CITIC Securities: The glass industry's downward cycle is coming to an end, and opportunities at the bottom are highlighted

The Zhitong Finance App learned that CITIC Securities released a research report saying that the demand side of float glass is resilient and provides stable support for applications in the automotive and home appliance fields. The increase in the probability of cold repair of ultra-old kiln production lines, opportunities for coal to gas conversion, and withdrawal of backward production capacity are expected to jointly promote the optimization of the industry's supply structure. By combing the price and capacity utilization rate of float glass, the company found that the complete cycle of float glass was about 3 years. Currently, the industry is at the end of the downward cycle, and industry profits and valuations are at historically low levels. Glass companies have shown confidence in development through repurchases. Maintain a “better than the market” rating.

CITIC Securities's main views are as follows:

Industry trends: The industry is likely to enter an upward profit range in the next two years.

The core contradiction on the demand side of float glass is still being dragged down by the real estate side, but automotive glass and major appliances contribute to structural increases. Demand side: Demand for float glass is related to completion, and is expected to remain under pressure for the next two years. However, thanks to the stable demand for automotive and home appliance glass and the increase in penetration rate in the construction sector, the overall demand for glass is resilient. According to Zhuochuang information, the sales volume of float glass nationwide from January to October 2025 was 830 million weight boxes, a year-on-year decrease of 7.6%. Supply side: The supply side remained stable in the first three quarters of 2025, and float glass production capacity increased slightly. Three major supply-side catalysts are expected to exist in the future:

1) Increased probability of cold repair for ultra-high kiln age production lines: As of the end of October 2025, according to Zhuochuang information, the daily melting volume of float glass in production lines with a kiln age of 9 years or more reached 29,000 tons, accounting for 18.4% of total production capacity.

2) Coal-to-gas opportunities: After the fuel is converted to natural gas, the quality of glass will be further improved, but at the same time, it will face rising costs, and the upward shift in cost focus in the future may form a bottom support for prices.

3) Clearing illegal production lines: Policy pressure will accelerate the withdrawal of highly polluting and non-compliant production capacity from the market. The start of production lines in Hubei Yijun reflects the high operating pressure faced by float glass companies. Combined with the weakening demand before the Spring Festival, it may prompt more companies to choose to cool their production lines during this period. According to Longzhong Information, as of November 20, 2025, the total production capacity of the float glass potential production line was 10,450 tons/day, accounting for 7% of the total production capacity.

Cycle position: The bottom of historical profit. Most companies are in a balanced state of cash flow, and net profit is negative.

By combing the price and capacity utilization rate of float glass, the bank found that the complete cycle of float glass is about 3 years. Since 2023Q4, the industry has entered a downward period that has continued for nearly two years. According to the time estimates of the previous cycle, float glass is at the end of the downward cycle. The difference between the price of float glass and the price of soda ash in 2025Q1-3 is 1290/969 yuan/ton, all close to the historic low in 2015.

As of November 20, 2025, the bank estimates that the thermal coal/petroleum coke/pipeline gas production lines in the industry are all in a state of book loss, with losses of 73/130/220 yuan/ton respectively. If the impact of non-cash costs is further considered, that is, after depreciation and amortization, the net cash flow of thermal coal/petroleum coke/pipeline gas was +57/0/ -90 yuan/ton, respectively, and production lines fueled by pipeline natural gas have actually lost money to the cash flow level. Judging from the operation of the company, it is currently also a low profit point for the company. In 2025Q1-3, the net interest rate of Kibing Group/CNGB/Jinjing Technology fell to +8%/+1%/-8%.

Valuation level: PB is within 10% of history.

After the real estate industry entered a stage of deep adjustment in 2021, the market capitalization of glass companies gradually shrank, and the PB valuation score fell below 10%. As of November 25, 2025, the market value of Kibing Group/Xinyi Glass/CSG decreased by 78%/69%/71%, respectively, from the 2021 high; the current PB is 1.2/1.0/1.1x, respectively, and is in the 3%/8%/0.7% position since listing. Since 2025, Kibing Group (601636.SH), Xinyi Glass (00868), Nanbo (000012.SZ), and Jinjing Technology (600586.SH) have separately announced their intention to repurchase, which not only shows confidence in future development and recognition of the company's values, but also helps to motivate the company's employees.

Risk factors:

Raw material costs have risen sharply; industry competition has intensified; diversified development of leading companies has fallen short of expectations; environmental protection policies have become stricter.