The company released the mid-year report of 2022, realizing operating income of 6.492 billion yuan, same reduction of 4.99%, attributable net profit of 1.079 billion yuan, same reduction of 51.22%, deduction of non-attributable net profit of 1.002 billion yuan, same decrease of 53.74%. Short-term float glass profits are still at the bottom, and fundamentals are expected to improve marginally with the concentrated release of demand; in the future, the continued release of photovoltaic glass, electronic glass, architectural glass and polysilicon capacity will provide growth and maintain a "buy" rating.

Matters: the company released the mid-2022 report, realizing operating income of 6.492 billion yuan, same reduction of 4.99%, attributable net profit of 1.079 billion yuan, same reduction of 51.22%, deduction of non-attributable net profit of 1.002 billion yuan, same reduction of 53.74%, net cash flow of operating activities of 586 million yuan. The second quarter income of the discount order was 3.429 billion yuan, the same as a decrease of 12.32%, the vested net profit was 557 million yuan, with a decrease of 58.53%, the non-vested net profit was 519 million yuan, with a decrease of 60.44%, and the net cash flow of operating activities was 621 million yuan.

Float glass profits are still at the bottom, engineering glass profits pick up. In the first half of the year, the real estate industry continued to decline and was affected by the local epidemic. In addition, raw fuel prices such as soda ash and natural gas rose sharply, the float glass industry faced double pressure of demand and cost, product prices declined and inventory accumulated. In the first half of the year, the company's float glass business revenue fell by 20.66%, and net profit decreased by 64.34%. However, since the second half of the year, there has been centralized cold repair in the float glass industry, and prices also bottomed out in August. Considering that the national level pays more attention to the problem of Baojiao buildings, the demand is still supported, and the profitability of the industry is expected to pick up at a low level. Although the company's engineering glass business was also affected by the epidemic and downstream demand, the price of the original glass at the cost end declined significantly, and the company actively adjusted the product structure to increase the proportion of high-end products. During the reporting period, business income increased by 1.11%, and net profit increased by 216%. In the future, under the promotion of green buildings, high-end engineering glass has a good development prospect, and the company continues to distribute production capacity in the field of engineering glass. Wujiang factory and Xianning factory reconstruction and expansion project company is expected to be basically completed this year. Hefei base, Xi'an base project has started construction, the company is expected to be put into use next year. With the gradual completion and launch of new production capacity, relying on the gold-lettered signboards of Southern Glass, the market share is expected to continue to increase.

Many factors affect the decline in the profit of photovoltaic glass, and the production line is ignited one after another to release sales elasticity. During the reporting period, the company's photovoltaic glass revenue decreased by 43.66%, and net profit decreased by 101%. We judge that the decline in revenue and profit on the one hand comes from the decline in the price of photovoltaic glass and the increase in the cost of raw fuel such as natural gas and soda ash, and the profit is at a relatively low point; in addition, the company's Dongguan production line is in a state of cold repair and technical reform in the first half of the year. we expect to have a greater impact on sales. In the long run, the growth trend of the photovoltaic industry is clear, which is expected to drive the growth of photovoltaic glass demand. The company's five 1200-ton photovoltaic glass production lines have been ignited and put into production one after another (the first line of Fengyang was ignited in May and the second line was ignited in August). And there is still capacity planning in Beihai, with the continuous improvement of scale and competitiveness in the future, photovoltaic glass is expected to become the company's new champion business.

The profit of electronic glass is declining, but the new product promotion is worth looking forward to. During the reporting period, under the influence of the local epidemic situation and the general environment, the electronic glass terminal market demand shrank and the cost increased significantly compared with the same period last year. The company's electronic glass and display business sectors achieved revenue of 810 million yuan, down 8.06%, and net profit of 112 million yuan, down 50.15%.

However, the company continues to promote new product research and development, research and development of new energy vehicle window glass new products, and successfully passed customer certification, we expect to achieve volume production in the second half of 2022; KK8 end-customer verification has achieved good results, we expect to put into the market next year. The follow-up company still has capacity expansion and new product research and development in the electronic glass field to enhance its scale and iterative ability, and its competitiveness is expected to continue to enhance in the future.

Polysilicon resumes production and thickens profits. During the reporting period, the company's polysilicon production line resumed production, benefiting from the continuous rise in silicon material / wafer prices, the company's solar energy business achieved an income of 1.434 billion yuan, an increase of 225%, and a net profit of 282 million yuan. Under the high silicon price, it is expected to contribute a larger profit increment for the whole year. According to its announcement, the follow-up company still has a big plan for polysilicon production capacity, and plans to raise funds by issuing convertible bonds to invest in the construction of a 50,000-ton high-purity silicon project in Qinghai, so as to further expand solar energy business and enhance the overall competitiveness of the group.

Risk factors: the recovery of real estate demand is not as expected; macroeconomic pressure; the company's new business expansion is not as expected; rising raw fuel costs and other risks.