes a significant portion of PV glass production costs. Fluctuations in these commodity prices can squeeze margins if they cannot be fully passed through to customers.
• Energy Costs: As an energy-intensive industry, any spike in electricity or natural gas prices directly impacts profitability.

4. Policy and Regulatory Changes

• Trade Policies: Changes in international trade policies, such as anti-dumping duties or local content requirements in key markets (US, EU, India), could affect the Company’s export volumes and profitability.
• Environmental Regulations: Stricter environmental regulations could increase compliance costs or force additional capacity closures, which, while beneficial for pricing, could disrupt operations.

5. Technological Substitution

• Alternative Materials: While unlikely in the near term, long-term developments in alternative encapsulation materials or module designs that require less glass could pose a structural threat. However, the current trend towards bifacial and double-glass modules actually increases glass usage per watt, mitigating this risk.

Rating / Sector Outlook

Sector Outlook: Improving Fundamentals

The PV glass sector is transitioning from a phase of severe oversupply and price distress to a phase of balanced supply and recovering profitability. The key drivers for this positive outlook include:
1. Supply Discipline: The widespread cold repairs and lack of immediate restarts indicate a maturing industry mindset focused on sustainable profitability.
2. Demand Resilience: Global solar demand remains robust, supported by energy transition goals and declining system costs.
3. Consolidation: The exit of high-cost producers is strengthening the market position of leaders like Flat Glass.

We expect the sector to see continued margin expansion in H2 2025 and into 2026, driven by tighter supply and stable-to-rising prices.

Valuation Analysis

We have updated our financial model to reflect the Q3 performance and the current market environment.

Earnings Forecast Adjustments:
* 2025E Net Profit: Adjusted to CNY 800 million (previously higher/lower depending on prior consensus). This reflects the strong Q3 recovery but acknowledges the weak H1 performance.
* 2026E Net Profit: Forecast at CNY 1.757 billion. This assumes a full year of normalized pricing and continued volume growth.
* 2027E Net Profit: Forecast at CNY 2.541 billion. This reflects long-term growth driven by market share gains and potential new capacity efficiency.

Valuation Multiples:
At the current A-share price of CNY 16.71, the valuation metrics are as follows:

(Note: P/E ratios are calculated based on the adjusted net profit forecasts and current share capital. H-share valuations are significantly lower, trading at approx. 29x, 13x, and 9x P/E for 2025-2027 respectively, offering a compelling value proposition for international investors.)

Peer Comparison:
Compared to its main competitor, Xinyi Solar, and other PV material suppliers, Flat Glass trades at a premium due to its pure-play focus on glass and superior cost structure. However, given the expected earnings growth of ~120% in 2026 and ~45% in 2027, the current P/E multiples are justified. The 2026 P/E of ~22x is attractive for a company with such strong growth visibility and market dominance.

Rating: BUY (Maintained)

We maintain our "BUY" rating on Flat Glass Group. The Company has successfully navigated the industry downturn, demonstrated operational excellence in Q3, and is well-positioned to benefit from the ongoing supply-side clearing. The combination of rising prices, falling inventory, and strong cash flow provides a solid foundation for future earnings growth. The stock offers a compelling risk-reward profile, particularly for long-term investors seeking exposure to the renewable energy transition with a focus on high-quality, market-leading assets.

Investment View

1. Core Investment Logic

A. Cyclical Rebound with Structural Strength
Flat Glass is not just riding a cyclical upturn; it is leveraging its structural strengths to maximize the benefit. The Q3 performance proves that when prices stabilize, the Company’s operating leverage kicks in, driving disproportionate profit growth. The shift from loss to profit in Q3 is not a one-off event but the beginning of a sustained recovery trend supported by fundamental supply-demand improvements.

B. Market Share Consolidation
The industry’s "cold repair" wave is effectively a shakeout of weaker players. Flat Glass, with its robust balance sheet and low costs, is gaining market share as competitors exit. This consolidation will lead to a more concentrated market structure, enhancing the Company’s pricing power and long-term profitability. The fact that capacity did not immediately restart upon price increases is a bullish signal for the sustainability of this trend.

C. Financial Health as a Competitive Weapon
In capital-intensive industries, cash is king. Flat Glass’s ability to generate CNY 860 million in operating cash flow in a single quarter during a downturn highlights its financial resilience. This allows the Company to:
* Maintain R&D spending to stay ahead in technology (e.g., thinner, stronger glass).
* Invest in strategic capacity expansions when opportunities arise.
* Weather any short-term market fluctuations without distress.
* Potentially pursue M&A opportunities to further consolidate the industry.

2. Catalysts for Future Performance

Short-Term (Next 6-12 Months):
* Q4 Seasonality: Historically, Q4 is the strongest quarter for solar installations. Continued strong demand could drive further volume growth and potentially another round of price increases.
* Inventory Normalization: As inventory levels reach optimal lows, any unexpected demand spike could lead to tight supply conditions, further boosting prices.
* Cost Pass-Through: If raw material costs remain stable, any further price increases will flow directly to the bottom line, expanding margins beyond the current 16-17% range.

Medium-Term (1-3 Years):
* New Capacity Efficiency: The Company’s new production lines are designed with higher efficiency and lower energy consumption. As these lines ramp up, they will lower the overall average cost base.
* Global Expansion: Potential expansion of overseas production facilities (if pursued) could mitigate trade risks and open up new markets.
* Product Mix Shift: Increasing adoption of double-glass modules and bifacial cells will drive demand for higher-value PV glass products, improving the average selling price mix.

3. Strategic Recommendations for Investors

For Institutional Investors:
* Accumulate on Dips: Given the long-term growth trajectory of the solar industry and Flat Glass’s dominant position, any short-term market volatility should be viewed as a buying opportunity.
* Focus on 2026-2027 Earnings: While 2025 earnings are recovering, the real value creation will occur in 2026 and 2027 as the market normalizes. Investors should focus on the forward P/E multiples rather than trailing metrics.
* Monitor Supply Data: Keep a close watch on industry capacity data (cold repairs vs. restarts) and inventory levels. These are the leading indicators for price trends.

Key Metrics to Watch:
1. PV Glass Prices (2.0mm and 3.2mm): Weekly price trends are the most immediate indicator of margin health.
2. Industry Operating Capacity: Any significant increase in operating capacity without a corresponding demand surge could signal trouble.
3. Company Inventory Levels: Continued destocking is positive; a reversal would be a warning sign.
4. Raw Material Costs: Trends in soda ash and natural gas prices.

4. Conclusion

Flat Glass Group’s Q3 2025 results are a clear validation of its business model and strategic execution. The Company has emerged from the industry downturn stronger, with cleaner inventory, healthier cash flows, and a more favorable competitive landscape. As the PV glass sector continues to clear excess capacity, Flat Glass is poised to capture a disproportionate share of the resulting profits.

We believe the market has not yet fully priced in the sustainability of this recovery and the long-term earnings power of the Company in a consolidated market. Therefore, we reiterate our BUY rating, with a positive outlook for the stock’s performance over the next 12-18 months. Investors should consider establishing or increasing positions in Flat Glass as a core holding in their renewable energy portfolios.

Appendix: Detailed Financial Analysis & Forecasts

A. Income Statement Analysis (Historical & Forecast)

The following table summarizes the key income statement items, highlighting the transition from the high-growth/high-margin era of 2023 to the corrective phase of 2024-2025, and the projected recovery in 2026-2027.

Table 2: Consolidated Income Statement Summary (CNY Million)

Analysis of Forecasts:
* 2025E: Revenue is forecast to decline YoY due to the weak H1, but Q3 and Q4 are expected to show strong growth. Margins remain under pressure in the full-year average due to H1 losses, but Q3-Q4 margins are significantly higher.
* 2026E: We anticipate a full-year recovery. Revenue stabilizes and begins to grow as new global demand comes online. Margins expand to ~20% as prices normalize and high-cost capacity exits. Net profit more than doubles YoY.
* 2027E: Strong revenue growth (17%) is driven by market share gains and potential new applications. Margins expand further to 22.2%, reflecting optimal operating efficiency and a balanced market. Net profit grows by ~45%.

B. Balance Sheet Strength

Flat Glass maintains a prudent balance sheet, with manageable leverage and strong asset quality.

Table 3: Key Balance Sheet Metrics (CNY Million)

Key Observations:
* Asset Structure: The Company is asset-heavy, with fixed assets comprising ~45-48% of total assets. This is typical for the manufacturing sector. The steady increase in fixed assets reflects ongoing investments in efficiency and capacity.
* Liquidity: Cash reserves remain healthy, although they fluctuate with capex cycles. The projected increase in cash by 2027 reflects strong cash generation from operations.
* Leverage: The debt-to-equity ratio is manageable and is projected to decrease in 2026-2027 as earnings improve and debt is paid down. This reduces financial risk and interest burden.
* Inventory Management: The forecasted decline in inventory in 2025-2026 aligns with our view of improved turnover and destocking.

C. Cash Flow Analysis

Cash flow generation is a critical strength of Flat Glass.

Table 4: Cash Flow Summary (CNY Million)

Analysis:
* Operating Cash Flow: The strong OCF in 2024 (CNY 5.9bn) was partly due to working capital changes. The 2025E forecast is lower due to lower profits, but still positive. The rebound in 2026-2027 reflects higher profitability.
* Capital Expenditure: Capex remains significant but is moderated compared to the peak expansion years. This suggests a shift from aggressive capacity expansion to optimization and maintenance.
* Free Cash Flow: The Company is moving towards positive free cash flow (OCF - Capex) in the forecast period, which will support dividend potential and debt reduction.

D. Ratio Analysis & Profitability Metrics

Table 5: Key Financial Ratios

Interpretation:
* ROE Trajectory: ROE dipped significantly in 2024-2025 due to margin compression. The projected recovery to ~9.5% by 2027 indicates a return to healthy profitability levels, though perhaps not the peak levels of 2023 due to a larger equity base.
* Margin Recovery: Gross and net margins are expected to recover to >20% and >13% respectively by 2027, reflecting a normalized, healthy industry state.
* Interest Coverage: The improvement in interest coverage ratio from 3.7x in 2025 to 9.0x in 2027 significantly reduces financial risk.

Market Sentiment & Analyst Consensus

Analyst Ratings Trend

Market sentiment towards Flat Glass has remained predominantly positive, with a strong consensus among analysts.

Table 6: Market Analyst Ratings Distribution

*Scoring: Buy=1, Outperform=2, Hold=3, Underperform=4, Sell=5. Lower score indicates more bullish sentiment.

Observation:
* The 6-month average score of 1.00 indicates a unanimous "Buy" consensus among tracked analysts over the longer term.
* Recent ratings (1-3 months) show a slight mix of "Outperform" alongside "Buy," but still heavily skewed towards positive recommendations. This suggests that while analysts are bullish, they are monitoring the situation closely.
* There are no "Hold" or "Sell" ratings in the recent history, indicating strong confidence in the Company’s long-term prospects.

Historical Target Prices

Table 7: Historical Recommendations and Target Prices

Current Context:
* The current market price of CNY 16.71 is near the lower end of the recent trading range.
* Previous target prices (e.g., CNY 29.61 in Aug 2024) suggest significant upside potential when market conditions were more favorable.
* Given the improved Q3 performance, we expect new target prices to be issued by the broker community that reflect the higher earnings trajectory for 2026-2027.

Deep Dive: Industry Supply-Demand Dynamics

To provide a comprehensive view, we delve deeper into the specific mechanics of the PV glass supply chain.

1. The "Cold Repair" Mechanism

PV glass furnaces are continuous operation units. Once ignited, they run for 8-10 years. However, when market conditions are severely negative, companies may choose to perform "cold repairs" earlier than scheduled. This involves shutting down the furnace, cooling it down, and performing major maintenance. This process is costly and time-consuming (several months). Therefore, a decision to cold repair is a strong signal of financial distress or strategic withdrawal.

• Impact on Supply: A cold repair removes capacity from the market immediately. Unlike a temporary production cut, it takes months to restart. This creates a "sticky" supply reduction.
• July 2025 Data: The 7,750 tons/day of cold repairs in July was a record high, signaling a capitulation point in the industry.

2. Price Elasticity and Restart Lag

One of the key features of the PV glass market is the lag between price recovery and supply response.

• Restart Costs: Restarting a cold furnace requires significant capital and energy. Companies are hesitant to restart unless they are confident that prices will remain high for an extended period.
• Current Behavior: The fact that prices rose in Aug-Sep 2025 without significant restarts indicates that producers are still cautious. This caution is beneficial for price stability.
• Future Risk: If prices sustain above CNY 15-16/sqm for several quarters, we may see a wave of restarts in late 2026 or 2027. This is a key risk to monitor.

3. Demand Side: The Rise of Double-Glass Modules

The structural demand for PV glass is being boosted by the technological shift towards double-glass (bifacial) modules.

• Penetration Rate: The penetration rate of double-glass modules is increasing globally, driven by their higher energy yield and durability.
• Glass Usage: Double-glass modules use two sheets of glass instead of one glass and one backsheet. This effectively doubles the glass usage per watt of installed capacity.
• Implication for Flat Glass: This structural trend means that PV glass demand is growing faster than solar installation growth. Flat Glass, as a leader in thin glass technology (which is preferred for double-glass modules to reduce weight), is well-positioned to benefit from this trend.

4. Raw Material Cost Structure

Understanding the cost side is crucial for margin analysis.

• Soda Ash: Accounts for ~20-25% of production costs. Prices have been relatively stable but are subject to environmental policy shifts in China.
• Natural Gas/Energy: Accounts for ~30-35% of costs. Energy efficiency is therefore a key competitive advantage. Flat Glass’s large kilns are more energy-efficient than smaller competitors.
• Silica Sand: High-quality low-iron silica sand is a scarce resource. Flat Glass has secured long-term supplies and owns mining rights, providing a cost and security advantage.

Conclusion and Final Thoughts

Flat Glass Group’s Q3 2025 performance is a testament to its resilience and strategic foresight. The Company has successfully navigated a challenging industry environment, emerging with a stronger market position, healthier balance sheet, and improved profitability.

Key Investment Takeaways:
1. Turnaround Confirmed: Q3 marks a definitive turning point in earnings, driven by price recovery and volume growth.
2. Supply Discipline: The industry’s commitment to capacity reduction is supporting prices and margins.
3. Leadership Premium: Flat Glass’s cost advantages and scale allow it to outperform peers and capture market share.
4. Valuation Appeal: With forward P/E ratios compressing to attractive levels (22x for 2026, 15x for 2027) amidst strong earnings growth, the stock offers compelling value.

We recommend investors accumulate shares of Flat Glass Group, viewing the current price levels as an attractive entry point for long-term exposure to the global energy transition. The Company is well-equipped to deliver sustainable growth and shareholder value in the coming years.

Disclaimer:
This report is prepared by Guojin Securities for institutional investors. It is based on information believed to be reliable, but Guojin Securities does not guarantee its accuracy or completeness. The views expressed are those of the analysts at the time of writing and are subject to change. This report is not an offer to buy or sell any securities. Investors should conduct their own due diligence and consult with their financial advisors before making investment decisions. Past performance is not indicative of future results.