Cost has little effect on Fuyao Glass, Fuyao Glass is still optimistic about photovoltaic glass, canopy and HUD
The production cost of soda ash is relatively low for Fuyao. Since the beginning of the year, the price has risen by 22%. The impact on Fuyao Glass is expected to be within 1% of the cost. The raw materials that Fuyao intends to purchase mainly include energy costs (25.2%, natural gas, electricity, etc.), PVB film (13.4%), soda ash (5%) and other raw and auxiliary materials (17.9%).
Industrial natural gas prices have stabilized and declined, generally remaining relatively stable. Due to the high monopoly and long-term cooperation price of PVB film, the price of soda ash has increased by 22.4% year-to-date, but the comprehensive cost after conversion only accounts for 5%. Taking into account the influence of factors such as the locked-in price of the purchase, it is expected that the price increase of soda ash will increase the cost of Fuyao by less than 1pct.
Fuyao’s gross profit margin is less affected by historical raw material price fluctuations, and its core influencing factors are product structure and capacity utilization. In the history of two rounds of raw material price increases (2006-2007 and 2016-2017), Fuyao’s gross profit margin has not been significantly affected. However, the company’s steady increase in gross profit margin from 2005 to 2018 was mainly driven by the improvement of product structure, and the decline from 2018 to 2019 was mainly due to the decline in capacity utilization. Looking forward to 2021, due to the recovery of the industry, the company’s capacity utilization rate is expected to rise significantly. Looking forward to the next five years, new trends such as the sky curtain will accelerate, and the company’s product structure is expected to accelerate upward. Therefore, we judge that the company’s gross profit margin is expected to continue to rise.
Labor + manufacturing costs account for a high proportion of the cost structure of the automotive glass industry. Fuyao’s cost control + refined management has advantages over competitors, and it is expected that the company’s global share will continue to expand. From the perspective of cost structure, labor costs + manufacturing costs account for a relatively high proportion of domestic leading companies’ market share. The internal reason is that labor cost control and scale advantages are often the competitive advantages of domestic enterprises. The labor cost + manufacturing cost of automobile glass accounts for a relatively high proportion of the industry attributes, which is what Fuyao is better at than overseas competitors. Therefore, we believe that Fuyao will have a sustained cost advantage over its competitors, thereby achieving continuous expansion of its global share.