The company released its 2023 annual report, with annual revenue of 25.89 billion yuan, an increase of 0.3%; net profit to mother of 2.22 billion yuan, a decrease of 37.8%; net profit of 1.96 billion yuan after deducting non-return to mother, a decrease of 10.7%; and EPS of 1.33 yuan. Among them, 2023Q4's revenue was 7.66 billion yuan, a decrease of 4.3%; net profit due to mother was 520 million yuan, a decrease of 54.3%; net profit after deducting non-return to mother was 4.7 billion yuan, a decrease of 16.4%; and EPS of 0.31 yuan. We continue to be optimistic about the company's strategy around the layout of new materials and new energy sources, and maintain the company's purchase rating.
Key points to support ratings
The supply and demand for 2023Q4 glass fiber, blades, and lithium film continued to be weak, and profits declined year-on-year: the overall supply of the company's three main businesses exceeded demand, and price competition was fierce. In particular, the price of the glass fiber industry dropped significantly in 2023Q4; according to Zhuochuang Information, the average price of 2400tex direct wound yarn, the mainstream 2023Q4 glass fiber product, was 3,335.1 yuan/ton, down 22.4%, putting pressure on the company's performance. The company's 2023Q4 revenue was 7.66 billion yuan, a decrease of 4.3%; net profit due to mother was 520,000 yuan, a decrease of 54.3%; net profit after deducting non-return to mother was 4.7 billion yuan, a decrease of 16.4%. Profitability improved month-on-month: 2023Q4 gross profit margin of 25.2% and net profit margin of 9.1%, with year-on-year changes of +3.2/-6.7pct, respectively, and an increase of 2.8/1.3 pct month-on-month.
The contribution of lithium film to performance increased significantly: according to the company's announcement, glass fiber/blade/lithium film accounted for 29.2%/33.0%/8.5% of revenue in 2023, a year-on-year change of -3.9/-1.5/+1.7 pct; the share of glass fiber/lithium film in net profit was 36.8%/27.2%, respectively, a year-on-year change of 38.5/14.4 pct.
Competition in the industry is intensifying, and leading companies have endogenous motivation: 1) Glass fiber: the company's product structure was optimized, and sales of wind power/thermoplastic/export products increased year-on-year in 2023, cushioning the industry's price reduction pressure; in parallel with capacity expansion and upgrading, Taiyuan's first line of 150,000 tons is expected to be put into operation in 24Q3, and 50,000 tons of the Zoucheng 5 line and the F01 to F05 line at the Manzhuang base are scheduled to start cooling. 2) Blades: In 2023, the company sold 5.6MW/set of wind power blades, with a year-on-year increase of 23%. It is expected to further increase to 6MW this year. As the proportion of sea breezes increases and the product structure is optimized, it can hedge against price reduction pressure to a certain extent; the company has 13 domestic production bases and 1 overseas base, which has an advantage in layout. 3) Lithium film: By the end of 2023, the company had a base film production capacity of 4 billion square meters, and H1 is expected to reach 60+ billion square meters in 2024; in 2023, the company's coating products account for about 30%, and it is expected to increase further this year. Advanced production capacity investment and product structure optimization help the company maintain profitability when industry prices drop.
valuations
Supply and demand in the glass fiber, blade, and lithium film industries are weak, price competition is fierce, and the company's performance is under pressure. We have adjusted our original profit forecast. The company's revenue for 2024-2026 is estimated to be 287.5/324.5/36.64 billion yuan; net profit to mother will be 21.6/28.7/3.72 billion yuan; EPS will be 1.29/1.71/2.22 yuan, respectively; and PE will be 12.5/9.4/7.2 times, respectively. In the medium to long term, we are optimistic about the company's strategy around the layout of new materials and new energy sources, and maintain the company's purchase rating.
The main risks faced by ratings
Production capacity of glass fiber, blades, and lithium film has exceeded expectations, raw material and fuel costs have risen, and demand has fallen short of expectations.