Periodic/Sector reports
Automobile: China Auto Sector Weekly (23 Oct 26)
Highlights
- The 3Q26 results for Fuyao Glass, CATL, and Ganfeng Lithium missed expectations on margins, due to product price drop, product mix, tax hikes, cost hikes, inventory provision, and one-off expenses.
- Lithium carbonate price drop more than offsets the export VAT rebate removal and 4% consumption tax on LIB, easing cost pressure for OEMs.
- We have 3Q26 earnings previews for BYD, Geely, GWM, Hesai and Robosense, which will post their 3Q26 results next week.
- Maintain MARKET WEIGHT. Top BUYs: BYD and Geely. Top SELLs: Li Auto and XPeng.
Analysis
- 3Q26 results of Fuyao Glass, CATL and Ganfeng Lithium 3Q26 results missed on margins. Their 3Q26 results missed expectations on margins, due to product price drop, product mix, tax hikes, sea freight cost hikes, inventory provision, and one-off expenses.
- Fuyao Glass (3606 HK/BUY/Target: HK$77.00). 3Q26 net profit missed estimates at Rmb2,036m (-9.9% yoy/-9.9%), due to: a) spikes in sea freight costs, b) Rmb78m in product quality, and c) US$14.34m (~Rmb100m) in expenses related to the fire at Phase 2 of the US plant. We expect margins to recover modestly in 4Q26, based on the easing sea freight costs, flat soda ash prices, and the absence of one-off expenses. Sales volume and ASP will be driven by the accelerating industry consolidation overseas. We trim our 2026-28 net profit forecasts by 11%/8%/8% to Rmb8.58b/Rmb10.73b/Rmb12.12b respectively on lower margins. Maintain BUY and cut target price to HK$77.00.
- Fuyao Glass (3606 HK/BUY/Target: HK$77.00). 3Q26 net profit missed estimates at Rmb2,036m (-9.9% yoy/-9.9%), due to: a) spikes in sea freight costs, b) Rmb78m in product quality, and c) US$14.34m (~Rmb100m) in expenses related to the fire at Phase 2 of the US plant. We expect margins to recover modestly in 4Q26, based on the easing sea freight costs, flat soda ash prices, and the absence of one-off expenses. Sales volume and ASP will be driven by the accelerating industry consolidation overseas. We trim our 2026-28 net profit forecasts by 11%/8%/8% to Rmb8.58b/Rmb10.73b/Rmb12.12b respectively on lower margins. Maintain BUY and cut target price to HK$77.00.
Highlights
- The 3Q26 results for Fuyao Glass, CATL, and Ganfeng Lithium missed expectations on margins, due to product price drop, product mix, tax hikes, cost hikes, inventory provision, and one-off expenses.
- Lithium carbonate price drop more than offsets the export VAT rebate removal and 4% consumption tax on LIB, easing cost pressure for OEMs.
- We have 3Q26 earnings previews for BYD, Geely, GWM, Hesai and Robosense, which will post their 3Q26 results next week.
- Maintain MARKET WEIGHT. Top BUYs: BYD and Geely. Top SELLs: Li Auto and XPeng.
Analysis
- 3Q26 results of Fuyao Glass, CATL and Ganfeng Lithium 3Q26 results missed on margins. Their 3Q26 results missed expectations on margins, due to product price drop, product mix, tax hikes, sea freight cost hikes, inventory provision, and one-off expenses.
- Fuyao Glass (3606 HK/BUY/Target: HK$77.00). 3Q26 net profit missed estimates at Rmb2,036m (-9.9% yoy/-9.9%), due to: a) spikes in sea freight costs, b) Rmb78m in product quality, and c) US$14.34m (~Rmb100m) in expenses related to the fire at Phase 2 of the US plant. We expect margins to recover modestly in 4Q26, based on the easing sea freight costs, flat soda ash prices, and the absence of one-off expenses. Sales volume and ASP will be driven by the accelerating industry consolidation overseas. We trim our 2026-28 net profit forecasts by 11%/8%/8% to Rmb8.58b/Rmb10.73b/Rmb12.12b respectively on lower margins. Maintain BUY and cut target price to HK$77.00.
- Fuyao Glass (3606 HK/BUY/Target: HK$77.00). 3Q26 net profit missed estimates at Rmb2,036m (-9.9% yoy/-9.9%), due to: a) spikes in sea freight costs, b) Rmb78m in product quality, and c) US$14.34m (~Rmb100m) in expenses related to the fire at Phase 2 of the US plant. We expect margins to recover modestly in 4Q26, based on the easing sea freight costs, flat soda ash prices, and the absence of one-off expenses. Sales volume and ASP will be driven by the accelerating industry consolidation overseas. We trim our 2026-28 net profit forecasts by 11%/8%/8% to Rmb8.58b/Rmb10.73b/Rmb12.12b respectively on lower margins. Maintain BUY and cut target price to HK$77.00.
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