Demand for photovoltaics has increased rapidly in the era of affordability, and the increase in the penetration rate of double glass has brought about alpha in the industry. As photovoltaic power generation enters the era of affordability, the installed capacity of photovoltaics will grow rapidly under the double stimulus of economic benefits and social benefits. Since double glass modules can bring power generation gains of up to 30%, the penetration rate of double-glass modules will increase rapidly, driving an annual increase of 20.2% in demand for photovoltaic glass.
The penetration rate of large components will increase rapidly, and there will be structural shortages in wide-format glass. As the penetration rate of large-sized components increases, the market demand for wide-format glass will increase rapidly. It is difficult to transform old production lines to wide widths. Demand for wide-format glass will be mainly satisfied by newly built production lines. It is expected that there will be structural shortages for wide-width glass, and new entrants can enjoy a certain latecomer advantage.
Consistency evaluation+drug safety have contributed to an increase in the penetration rate of neutral pharmaceutical glass in China, and domestic enterprises are laying out production capacity plans to promote the domestic substitution process. Neutral borosilicate glass has unparalleled superiority in ensuring the quality of pharmaceuticals. It is internationally recognized as a safe pharmaceutical packaging material, and it is also a mandatory packaging material used by countries such as Europe, America, and Japan. With the increase in domestic compliance evaluation requirements for pharmaceutical packaging materials, domestic demand for neutral drug glass will rise rapidly in the future. However, the technical barriers to this glass are high. The top two manufacturers, SCHOTT and Corning, occupy 80% of the global market, and domestic companies are actively planning production capacity to promote the domestic substitution process. The company has signed a technical service agreement with Meiying Group, and the implementation of the project will receive full technical support.
The daily-use glass business has stable profits, actively promoted projects in Pakistan, and developed overseas markets. Daily-use glass is the company's main business, and the revenue scale and gross margin level have remained stable. Fluctuations in the company's performance over the past few years have mainly been due to non-operating losses. As investment targets in the entertainment industry have already been calculated on a large scale, it is expected that the burden of history will gradually be removed, and the company's profit level will be clearly repaired in the future. Furthermore, the company actively promoted the Pakistan project to help the company develop overseas markets.
Joining hands with Meiying Group to develop neutral borosilicate pharmaceutical glass. On October 20, 2020, the company issued an announcement stating that Deli Pharmaceutical Glass and Meiying Group Co., Ltd. signed a “Technical Service Agreement” for “5.0 Neutral Pharmaceutical Glass Molded Bottles” and “5.0 Neutral Pharmaceutical Glass Tubing” for the technical consultation and service of neutral pharmaceutical glass production processes. The American Eagle Group will set up a technical support team headed by Bandini Alessandro, president of the Italian Glass Association, to support the company's pharmaceutical glass development in factory planning, electrofusion kilns, chemical formulations and related raw material standards, production process and equipment selection, mold technology, design and personnel services. On November 25, the company announced a fixed increase plan. It plans to raise 500 million yuan mainly for the neutral pharmaceutical borosilicate glass project. The construction period of the project is 24 months. After delivery, it can reach the production capacity of 10,000 tons of first-class water-resistant pharmaceutical glass control products and 2,800 tons of high-end molded bottles per year. The company's pharmaceutical glass project is progressing steadily.
Photovoltaic glass has become a new growth pole, and new production capacity has been built to produce a wide range of thin glass. The company plans to invest about 2 billion yuan to build two 1000t/d photovoltaic glass production lines, which mainly produce wide and thin glass. The two production lines will be put into operation in 2021/2022 respectively; the company signed an agreement with the Bengbu government department to enjoy lower gas and electricity costs. Furthermore, Zhongdu Ruihua Mining, in which the company has a stake, has high-quality quartz sand resources that can be used in photovoltaic glass production. Taken together, the company has a certain advantage on the cost side of raw materials.
Performance forecast: The company is expected to achieve revenue of 773/1306/3.279 million yuan in 2020-2022 and achieve net profit of 0.21/100/501 million yuan, corresponding valuation of 199.3/41.8/8.3 times. First coverage, giving it an “increase in holdings” rating.
Risk warning: Demand for photovoltaic installations has declined and industry competition has intensified; the company's pharmaceutical glass production capacity fell short of expectations; the utilization rate of pharmaceutical glass production did not meet expectations; the production capacity of photovoltaic glass did not meet expectations; the production results of photovoltaic glass did not meet expectations; the price of photovoltaic glass fell short of expectations, which led to the profitability of photovoltaic glass falling short of expectations.