According to a research report released by Morgan Stanley, the bank maintains its In-Line rating on FUYAO GLASS (03606) H-shares with a target price of HK$53.5.

The bank expects the company's third-quarter performance to broadly follow the trend seen in the second quarter, with average selling price growth offsetting sales volume declines. Third-quarter revenue is expected to record single-digit growth on both a year-on-year and quarter-on-quarter basis, while profit growth is expected to turn positive year-on-year, mainly benefiting from a narrowing of exchange losses.

Morgan Stanley noted that China's automobile production fell 6% year-on-year in the third quarter, compared with a 3% year-on-year decline in the second quarter. Destocking of aftermarket glass continued to weigh on results in the third quarter, though the year-on-year decline was relatively modest. Original equipment glass sales were dragged down by weak automobile production, while aftermarket glass sales continued to decline as key customers destocked, although average selling prices for automotive glass kept rising.

The bank expects gross margin to remain resilient year-on-year in the third quarter, with product mix improvement expected to offset the impact of lower capacity utilization. Management targets a gross margin of 38% by the second half of 2026.

The company recorded an exchange loss of RMB 120 million in the third quarter of 2025, compared with an exchange gain of RMB 602 million in the first half of 2025. The bank expects Fuyao Glass's third-quarter core operating profit from automotive glass to be broadly in line with expectations, with the impact on consensus earnings per share forecasts for the next 12 months remaining largely unchanged.