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

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

Glass price and cost: Since 2010, the price of major float glass has begun to fall at a high level. The price of 5mm float glass has dropped 15.9% from the beginning of the year to 78.9 yuan per weight box. The price of coated and ultra-clear glass has remained low and fluctuated. While product prices are falling, raw material prices have risen sharply. The prices of heavy oil and soda ash have risen by 9.8% and 12.1% respectively from the beginning of the year, and have increased by 40.0% and 41.1% respectively from the previous low. The price difference between glass-soda ash and heavy oil, which reflects the profitability of the glass industry, dropped by 49.0% from the previous high, and profitability was significantly compressed.

Investment strategy: The contradiction between production capacity and demand in the flat glass industry is facing the possibility of further intensification in 2010, and the weak price cannot be passed on to the rising pressure of the cost of heavy oil and soda ash. We believe that the industry's downturn will continue. The current PE valuation of the glass sector reflects more of the structural adjustment results of the increase in the proportion of special glass such as ultra-white 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 the industry's fundamentals, the investment rating of "Neutral" for the glass industry is maintained.

In the selection of individual stocks, we follow a differentiated route, avoid pure flat glass business companies, and select special glass and related product manufacturers that benefit from the support of national industrial policies. Under the background 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, and a curtain wall product and engineering construction industry chain, and LOW-E coated energy-saving glass business And actively involved in solar photovoltaic glass AVIC Sanxin.