The 24Q1 revenue/net profit ratio was -3.7%/-37.6%. Maintaining the “purchase” rating, the company published its quarterly report for the year 24:24Q1 achieved revenue/net profit of 5.8/50 million yuan, -3.7%/-37.6% year over year. The year-on-year decline in glass fiber prices affected the company's profit, but at the end of March, the glass fiber industry began to raise prices under the influence of factors such as marginal improvement in supply and demand. It is expected that Q2's profitability will recover significantly. Considering that the price increase of glass fiber has been implemented relatively well since April, we raised the company's 24-26 net profit forecast to 2.9/4.1/62 billion yuan, which is comparable to the company Wind's consistent expected average of 20xPE in 24 years. Considering that the company's products account for relatively high profitability or strength, but the pace of commissioning is relatively slow, giving the company 20xPE for 24 years, with a target price of 14.40 yuan, maintaining a “buy” rating.
The decline in 24Q1 revenue was less than the average price of the industry. The gross margin declined significantly year-on-year but rebounded month-on-month. According to Zhuochuang Information, the average price of 24Q1 glass fiber wound direct yarn/SMC bonded yarn/G75 e-yarn was -26%/-18%, and -6%/-1%/-7% month-on-month, respectively, while the company's revenue fell only 3.7% year on year. We think it was mainly due to the company's overall product structure adjustment. The 24Q1 company's overall gross profit margin was 21.6%, or -6.2/+2.0pct. The year-on-year decline was mainly due to a year-on-year decline in prices, a month-on-month increase, or a relatively good overseas profit due to an increase in the share of Q1 exports (according to Zhuochuang Information, China exported 530,000 tons of glass fiber and products in 24Q1, +12.4% year over year).
The R&D/finance expense ratio declined markedly. Net operating cash flow was -49.7% compared to the 24Q1 company period, -0.7 pct. Among them, the sales/management/R&D/finance expense ratio was 2.4%/5.2%/4.6%/0.7%, +0.7/+1.1/-1.4/-1.2pct. The significant decrease in financial expense ratio was mainly due to an increase in bank interest income. The net profit margin of the 24Q1 company was 7.8%, -5.7pct year on year, mainly due to a decline in gross margin. The 24Q1 net operating cash flow was 50 million yuan, or -49.7% year-on-year, mainly due to a decrease in sales repayments and an increase in term deposit payments.
Glass fiber price increases are gradually being implemented, and we look forward to a recovery in profitability in Q2
According to Zhuochuang information, as of the end of March '24, the domestic glass fiber yarn sample inventory was 794,000 tons, or 112,000 tons month-on-month. The inventory declined markedly, driven by improvements in supply and demand and price increases. Price increases in the glass fiber industry were gradually implemented in April. As of April 20, the price of 2,400 tex direct wound yarn/SMC bonded yarn/G75 e-yarn was 3,400/4100,7950 yuan/ton, +12.1%/+5.8%/+9.7% month-on-month. The price increase is expected to drive the company's profitability in Q2 to be significantly restored. Meanwhile, the company's 600,000-ton intelligent manufacturing base and 80,000-ton technical improvement project continue to advance steadily, and the company's production capacity and production efficiency are expected to increase further after completion.
Risk warning: risk of price fluctuations of raw materials, risk of technological upgrading, risk of further deterioration of supply and demand.