The company released its 2023 annual report, with annual revenue of 2.61 billion yuan, a decrease of 13.6%, a net profit of 300 million yuan, a decrease of 63.8%, and EPS of 0.72 yuan; of these, 2023Q4 revenue was 620 million yuan, a decrease of 14.1%, and net profit to mother of 0.1 billion yuan, a decrease of 96.2%. The price inflection point in the glass fiber industry has arrived, and the company's production capacity construction continues to advance, maintaining the company's purchase rating.
Key points to support ratings
Sluggish industry sentiment dragged down performance: According to Zhuochuang Information, the average price of the mainstream glass fiber product 2,400 tex wound direct yarn 2023/2023Q4 was 3,908.9/3,335.1 yuan/ton, respectively, down 27.6/ 22.4%; the price drop weighed on the company's performance. The company's revenue for the full year of 2023 was 2.61 billion yuan, a decrease of 13.6%, a net profit of 300 million yuan, a decrease of 63.8%, and EPS of 0.72 yuan; of these, 2023Q4 revenue was 620 million yuan, a decrease of 14.1%, and net profit to mother was 0.1 billion yuan, a decrease of 96.2%.
Expenses increased year-on-year, and profit levels declined year-on-year: the company's expense ratio was 14.3% in the 2023Q4 period, up 1.4 pct. Among them, sales/management/ financial/ R&D expense ratios were +1.8/+1.6/-2.3/+0.3 pct, respectively. The 2023Q4 gross profit margin was 19.1%, down 8.0 pcts from the same period, down 4.9 pcts; the net profit margin was 1.2%, down 28.5 pcts from the same period, down 10.1 pct from the previous month.
Production capacity construction continues to advance, and flexibility is sufficient: The construction of the company's 600,000-ton high-performance glass fiber intelligent manufacturing base continues to advance. The 30,000 ton production line in Changzhou Tianma was renovated at the end of 2023, and it is proposed to be technologically converted to an 80,000 ton high-end high-performance glass fiber and special fabric production line. The total production capacity of the above two projects will increase by 650,000 tons.
Leading companies collectively raised prices, and industry inventories declined markedly: At the end of March 2024, leading companies in the glass fiber industry issued price increase letters one after another. Among them, direct yarn prices of mainstream varieties increased by 200-400 yuan/ton, and the price of joint stock yarn increased by 300-500 yuan/ton. According to Zhuochuang Information, the price increase has been gradually implemented; in March 2024, the industry's inventory was 794,000 tons, a decrease of 12.4% /112,000 tons; the number of inventory days was 41.6 days, a decrease of 6.7 days from the previous month; stimulated by price increases at the end of March, the enthusiasm for midstream and downstream pick-up increased.
valuations
The price of 2023Q4 glass fiber fell again at the bottom, and we lowered our original profit forecast. The company's revenue for 2024-2026 is estimated to be 30.4/37.0/3.92 billion yuan; net profit to mother will be 3.4/4.9/560 million yuan; EPS will be 0.83/1.19/1.37 yuan, respectively; and PE will be 11.9/8.3/7.3 times, respectively. At the end of 2024Q1, glass fiber companies collectively raised prices. The price inflection point is now, and corporate profits are expected to improve; and considering the upcoming launch of the company's new production capacity, we are optimistic about the company's flexibility in mid-term performance and maintain the company's buying rating.
The main risks faced by ratings
Glass fiber production capacity exceeded expectations, raw material and fuel costs rose, and demand for glass fiber fell short of expectations.