Glass demand: From January to August, the sales area of ​​commercial housing was 527 million square meters, a year-on-year increase of 6.7%, and the growth rate fell by 36.2 percentage points year-on-year. The negative impact of commercial housing sales began to be transmitted to the construction field. Since May 2010, the growth rate of newly started area, construction area and completed area of ​​housing has declined in a consistent manner. If the growth rate of the newly started area of ​​commercial housing declines and gradually transfers to the completed area, it will further affect the demand for flat glass.

Glass supply: While the growth rate of demand has declined, the growth rate of flat glass production capacity has maintained an upward trend. As of the end of August 2010, the total production capacity of flat glass was about 770 million weight cases, a year-on-year increase of 19.56%; the production capacity increased by 29.4% year-on-year to about 680 million weight cases. In the context of high actual production capacity growth, the total elimination capacity target of glass enterprises in 2010 was only 9.935 million weight boxes, accounting for 1.5% of the total, which was insignificant. In general, the contradiction between supply and demand in the glass industry still exists.

Glass prices and costs: Since 2010, the prices of major float glass have begun to fall from high levels. Among them, the price of 5mm float glass has dropped by 15.9% from the high point at the beginning of the year to 78.9 yuan/weight box, and the prices of coated and ultra-clear glass have remained low and fluctuated. While product prices fell, raw material prices rose sharply. The prices of heavy oil and soda ash rose by 9.8% and 12.1% from the beginning of the year, respectively, and 40.0% and 41.1% from the previous low. The price difference between glass-soda ash and heavy oil, which reflects the profitability of the glass industry, fell by 49.0% from the previous high, and profitability was greatly compressed.

Investment strategy: The contradiction between production capacity and demand in the flat glass industry is likely to be further intensified in 2010, and the weak price cannot pass on the upward pressure on the cost of heavy oil and soda ash. We believe that the downturn in the industry's prosperity will continue. At present, the PE valuation of the glass sector reflects the structural adjustment results of the rising proportion of special glass such as ultra-clear glass and coated glass among listed companies in the glass sector, while the PB level is at a high level. In view of the pessimistic expectations of industry fundamentals, maintain the investment rating of "Neutral" in the glass industry.

In the selection of individual stocks, we follow a differentiated route, avoid pure flat glass business companies, and choose special glass and related product manufacturers that benefit from the support of national industrial policies. In the context of the country's promotion of clean energy development and building energy conservation, investors are advised to pay attention to CSG A, which has a solar photovoltaic industry chain and LOW-E coated energy-saving glass, as well as its curtain wall products and engineering construction industry chain, LOW-E coated energy-saving glass business And actively involved in solar photovoltaic glass AVIC Sanxin.