Supply and demand in the float glass industry is expected to remain favourable in 2021 and 2022, and Xinyi Glass should outperform, given its capacity expansion. We raised our core profit forecasts by 24.8%, 25.0% and 19.9% for 2021, 2022 and 2023, respectively, after factoring in a higher contribution from the float glass segment. Xinyi Glass has outperformed since 2H20, but its valuation is still reasonable, with a decent yield. We maintain our ADD rating, with a higher target price of HK$36.16, based on 16x 2021 P/E (higher than the historical mean of 14x). Given its low base in 1H20, Xinyi Glass might issue positive profit alert, which might be a catalyst.
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