Incident: On April 25, 2024, the company released its report for the first quarter of 2024. In 24Q1, the company achieved revenue of about 4.430 billion yuan, -12.16% year-on-year, net profit of about 216 million yuan, 4.7.66% year-on-year, and net profit after deducting non-return to mother about 108 million yuan, or -70.76% year-on-year.
24Q1 glass fiber and lithium film prices are under pressure to affect performance. The 24Q1 off-season company achieved revenue of -12.16% to 4.430 billion yuan, gross margin of about 19.43%, or -5.74pct year on year, mainly due to the year-on-year decline in the prices of glass fiber and lithium battery separator products. In '23, the price of thick yarn across the country declined quarterly and continued to drop to 24Q1. According to Zhuochuang information, the average transaction price for 24Q1 was about 3,159 yuan/ton, -23.9% year-on-year, and -4.5% month-on-month; the price of electronic yarn bottomed out again after a slight rebound in the 3rd and 4th quarter of '23. The average transaction price of G75 electronic yarn in 24Q1 was about 7,338 yuan/ton, -18.8% year-on-year and -9.7% month-on-month. In terms of cost ratio, 24Q1 company's expense ratio was 14.70%, up 1.17pct year on year, and 0.38pct from 23Q4. Among them, sales/management/R&D/finance expenses rates were 1.50%/6.42%/4.65%/2.13%, respectively, -0.26/+1.46/-0.56/+0.52 pct, respectively. In 24Q1, the company's net profit margin to mother was about 4.88%, -3.31pct year-on-year.
Prices of thick yarn and fine yarn generally rose, and the bottom of the 24Q1 industry signal was obvious. At the end of March, all categories of thick yarn achieved a general rise, and the price increase trend continued until April. According to Zhuochuang information, last week (April 12 to April 18), the increase in direct winding yarn ranged from 100-200 yuan/ton, and the price increase of joint yarn ranged from 300 to 500 yuan/ton. As of April 19, the average transaction price of alkali-free 2400tex direct wound yarn/ton nationwide was about 3,413 yuan/ton, +5.81% month-on-month, up 9.64% from the bottom price of 3113 yuan/ton in March. Similarly, prices in the e-yarn market continued to rise. Last week, prices from most manufacturers increased by about 600 yuan/ton compared to the previous period, and the supply and demand pattern is improving. Currently, the mainstream price of e-yarn G75 ranges from 7,800 to 8100 yuan/ton, and the price has risen 7.19% month-on-month. The current mainstream price of electronic cloth ranges from 3.5-3.6 yuan/meter. 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.
Businesses such as wind power blades, gas cylinders, and lithium membranes are expected to continue to grow. In '23, the country added about 75.66 GW of wind power installed, +96.0% year on year. The company's blade sales volume in '23 was +4.96% to 21.6 GW (including Fu Lian in the table, same below). Wind power tender prices were low, but benefiting from the decline in raw material prices, the company's blade gross margin was +9.67pct to 18.29% year over year. The company's blade business is expected to maintain steady growth. In 24Q1, the country added about 15.50 GW of wind power installed, +49.0%. According to the China Telecommunication Union forecast, the grid-connected capacity of wind power is expected to reach 530 million kilowatts in 24, and it is estimated that the new installed capacity is expected to reach 88.66 GW in 24. After merging and consolidating, the company became the absolute leader in the domestic wind power blade industry, and its medium- to long-term competitive strength is expected to continue to improve. Domestic NEV production and sales in 2012 were 958.7 and 9.495 million units, respectively, +35.8%/+37.9%, respectively. The penetration rate reached 31.6%, up 5.9 pct from '22. Lithium battery shipments were 886 GWh, +35% year over year, and lithium battery diaphragm shipments were 17.69 billion square meters, +32.8% year over year. Domestic NEV sales volume was about 2.09 million units in 24Q1, +31.82% year-on-year. The high increase in NEV production and sales is expected to continue to drive an increase in lithium battery separator shipments. As of 23, the company's lithium battery diaphragm production capacity reached 4 billion square meters, and production capacity is expected to exceed 6 billion square meters in mid-year. We believe that the growth of the lithium battery diaphragm business is expected to accelerate as production capacity continues to expand in the medium term.
Investment advice: We believe that short-term fluctuations in the glass fiber industry will not change the company's long-term growth logic, and that diversification of the company's business is conducive to smoothing the impact of fluctuations in a single industry. We expect the company's net profit to be 2,665, 29.86, and 3,563 billion yuan in 24-26. The current price is 10.35, 9.24, and 7.74 times PE, respectively, to maintain a “buy” rating.
Risk warning: Onshore wind power installations fell short of expectations; stricter environmental controls affected capacity expansion and fiberglass yarn production; solid-state battery development exceeded expectations; demand in emerging industries fell short of expectations.