Key takeaway

The company recorded revenue of RMB6.668bn in 1H26, down 13.81% YoY, and a net loss attributable to shareholders of the parent company of RMB363mn, including a net loss of RMB401mn in 2Q26. The earnings pressure was mainly due to continued declines in PV glass prices, lower capacity utilization, and asset impairment. Industry-wide losses are accelerating furnace shutdowns for cold repair and production cuts. Daily melting capacity in operation has fallen from the year-to-date peak of 89,700 tonnes per day to 75,800 tonnes per day. Days of inventory have also declined, while glass prices have edged up from the bottom. In the medium to long term, the company is well positioned to achieve an early recovery in profitability during industry supply rationalization and price recovery, supported by its advantages in costs, scale, self-supplied resources, and overseas presence.

Event

The company released its 1H26 report. Revenue was RMB6.668bn, down 13.81% YoY. Net loss attributable to shareholders of the parent company was RMB363mn, down 239.04% YoY. Net loss attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB376mn, down 265.52% YoY. In 2Q26, revenue was RMB2.995bn, down 18.13% YoY and 18.48% QoQ. Net loss attributable to shareholders of the parent company was RMB401mn, reversing from profit both YoY and QoQ. Net loss attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB407mn, also reversing from profit both YoY and QoQ.

Quick Take

Profitability came under significant pressure in 2Q26, mainly due to continued declines in PV glass prices, lower sales volume, and asset impairment. In 1H26, the company recorded revenue of RMB6.668bn, down 13.81% YoY, and a net loss attributable to shareholders of the parent company of RMB363mn. PV glass generated revenue of RMB5.862bn, accounting for 87.90% of the company’s revenue, with a gross margin of approximately 6.73%. It rema ined the main source of fluctuations in the company’s earnings. According to the company’s interim report, the revenue decline was mainly due to lower PV glass prices and sales volume. Costs were affected by lower sales volume and declines in the prices of certain raw materials.

Expenses and impairment losses further weighed on earnings during the reporting period. In 1H26, the company's administrative expense was RMB202mn, up 39.41% YoY, mainly due to higher spending on production capacity optimization; financial expense was RMB255mn, up 24.23% YoY, mainly due to increased foreign exchange losses; and R&D expense was RMB256mn, up 19.22% YoY. In addition, the company recognized asset impairment losses of RMB201mn, including inventory write-downs of RMB98mn and impairment losses on fixed assets of RMB103mn, mainly due to changes in supply and demand in the glass market and production line shutdowns. Despite pressure on earnings, net cash flow from operating activities reached RMB1.341bn in 1H26, down only 4.27% YoY, while net cash outflow from investing activities narrowed significantly YoY, indicating relatively stable cash flow.

Industry supply has entered a phase of accelerated capacity clearing, and the supply -demand balance for photovoltaic glass is expected to improve gradually. In 1H26, photovoltaic glass prices fell close to cash cost due to demand adjustments and excess capacity, leaving the industry broadly loss-making; persistently low prices prompted high-cost and outdated furnaces to undergo cold repair or permanent shutdown, while the rollout of new capacity slowed. As supply continues to contract and demand recovers moderately in 2H26, the industry's supply-demand imbalance is expected to ease. FLAT has advantages in technology, scale, customer resources, and cost control. As inefficient capacity continues to exit, the company is expected to benefit from higher industry concentration and a recovery in profitability.

Earnings forecast: We expect the company's net profit attributable to shareholders of the parent company to be RMB-749mn, RMB536mn, and RMB1.079bn in 2026-2028, respectively, representing YoY growth of -176.4%, 171.59%, and 101.1%. EPS is projected at RMB-0.32, RMB0.23, and RMB0.46, respectively, corresponding to PE ratios of -31.9x, 44.56x, and 22.16x based on the closing market capitalization on August 25.

Risks: 1. Intensified industry competition. According to the statistics from photovoltaic glass hearings by the Ministry of Industry and Information Technology across various provinces, there is a significant amount of photovoltaic glass capacity under construction or planned in China. If these capacities are activated simultaneously at a certain point, there could be a short-term risk of a price war in the glass sector; 2. Rising costs of raw materials. The main raw materials for photovoltaic glass include soda ash, quartz sand, and natural gas. Rapid price increases of these products could lead to a narrowing of the gross margin for photovoltaic glass; 3. Photovoltaic industry demand below expectations. We forecast the company's shipment volume based on the assumption that demand in the photovoltaic industry will maintain annual growth of 20%-30% over the next few years. If photovoltaic industry demand falls short of expectations, the company's glass shipment volume may also be lower than our forecast.