Fuyao Glass looks to new era as its founder bows out

The son of celebrated entrepreneur Cao Dewang has formally taken the helm at the automotive glass giant, just as the firm unveiled upbeat quarterly earnings

Key Takeaway:

• The company logged double-digit growth in revenue and profit, and its operating cash flow surged, but its shares slipped 
• In a long-anticipated handover, Cao Hui moved up from the position of vice chairman after a long career in the business founded by his father

By Lee Shih Ta

It could be said that Cao Dewang went out on a high.

The man who built Fuyao Glass Industry Group Co. Ltd. (3606.HK; 600660.SH) into a world leader in the automative glass industry passed the corporate baton to his son this month, just as the business announced bumper earnings.

The handover came as no big surprise, and profits were up, but investors were nevertheless cautious about the company’s prospects under the new leadership, as it sharpens its focus on smart glass and other value-added products.

Dubbed “the king of glass”, the outgoing chairman enjoys storied status in China as a pioneering entrepreneur who turned a tiny windshield business into an international powerhouse. Cao, who also goes by the name Cho Tak Wong, resigned as chairman in mid-October after nearly four decades at the helm, to be succeeded by his son, previously his second in command.

In his elevated role, the new chairman presided over a positive set of earnings.

Double-digit growth

Fuyao Glass revenues rose 18.9% to 11.85 billion yuan ($1.67 billion) in the third quarter from the same period a year earlier, while net profits rose 14% to 2.26 billion yuan. Over the nine months to end-September, revenues jumped 17.6% to 33.3 billion yuan from the prior-year period and net profit surged 28.9% to 7.06 billion yuan, defying a broader slowdown in the manufacturing sector.

Fuyao’s cash position also remains strong. Net operating cash flow for the first three quarters reached 9.89 billion yuan, a year-on-year jump of 57%. As of end-September, cash and cash equivalents stood at 21.86 billion yuan, well above short-term liabilities. On finance costs, the company even logged a net credit of 923 million yuan, indicating that interest income exceeded expenses.

In other words, the new leadership has inherited a cash-rich giant with a solid balance sheet to drive its onward strategy.

However, the earnings tally did not fully satisfy investors, as softer quarter-on-quarter figures and lower foreign exchange gains weighed on sentiment. On the day after the announcement, Fuyao’s Shanghai-listed shares opened lower and slid more than 5%, while its Hong Kong shares fell to HK$67.5. Over the next week, the stock fluctuated between HK$68 and HK$70, hovering around 3.7% below pre-announcement levels.

Fuyao’s brand has long been inextricably linked with its celebrated founder. From its humble beginnings in 1987 as a factory in Fujian province, the company now ranks as China’s largest automotive glass supplier and the second biggest in the world, deeply integrated into global supply chains. Its U.S. expansion was featured in the award-winning 2019 documentary “American Factory”, which focused on a Fuyao plant in Ohio that was formerly owned by General Motors.

By 2024, Fuyao was operating plants in 12 countries with a 70% market share in China, 43% in the United States and around 20% in Europe.

In stepping back, Cao Dewang cited his advanced age and a desire to let the next generation take care of Fuyao’s future, although he remains a director and was granted the lifetime title of honorary chairman.

Taking the reins

Cao Hui, who is also known as Tso Fai, joined his father in the family business in 1989, going on to head its North American operations and serve as group president. He notably led the legal team that won a landmark victory in a 2001 U.S. anti-dumping case. After a period of entrepreneurship, he folded his company into Fuyao’s ecosystem, strengthening its presence in the aftermarket glass business.

Analysts are not expecting the company to change course under the new boss. Huatai Securities noted in a report that daily operations should be unaffected, with governance and decision-making frameworks already firmly in place. Soochow Securities maintained its “buy” rating, citing Fuyao’s strong market position and clear R&D strategy. Morgan Stanley said business progress remained on track, with revenues hitting records and gross margin edging higher, despite the slippage between quarters.

Fuyao is expected to keep its focus on product innovation. From 2020 to 2024, the company’s R&D spending rose from 816 million yuan to 1.68 billion yuan, outpacing revenue expansion with a compound annual growth rate of 19.8%.

The company has rolled out a series of value-added products, transforming itself from a traditional manufacturer into an innovator in smart glass and automotive electronics. The premium products include head-up-display (HUD) glass that incorporates driving data, glass with an integrated 5G antenna, and solar glass. The high-value products now exceed half of total output, raising the company’s average selling price by nearly 7% year on year.

Fuyao’s international expansion is also gathering pace. Overseas sales reached around 17.56 billion yuan in 2024, accounting for about 45.35% of total revenue.

The company’s price-to-earnings ratio stands at about18.3 times, slightly below the 19.9 times for Xinyi Glass (0868.HK) but above the 16 times for Saint-Gobain (SGO.PA).

While Fuyao enjoys a firm global footprint and robust cash flow, investors will still be watching to see whether it can maintain its expansion pace. If fourth-quarter earnings are strong, the stock could have room to rise.

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