Citi has revised its stance on Flat Glass Group Co Ltd (6865: HK) (OTC: FGSGF), moving the stock from a Buy to a Neutral rating.
The firm also adjusted its price target downward from RMB14.00 to RMB13.00. This change was attributed to a significant reduction in the company's net profit forecasts for the years 2024-26, primarily due to lower sales prices for solar glass.
The firm anticipates a 90% year-over-year decline in net profit for Flat Glass in the third quarter of 2024, expecting it to be around RMB90 million. This expected drop is largely due to a decrease in solar glass prices, which are projected to fall by 25.2% year-over-year to RMB14.0 per square meter for 2.0mm products.
Citi has initiated a 30-day negative catalyst watch, in light of the anticipated earnings miss for the third quarter of 2024. The firm's earnings estimates for Flat Glass are approximately 25% below the consensus provided by Bloomberg, which Citi believes is likely to be revised downwards.
The current valuation metrics for Flat Glass, which include a price-to-earnings ratio (PER) of 18.2 times for the year 2025, a price-to-book (PB) ratio of 1.1, and a dividend yield of 1.1%, were deemed unattractive by Citi, especially in the context of the profit reduction. .
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