Incident: On April 23, 2024, the company released its report for the first quarter of 2024. In the first quarter of '24, the company achieved revenue of about 581 million yuan, -3.67% year-on-year (10.44pct narrower than 23Q4), down 6.14% month-on-month, and realized net profit to mother of about 51 million yuan, or -37.56% year-on-year (decline narrower than 23Q4 to 58.64 pcts), up 523.00% month-on-month to 23Q4, achieving net profit of about 0.45 million yuan year-on-year. (The decline was 43.43pct narrower than 23Q4), up 189.84% from 23Q4.
Q1 Revenue declined slightly during the off-season. The first quarter was the traditional low season for the glass fiber industry. The 24Q1 company's revenue was 581 million yuan, a slight decrease of 3.67% from the 603 million yuan in 23Q1, and a slight decrease of 6.14% month-on-month from 619 million yuan in 23Q4. We think the main reason is the price. The price of thick yarn declined quarterly in '23, and the decline continued until 24Q1. According to Zhuochuang information, the average transaction price of alkali-free 2400tex direct yarn in 24Q1 was about 3,159 yuan/ton, -23.9% YoY and -4.5% month-on-month.
The gross margin rebounded slightly from 23Q4, and the cost ratio decreased slightly. Judging from the profit situation, the 24Q1 company's gross margin was about 21.55%, -6.24pct year over year, but it was 2.41 pct better than 23Q4 month-on-month. Judging from the cost situation, the 24Q1 company's fee rate was about 12.87%, -0.68pct year on year, down 1.40pct from 23Q4. Among them, sales/management/R&D/finance expenses rates were 2.38%/5.24%/4.56%/0.70%, respectively, +0.71/+1.14/-1.37/ -1.15pct, respectively. The decline in financial expenses was clearly mainly due to an increase in bank interest income. Taken together, the 24Q1 company's net profit margin was about 8.74%, up 4.75pct year on year, 7.43pct from month on month, 7.43pct higher than 23Q4, about 7.79% net profit margin after deducting non-return net profit margin, 4.28pct year on year, and 5.27pct month-on-month improvement over 23Q4.
Glass fiber achieved a general rise in price, 24Q1 or the bottom of the industry. At the end of March, all categories of thick yarn achieved a general rise. The price increase trend continued until April. According to Zhuochuang information, last week (April 12 to April 18), the market price of non-alkali kiln thick yarn continued to rise. Prices of most pool kiln manufacturers increased during the week compared to the previous period. Among them, direct wound yarn increased by 100-200 yuan/ton, and the price of joint stock yarn increased by 300-500 yuan/ton. As of April 19, the average transaction price for alkali-free 2400tex direct yarn was about 3,413 yuan/ton across the country, +5.81% month-on-month, up 9.64% from the bottom price of 3113 yuan/ton in March. We believe that the signs of price increases for both thick yarn and electronic yarn at the end of March are significant, indicating that 24Q1 or the bottom of the industry. After a 2-year downward cycle, the dark time for the glass fiber industry has passed. Whether leading companies are valued or operating at the bottom of their safety margins or have been established, Q2 performance elasticity is expected to gradually show.
The new production capacity is expected to land after the price increase, supporting the flexibility of subsequent performance. The company has a production capacity of about 300,000 tons in 23 years, and the first 150,000 ton production line of the first phase of the 600,000 ton project is expected to be put into operation at 24H1. At the same time, the Tianma production line 3 and 8 cold repair technology was initiated at the end of 23. After the construction and technical improvement projects are put into operation, the company's production capacity is expected to increase to 500,000 tons/year. The increase in production and marketing scale is expected to drive further cost reduction. It is also expected to improve the company's product performance and further increase the middle and high-end market share.
Investment advice: We believe that the current price inflection point in the industry has arrived. As the industry leader in the integrated layout of glass fiber and products, the company's production capacity grew by leaps and bounds after the release of new production capacity in 24 years, compounding the upward price inflection point, and medium- to long-term performance flexibility can be expected. We maintain our previous profit forecast. The company's net profit for 24-26 is estimated to be 3.78, 5.00, and 670 million yuan, respectively. The current price corresponds to PE of 11.68, 8.82, and 6.58 times, respectively, to maintain a “buy” rating.
Risk warning: The macroeconomic downturn exceeded expectations, overseas demand fell short of expectations or the exchange rate fluctuated sharply, the construction progress of projects under construction fell short of expectations, the new supply of the industry exceeded expectations, and the cost of raw materials exceeded expectations.