The company achieved net profit of 216 million yuan in the first quarter, down 47.66% year on year. The company released its quarterly report. 24Q1 achieved revenue/net profit of 4.430/216 million yuan, -12.16%/-47.66% year-on-year, and 24Q1 realized net profit without return to mother of 108 million yuan, -70.76% year-on-year. Non-recurring profit and loss were mainly government subsidies included in current profit and loss.
Glass fiber profits bottomed out during the completion phase, and sales of diaphragms and blades may continue to grow at a rapid rate 1) Glass fiber prices are expected to drop more, and Q2 profits are expected to pick up: 24Q1 glass fiber sales may increase year over year, but prices continue to decline. According to Zhuochuang Information, the average price of 24Q1 2400tex direct wound yarn ton was 3067 yuan, -6%/-25% month-on-year, respectively. As of the end of March, the price had risen steadily to 3,492 yuan/ton. We expect the price and profit of the company's 24Q1 glass fiber products to decline month-on-month, and Q2 profits are expected to pick up. We calculate that in response to the price increase, the company's Q2-Q4 net profit increased by about 200 million yuan, accounting for 10% of net profit deducted from non-return to mother in '23. We believe that demand for glass fiber is expected to increase steadily over the same period last year. Although the industry is likely to add more production capacity, considering the timing of ignition and supporting cooling, the actual supply impact is expected to be lower than expected, and prices are expected to gradually recover.
2) The blade performance contribution is expected to be limited. Blade sizing drives growth: Q1 is usually a low season for downstream installed capacity. 24Q1 wind power added 15.5 million kilowatts of installed capacity, +33% over the same period, accounting for 20% of the new wind power installed in 23. We expect the Q1 blade business contribution to be limited. The company's blade sales volume and gross margin both increased in '23, and revenue fell slightly year-on-year due to falling prices. The company completed the acquisition of 100% of China Fulianzhong's shares and built and put into operation at several domestic and foreign bases. With the large-scale development of blades, the company's blade sales are still expected to grow in '24, while increasing overseas share or driving up profits.
3) Diaphragm production and sales are expected to grow well, and downstream demand is booming: The downstream diaphragm is booming, fully benefiting from the growth in demand in the NEV and energy storage markets. The company has followed the trend and steadfastly expanded production (reaching 4 billion square meters in 23 years, and the company expects to exceed 6 billion square meters in mid-24). We expect 24Q1 production and sales to maintain a good growth trend, but due to intense price competition in the industry, we think the company's lithium film sales growth is still quite elastic (Net profit of the subsidiary Sinoma Lithium Film in '23 7.44 billion).
The 24Q1 company's overall gross profit margin was 19.43%, -8.65/-5.77pct, which was mainly affected by price declines. The cost ratio for the period was 14.70%, +0.64pct year on year. Among them, sales/management/R&D/finance expenses were +0.17/+1.00/ -0.75/+0.22pct, respectively, and finally achieved a net profit margin of 6.58%, and -5.62/-2.52 pct year over month, respectively. The balance ratio at the end of 24Q1 was 53.99%, +3.33pct year over year. Net operating cash flow was 1.757 billion yuan, or 628 million yuan year on year, mainly due to the current payment ratio of +27.16 pct year on year reaching 115.51%.
Resonance is rising, growth momentum continues to be enhanced, and the characteristics of maintaining the “buy” grade fiberglass boom are obvious compared to the bottom in history. After integration, benefits improved rapidly, and the steady expansion of diaphragm production maintained a high level of prosperity. Maintain the company's 24-26 net profit forecast to 25.0/30.6/3.67 billion, yoy +12%/+22%/+20%. Referring to comparable companies, the company was given 15 times PE in 24 years, corresponding to a target price of 22.33 yuan, and maintained a “buy” rating.
Risk warning: Glass fiber supply exceeded expectations; wind power installation fell short of expectations; lithium film customer development and cost fell below expectations; uncertainty about the integration and implementation of China Jushi assets.