Blue chip Shanghai Yaohua Pilkington Glass Co. has been one of the few stars of the Shanghai B share market, but analysts differ about its prospects.
While some emphasize Yaohua“s position as a lead…
Blue chip Shanghai Yaohua Pilkington Glass Co. has been one of the few stars of the Shanghai B share market, but analysts differ about its prospects. While some emphasize Yaohua“s position as a leading Chinese high-quality glass producer, others see competition intensifying because of a sharp increase in national output capacity. The firm was to publish its 1995 annual results in early April, said Gui Xintian, secretary of the Yaohua general manager“s office. He declined to give forecasts ahead of the official publication. In 1994, the firm posted a post-tax profit of 250.19 million yuan (US$ 30.06 million) on turnover of 628.2 million yuan, using international accounting standards. Yaohua has a broad export base to balance its foreign exchange exposure and alleviate sluggish demand in China caused by government austerity measures. Its glass is mainly used in big construction projects, luxury properties and the auto industry, all sectors likely to be hit by a tight credit policy this year. Despite intensifying competition from domestic and overseas producers amidst a potential over-supply situation, reputable product quality, good management and capacity expansion will underpin a superb performance in 1996 and 1997, the company said. Mr. Xintian said the new production line had started commercial operation this year and would add 60,000 tonnes to production capacity, which would total 240,000 tonnes in 1996. About 60% of the company“s output in 1995 was exported and 40% sold on the domestic market, where prices are slightly higher, he added. Some analysts were less optimistic, estimating net profit at 220 million yuan in 1995, 269 million in 1996 and 238 million in 1997. With China“s high-quality float glass capacity growing fast, domestic prices will continue to soften, squeezing margins. A weak domestic market means the firm will continue to rely this year on exports, where prices are 20% lower than on the domestic market. Earnings in 1997 will be affected by a 10-week shutdown of its first production line for maintenance.