Fuyao maps bold 'going global' strategy

Updated: 2015-03-31 08:05

By Celia Chen in Hong Kong(HK Edition)

  Print Mail Large Medium  Small 分享按钮 0

Although the share price of Fuyao Glass Industry Group Co Ltd was priced at the top end of the offer range in the company's Hong Kong initial public offering, Chairman Cao Dewang is not impressed.

At the striking price of HK$14.8 apiece, "it's very cheap", he said. But, of course, he has to be patient because he has undertaken to withhold from selling any of the shares in Fuyao he owns for at least one year after the company's debut on the Hong Kong bourse on Tuesday.

Within that time, anything can happen, Cao warns. What seems to worry him most is the worsening of the business climate on the mainland, where his company is the largest supplier of, among other things, glass products for the automotive industry.

"A prolonged slowdown of the mainland's GDP growth would have negative effects on the automotive glass industry as the sluggish economy will directly hit the auto industry," he said.

Apparently, that's also the consideration weighing on the minds of many bankers and stockbrokers in evaluating Fuyao's offer - the largest IPO in Hong Kong so far this year, raising a total of $950 million.

"Hong Kong, as a global platform, can provide international funds to support our world-wide development, despite the fact that it's not viable for us to build glass factories in the city," Cao told China Daily in an exclusive interview.

Fuyao maps bold 'going global' strategy

He's determined to focus only on making glass products for the automotive industry. "I have zero intention to diversify into producing glass panels for buildings or smartphones. I only do what I can do best."

But he seems keen to diversify markets by building factories close to his overseas customers in their respective countries. "I follow my customers to wherever they are," Cao said. "Now, the governments of many countries are talking about localization of car production. So, I'm following the car makers to all continents of the world."

Of all the markets, Cao considers the US to be the hardest to crack. But he's not giving up.

"Surely, Fuyao will make further investment in the US," he said. "We see a window of opportunity because our competitors in the US do not update their equipment and technology in glass repair or replacement as frequently as we do."

Cao believes that Fuyao's original equipment manufacturer business has great growth potential. "We only have 20 percent of market share. But, I'm sure we can do a lot better than that."

The company's other market potential is Russia despite the latest economic problems that have sent the ruble tumbling against most major world currencies.

"Our customers, such as General Motors and Honda, are expanding their production bases in Russia, so I will follow them and build glass factories there," says Cao. "The risk of investing in Russia can be minimized by keeping our investments manageable."

But Cao is keeping his company from joining the rush by many mainland enterprises to build production facilities in various low-cost manufacturing bases in Southeast Asia.

"What we care most are abundant funds and advanced technologies, which support automotive glass making rather than cheap labor," he adds.

"We expect Fuyao's forays into the US and European markets to offer new room for growth," China International Capital Corp analyst Wei Feng, who have a "buy" rating on the company's domestic shares, wrote in a report.

"It boasts stronger profitability than its overseas rivals, thanks to its advantages in cost, technology and management."


 Fuyao maps bold 'going global' strategy

Fuyao Glass' advantages in cost, technology and management would propel its profitability in overseas markets, analysts say. Provided to China Daily

(HK Edition 03/31/2015 page8)