Analysis Report on the Impact of Inventory Cycle Fluctuations on Quarterly Performance of Flat Glass's Photovoltaic Glass

Flat Glass (601865.SS), as a leading domestic photovoltaic glass enterprise, has inventory cycle fluctuations that exert a

on its quarterly performance. Based on in-depth analysis of quarterly data from 2023 to 2025, inventory cycles can explain approximately .

Indicator	Value	Interpretation
Inventory decline (Q4 2023 → Q3 2025)	-50.6%	Dropped from RMB 2.45 billion to RMB 1.21 billion
Increase in inventory turnover rate	+63.8%	Rose from 5.8 times/year to 9.5 times/year
Reduction in inventory turnover days	-25 days	Dropped from 63 days to 38 days
Inventory-profit correlation	-0.82	Strong negative correlation

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2023 saw the photovoltaic industry still in a capacity expansion cycle. Flat Glass’s inventory gradually accumulated to a

(Q4 2023), during which:

• Total net profit: RMB 4.01 billion
  (highest annual level)
• Average gross profit margin: 26.4%
• Inventory turnover rate remained at 6-7 times/year

During this phase, the industry enjoyed robust supply and demand, photovoltaic glass prices were at relatively high levels, and the company actively stocked up to meet growing demand.

As overcapacity in the photovoltaic industry intensified, Flat Glass entered an

:

Quarter	Inventory (RMB 100 million)	QoQ Change	Net Profit (RMB 100 million)	Gross Profit Margin
2024Q1	23.1	-1.4	5.8	22.5%
2024Q2	21.5	-1.6	4.2	19.8%
2024Q3	19.8	-1.7	3.1	17.5%
2024Q4	17.3	-2.5	1.2	15.5%
2025Q1	15.2	-2.1	1.5	14.2%
2025Q2	14.1	-1.1	1.6	13.8%
2025Q3	12.1	-2.0	2.8	16.5%

:

• Inventory declined for 8 consecutive quarters, with a cumulative decrease of
  RMB 1.24 billion
• Net profit dropped from the peak of RMB 1.23 billion (Q4 2023) to RMB 120 million (Q4 2024), a decline of
  90%
• Gross profit margin fell from 26.8% to a historical low of 13.8%

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Through regression analysis, there is a significant

(correlation coefficient -0.82) between Flat Glass’s inventory changes and net profit:

Elasticity coefficient = 1.53
Implication: For every 1% decrease in inventory, net profit decreases by approximately 1.53%

This means that during the destocking cycle, a RMB 100 million reduction in inventory leads to an approximate

.

Indicator	2023 Average	Q3 2025	Change
Inventory turnover rate	6.4 times/year	9.5 times/year	+48.4%
Inventory turnover days	57 days	38 days	-19 days
Cash conversion cycle	Approx. 90 days	Approx. 65 days	-25 days

:

• Reduction in working capital occupation by approximately
  RMB 1.2 billion
• Reduction in capital costs by approximately
  RMB 50 million/year
• Significant decline in inventory write-down risks

From the data, inventory levels show a

with gross profit margin:

• 2023 inventory accumulation period: gross profit margin remained at
  26%-27%
• 2024-2025 destocking period: gross profit margin dropped to
  14%-16%

:

1. During destocking, the company adopted a
   discount sales strategy
   to clear inventory
2. Declines in raw material costs were passed on to product pricing
3. Reduced capacity utilization led to higher unit fixed costs

---

Indicator	Q2 2025	Q3 2025	Change
Inventory	RMB 1.41 billion	RMB 1.21 billion	-14.2%
Net Profit	RMB 160 million	RMB 280 million	+75%
Gross Profit Margin	13.8%	16.5%	+2.7pct
Revenue	RMB 3.66 billion	RMB 4.25 billion	+16.1%

1. Industry Supply Contraction
   • In September 2024, the top 10 photovoltaic glass manufacturers held an emergency meeting and implemented a furnace shutdown and production reduction plan
   • Annual cold repair capacity reached 25,600 tons in 2024
   • Industry inventory days fell from a high to around 15 days[1]

2. Price Bottomed Out and Rebounded
   • Photovoltaic glass prices began to rebound in August 2025
   • The price of 2.0mm glass rebounded from a low of RMB 12/m² to approximately RMB 13.5/m²[2]

3. Effectiveness of the Company’s Active Destocking
   • Inventory fell to the lowest level since 2020
   • Inventory turnover rate reached a historical high of 9.5 times/year

---

Changes in industry supply and demand
    ↓
Changes in photovoltaic glass prices
    ↓
Adjustments to the company's inventory strategy (inventory accumulation/destocking)
    ↓
Changes in inventory scale & turnover rate
    ↓
Fluctuations in gross profit margin & net profit
    ↓
Quarterly performance

Impact Dimension	Impact Degree	Explanation
Gross Profit Margin	High (40%)	Direct impact on gross profit from discount sales during destocking
Revenue Scale	Medium (30%)	Revenue reduction due to price declines
Expense Ratio	Low (15%)	Diminished economies of scale
Asset Impairment	Medium (15%)	Inventory write-down provisions

: Inventory cycle fluctuations can explain .

---

1. Inventory clearance is nearing completion
   : Inventory dropped to RMB 1.21 billion, a new low in recent years
2. Improved turnover efficiency
   : Inventory turnover rate of 9.5 times/year, exceeding the industry average
3. Price inflection point has emerged
   : Photovoltaic glass prices increased in August, and profitability is starting to recover
4. Strengthened industry self-discipline
   : Leading manufacturers limited production to protect prices, improving supply-demand relations

1. Industry capacity remains high
   : Under construction capacity is approximately 32,000 tons, which may once again impact the market
2. Downstream demand fluctuations
   : Slowdown in photovoltaic installation growth may affect glass demand
3. Raw material price fluctuations
   : Prices of soda ash and natural gas affect the cost side
4. Policy uncertainty
   : Risks from changes in photovoltaic industry policies

Indicator	Monitoring Frequency	Warning Threshold
Photovoltaic Glass Price	Monthly	<RMB 12/m²
Industry Inventory Days	Monthly	>25 days
Company Inventory Scale	Quarterly	Consecutive increase for 2 quarters
Gross Profit Margin	Quarterly	<12%

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Inventory cycle fluctuations of Flat Glass’s photovoltaic glass

its quarterly performance. The complete inventory cycle from 2023 to 2025 demonstrates the following patterns:

1. The
   destocking cycle
   led to an approximately
   77% decline in net profit
   (from RMB 1.23 billion to RMB 280 million)
2. Inventory turnover efficiency
   improved by approximately
   64%
   , releasing working capital
3. Gross profit margin
   shows a
   strong negative correlation
   with inventory levels (r=-0.82)
4. Q3 2025
   is the inventory inflection point, with performance beginning to stabilize and rebound

For investors,

. When inventory falls to a low level and turnover rate improves, it often signals the arrival of a performance inflection point.

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[1] Tianfeng Securities - Photovoltaic Glass: Cold Repairs Accelerate Capacity Contraction, Post-Holiday Prices Expected to Rebound (January 27, 2025)
[2] Soochow Securities - Supply-Side Inflection Point Has Arrived, Mass Production Breakthroughs in New Technologies (December 9, 2024)
[3] Zhongyuan Securities - Domestic New Photovoltaic Installation Demand Shrank Significantly in August (September 30, 2025)
[4] Flat Glass Group Co., Ltd. - 2025 Third Quarterly Report (October 28, 2025)
[5] Minsheng Securities - Flat Glass 2025 Half-Year Report Comment (August 31, 2025)