Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

An inquisitive investment analyst with background in both finance and computing. Covering ECM research, biotech, market data analytics.

Asia Pac IPO & Placement Research, China biotech

Fuyao Glass Placement - Expected Deal but Expensive Valuation

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

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Equity Capital Markets

Fuyao Glass Industry Group / Equity Capital Markets

Fuyao Glass is a global&nbsp;market leader in the automotive glass segment based in China. The company&nbsp;is the dominant player in China with 63% market share by value and is the second biggest player globally with 20% market share by volume. &nbsp;While we like the company's overall prospects, however, at the high end upside might be restraint. We still remain positive on the deal and would subscribe to it given:<ul><li>The company offers a unique proxy to&nbsp;China's growing automotive market. Unlike direct investment in the shares of auto manufacturers,&nbsp;whose performance is volatile as a result of their dependence on new model&nbsp;launches, Fuyao has seen smooth revenue cagr&nbsp;of 16% from 2009 to 2014, with no YoY decline in revenue even in the tough year of 2014, thanks to its product/service quality and diversified customer base.&nbsp;</li><li>The company has been listed in A-share market for more than 20 years and the company is raising capital from international market to fund its international expansion in the US and Russia.&nbsp;</li><li>The company scores well on our IPO evaluation framework, except its valuation appears to be expensive. However, taking into consideration that the peers are not very representative of Fuyao's market leadership, we think some valuation premium to its peers is justifiable. We are also cautious about comparing Fuyao with both its Japanese peers (Asahi Glass and Nippon Glass Sheet) as they have very thin margins, low ROEs and lesser relative exposure in the auto glass.</li><li>The offer&nbsp;prices&nbsp;also represent tight discounts to its A-share compared to other dual listed shares, thus we would accumulate the its shares, but&nbsp;preferably&nbsp;not at the high end.&nbsp;</li></ul>&nbsp;

Fuyao Glass is a global&nbsp;market leader in the automotive glass segment based in China. The company&nbsp;is the dominant player in China with 63% market share by value and is the second biggest player globally with 20% market share by volume. &nbsp;While we like the company's overall prospects, however, at the high end upside might be restraint. We still remain positive on the deal and would subscribe to it given:The company offers a unique proxy to&nbsp;China's growing automotive market. Unlike direct investment in the shares of auto manufacturers,&nbsp;whose performance is volatile as a result of their dependence on new model&nbsp;launches, Fuyao has seen smooth revenue cagr&nbsp;of 16% from 2009 to 2014, with no YoY decline in revenue even in the tough year of 2014, thanks to its product/service quality and diversified customer base.&nbsp;The company has been listed in A-share market for more than 20 years and the company is raising capital from international market to fund its international expansion in the US and Russia.&nbsp;The company scores well on our IPO evaluation framework, except its valuation appears to be expensive. However, taking into consideration that the peers are not very representative of Fuyao's market leadership, we think some valuation premium to its peers is justifiable. We are also cautious about comparing Fuyao with both its Japanese peers (Asahi Glass and Nippon Glass Sheet) as they have very thin margins, low ROEs and lesser relative exposure in the auto glass.The offer&nbsp;prices&nbsp;also represent tight discounts to its A-share compared to other dual listed shares, thus we would accumulate the its shares, but&nbsp;preferably&nbsp;not at the high end.&nbsp;&nbsp;

Fuyao Glass' HK IPO: Reputable auto glass leader - Take the deal