Events:

On October 25, 2023, the company released the third quarter report of 2023. During the Q3 reporting period, the company realized total operating income of 2.09 billion yuan, an increase of 6.76% over the same period last year, an increase of 15.43% over the previous year, and a net profit of 162 million yuan, an increase of 224.39% over the same period last year. 6.78% lower than the previous year Q1-3 achieved a total operating income of 5.804 billion yuan, an increase of 2.14% over the same period last year, and a net profit of 423 million yuan, an increase of 1.82% over the same period last year.

The profit level increased significantly compared with the same period last year, and the glass profit improved compared with the same period last year. Q3 achieved a sales gross profit margin of 20.46%, an increase of 7.66pct, a slight decrease of 0.07pct, a net sales margin of 7.86%, a year-on-year increase of 5.33pct and a decrease of 1.80pct.

We believe that the main reason for the sharp increase in the company's profit level compared with the same period last year is that due to the depressed demand in the same period last year, the price of float glass is at a phased low, the traditional construction glass business is under great pressure, and the price of 2023Q3 float glass is up about 20% compared with the same period last year. At the same time, the price of raw materials continues to decline and production consumption decreases, so the pressure on the cost side is partially alleviated and the profit space is expanded.

Photovoltaic glass production capacity is stable, is expected to support sustained growth in 2021 the company completed ultra-white TCO coated glass substrate research and development, on the basis of high transmittance substrate have successfully developed 3.2mm and 2.65mm ultra-white TCO conductive glass, the company has established supply relations with some cadmium telluride, perovskite battery companies at home and abroad, and has been recognized by downstream customers. The company's Ningxia 600t/d photovoltaic Calendering glass production line continues to improve product production and quality indicators to provide support for domestic photovoltaic module leading enterprises, the follow-up two 1200t/d production lines have passed the hearing. Malaysia Jinjing Phase I stable production, Phase II 600t/d production line was ignited in May 2023, and the product was successfully launched in the first half of the year.

Soda price rebounds, business operation stability improves

In the first half of the year, soda ash prices fell sharply from the February high, by about 29%, so the performance was partially affected, benefiting from the continued decline in raw fuel prices in the third quarter, while soda ash prices rebounded since August and profits improved. The main body of the company's soda ash business operation is the wholly-owned subsidiary Haitian Company, with an annual production capacity of 1.5 million tons, in addition to meeting the needs of the company's glass plate, the remaining production capacity is all exported.

Earnings forecast, valuation and rating

We estimate that the company's operating income from 2023 to 2025 will be 82.5 pound 9.38 billion yuan, with a year-on-year growth rate of 10.6%, 13.7%, 15.1%, 6.2 and 45.8%, respectively, and a 3-year CAGR of 45.8%, 16.5%, 0.74 and 43.8 per share, respectively. The corresponding PE is as much as that in 15-10-9. With reference to the comparable company valuation, we give the company 18 times PE in 2024, with a target price of 11.44 yuan, maintaining a "buy" rating.

Risk tips: large-scale production of photovoltaic glass capacity leads to the risk of squeezing the company's market share, the progress of the company's photovoltaic glass expansion project is not as expected, policy regulatory risks.