Glass industry: Special glass and glass fiber are favored

Glass demand: From January to August, the sales area of ​​commercial housing was 527 million square meters, a year-on-year increase of 6.7%, and the growth rate was down by 36.2 percentage points year-on-year. The negative impact of the sale of commercial housing began to be transmitted to the construction and construction area. Since May 2010, the growth rate of new housing starts, construction area, and completed area has consistently declined. If the growth rate of newly-started commercial housing areas declines and is gradually transmitted to the completed area, the demand for flat glass will be further affected.

Glass Supply: While demand growth is declining, flat glass production growth has kept rising. As of the end of August 2010, the total production capacity of flat glass was approximately 770 million weight boxes, an increase of 19.56% year-on-year; the production capacity increased by 29.4% year-on-year to approximately 680 million weight boxes. Under the background of high actual production capacity growth, the total elimination capacity target for the glass companies in 2010 was only 9.935 million weight boxes, which accounted for 1.5% of the total volume. The effect was negligible. In general, the contradiction between supply and demand in the glass industry still exists.

Glass prices and costs: Since 2010, the prices of major float glass products have fallen at a high level. The price of 5mm float glass has dropped by 15.9% from the beginning of the year to RMB 78.9/weight box. The prices of coated glass and ultra-white glass have remained low and fluctuating. While the price of the product was falling, the price of raw materials went back up sharply. The prices of heavy oil and soda ash increased by 9.8% and 12.1% from the beginning of the year, and rose by 40.0% and 41.1% respectively from the previous lows. The price difference between glass-soda ash and heavy oil, which reflect the profitability of the glass industry, fell by 49.0% from the previous high, and profitability was significantly reduced.

Investment strategy: The contradiction between production capacity and demand in the flat glass industry is likely to be further intensified in 2010. Weak prices cannot pass on the pressure of rising costs of heavy oil and soda ash. We believe that the downward trend of the industry will continue. Currently, the PE valuation of the glass segment reflects more structural adjustments in the increase in the proportion of specialty glass such as super-white glass and coated glass in the listed companies of glass plates, while the PB level is at a high level. In view of the pessimistic expectations of the fundamentals of the industry, the “neutral” investment rating of the glass industry is maintained.

In the selection of individual stocks, we follow the differentiated route to avoid the flat glass business companies, and choose the special glass and related products manufacturing companies that benefit from the industrial policies of the country. Under the background of promoting clean energy development and building energy conservation in the country, it is recommended that investors pay attention to CSG A (16.09, 0.30, 1.90%), which owns the solar photovoltaic industry chain and LOW-E coated energy-saving glass, as well as owning the curtain wall products and engineering construction industry chain. , LOW-E coating energy-saving glass business and actively involved in solar photovoltaic glass Sanxin.