Leading float glass manufacturer with strong shareholders

The company now has 13 float glass production lines with a daily melting capacity of 6900 tons; in addition, it also has offline low radiation coated glass production line and photovoltaic glass processing production line. The company's production base or close to the main consumption center, or close to the producing area of energy and resources, the market competitive advantage and cost advantage are obvious. Kaisheng Technology Group, the major shareholder of the company, is a wholly-owned subsidiary of China National Building Material Group Co., Ltd. Bengbu Glass Industry Design and Research Institute is the largest grade A glass process design and research institute in China with strong R & D strength. In addition, Kaisheng Group still has a large scale of unlisted glass assets, China Glass as the group's efforts to build a "high-quality float and specialty glass business platform", there is still a greater possibility of asset injection in the future. The strong shareholder background is the strong backing for the steady development of the company.

It is expected that the supply and demand of the glass industry will maintain a tight balance, and the momentum of price growth still exists in the first half of 2020. The profits of national glass production enterprises have been greatly affected by the COVID-19 epidemic, and there are a large number of cold repair and suspension production lines. In the second half of the year, with the decline in the price of soda ash upstream and the higher-than-expected demand downstream of glass, the prosperity of glass production enterprises gradually rebounded. In 2021, with the effective control of the COVID-19 epidemic in China, the rapid development of the real estate industry led to the rapid destocking of the glass industry, and the glass price showed a V-shaped reversal. In the second half of the year, due to the impact of the outbreak of the photovoltaic industry and the recovery of automobile demand, the glass demand increased significantly in 2021, and the overall price of the industry remained high. Looking to the future, on the one hand, in order to achieve the goal of "double carbon", the policy will continue to strictly control the carbon emissions of high energy-consuming industries such as glass, strictly prohibit the addition of new floating normals, and the production capacity of the supply side is limited; while the demand side benefits from the outbreak of the photovoltaic industry, the release of demand for real estate completion, and the warming of car demand, it is expected that the supply and demand of the glass industry will remain tight in the short term, and glass prices are expected to remain high.

The company's profit level has improved significantly in the middle of 2021.

As of June 30, 2021, the company achieved a main business income of 2.025 billion yuan, an increase of about 73% over the same period last year; a gross profit of 715 million Hong Kong dollars, an increase of 283% over the same period last year; and a net profit of 273 million yuan, turning a loss into a profit. an increase of 521 million yuan over the same period last year (- 248 million yuan in the same period last year). Revenue and profits increased significantly in the middle of 2021. The medium-term gross profit margin was 35.3%, a sharp increase of about 19.4 percentage points over the same period last year. The sharp increase in gross profit margin is mainly due to the sharp rise in the price of glass products and the improvement of the company's management efficiency. Although the price of glass products has fallen somewhat since the fourth quarter, from the perspective of the whole year, the price is still high, and we expect the company's annual gross profit margin in 2021 to be higher than in the middle of this year.

Profit forecast

We estimate that the operating income of the company in 2021 will be 51.08,58.74 and 6.461 billion yuan respectively, and the net profit will be 8.16,9.64 and 1.074 billion yuan respectively, and the corresponding EPS will be 0.45,0.53,0.59 yuan respectively.

Risk hint

Upstream materials and fuel costs rose faster than expected; real estate completed area, car sales were lower than expected; capacity growth was lower than expected.