J.P. Morgan lifted its target price for Xinyi Glass (00868) to HK$27 from HK$20 and upgraded its rating to "overweight" from "neutral".
The research house said its discussions with industry experts indicate that construction materials demand recovery post-CNY in 2021 will be faster than usual due to a travel restriction policy for construction workers. This would benefit glass/cement/steel sectors. JPM said glass is its top pick to play the demand recovery theme, given its strong earnings growth momentum.
With new capacity addition limited to <5% in 2021, JPM expects the glass price should stay at a high level, leading to record-high gross margins and close to 40% earnings growth in 2021. It raised its FY2021/22 earnings forecasts by 50%/44% on higher ASP assumptions.
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