The company released its 2024 quarterly report. 2024Q1 revenue was 580 million yuan, a decrease of 3.7%, and net profit to mother was 50 million yuan, a decrease of 37.6%, and EPS 0.12 yuan. The 2024Q1 industry is still at its bottom, and the company's performance improved markedly month-on-month, and net profit to mother increased 523.0% month-on-month, highlighting profit resilience and structural advantages.
The price inflection point in the glass fiber industry has arrived, and the company's production capacity construction continues to advance. Maintain the company's buy rating.
Key points to support ratings
The 2024Q1 industry is sluggish, and the company's performance declined year on year: According to Zhuochuang Information, the average price of the mainstream glass fiber product 2400tex direct yarn 2024Q1 was 3,172.9 yuan/ton, down 26.7%, the price drop was significant, and the company's performance declined year on year; 2024Q1 revenue was 580 million yuan, down 3.7% from mother, and net profit of 50 million yuan, down 37.6%. The 2024Q1 industry is still at its bottom, and the company's net profit to mother increased 523.0% month-on-month, mainly due to 1) the company's simultaneous sale of glass fiber yarn and glass fiber products, which have structural advantages; 2) the 2023Q4 company accrued an inventory price drop of about 16.59 million yuan.
The cost ratio improved year on year, the profit level decreased year on year, and the month on month: the company's expense ratio for the 2024Q1 period was 12.9%, down 0.7 pct. Among them, the sales/management/finance/R&D expense ratio was +0.7/+1.1/-1.2/-1.4pct, respectively. The 2024Q1 gross profit margin was 21.6%, down 6.2 pcts, up 2.4 pcts month on month; net profit margin was 8.7%, down 4.7 pcts, up 7.5 pcts month over 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
We maintain our original profit forecast. We expect the company's revenue for 2024-2026 to be 30.4/37.0/3.92 billion yuan; net profit to mother of 3.4/4.9/550 million yuan; EPS of 0.83/1.19/1.37 yuan, respectively; and PE of 13.0/9.0/7.9 times, respectively. At the end of 2024Q1, glass fiber companies collectively raised prices, and the price inflection point was reached, and corporate profits may improve; and considering that the company's new production capacity will soon be launched and the technical reform of old production lines will be updated, we are optimistic about the company's performance elasticity and maintain the company's purchase 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.