Key takeaway

2Q26 revenue beat consensus, while profit missed. The sharp revenue growth mainly benefited from surging sales through heat-resistant glass e-commerce channels and overseas business, as well as rising sales of medium borosilicate molded vials and RTU products. Profit swung to a loss mainly due to continued brand investment by the Hangzhou e-commerce company and the concentrated recognition of share-based payment expenses, which weighed on earnings. Looking ahead to 3Q26, the pharmaceutical packaging segment is expected to maintain growth, driven by price increases for medium borosilicate products and rising sales of new molded vial and RTU products. The heat-resistant glass segment is expected to sustain rapid growth, supported by e-commerce channels and overseas brand operation centers. The overseas capacity bottleneck is expected to ease after the Brazil production base commences operations. On the profit side, losses from the e-commerce business are expected to narrow as economies of scale emerge. Together with the stabilization of share-based payment expense allocation, this should improve the company's profitability QoQ. In new materials, the company is expected to continue advancing glass substrate sample delivery and validation.

Event

The company released 1H26 earnings results

In 1H26, the company recorded operating revenue of RMB673mn, up 34.93% YoY; net profit attributable to shareholders of the parent company of RMB31mn, down 23.95% YoY; net profit attributable to shareholders of the parent company excluding non-recurring gains and losses of RMB25mn, down 13.09% YoY; and EPS of RMB0.12, down 33.33% YoY.

Risks:

1) Risk of continued losses in the e-commerce business: The Hangzhou e-commerce subsidiary remains in the investment phase. If brand building and traffic conversion fall short of expectations, losses may persist and weigh on the company’s overall profitability.

2) Risks from downstream pharmaceutical demand and centralized procurement policies: Demand for pharmaceutical glass is closely linked to the business conditions of the downstream pharmaceutical industry and the pace of centralized procurement. If price reduction pressure from centralized procurement is passed upstream, it may affect the company’s product prices and gross margin.

3) Risk of fluctuations in raw material and energy prices: Raw materials and energy account for a relatively high proportion of the company’s costs. Price fluctuations may place pressure on its cost base.

4) Risk that new projects and overseas production bases fall short of expectations: Overseas production bases in Brazil and Egypt, as well as new projects such as glass substrates for advanced packaging, are under construction or commissioning. Their construction progress, capacity ramp-up, and customer validation remain uncertain.

5) Some of the above risks are unpredictable (such as fluctuations in the macroeconomic environment, changes in policies for the glass materials industry, or changes in the company's business plans), which may result in our profit forecasts falling short of expectations.