Xinyi Glass: analyst raises target price

The target price for Xinyi Glass Holdings was raised to HKD 4.35 from HKD 3.31 by Morgan Stanley on expected growth as a result of increased output.
“We reiterate our “overweight“ rating and raise …

The target price for Xinyi Glass Holdings was raised to HKD 4.35 from HKD 3.31 by Morgan Stanley on expected growth as a result of increased output. “We reiterate our “overweight“ rating and raise our price target by 31% factoring in new capacity build-up in float glass and the solar ultra-clear glass segment on the one hand, and a slightly improving margin outlook on the other hand, thanks to cost reductions. Our new estimate implies 44 %, 23 % and 20 % earnings growth during 2006-2008”, Morgan Stanley said in a research note. Xinyi plans to speed up its capacity expansion in 2007, including two more float glass lines, while further integration should help generate more cost savings and capture further growth opportunities, the note said. It said Xinyi is likely to enjoy cost reductions due to the 34% decline in the price of heavy oil, which accounts for 30% of float glass production costs. “In light of the optimistic business outlook, we are raising our 2006 full year earnings per share by 11% from CNY 0.24, which translates into 2H earnings of HKD 234 million, representing 58% year-on-year and 67% sequential growth”, Morgan Stanley said. In 2007 and 2008, Morgan projects net profit to reach HKD 459 million and HKD 551 million, representing 23% and 20% year-on-year growth, respectively.