The company achieved net profit deducted from mother of 165 million yuan in the first quarter, an increase of 95.94% over the previous year. In 24Q1, the company achieved revenue/net profit of 17.75/ 170 million yuan, -6.79%/+94.02%, and realized net profit without return to mother 165 million yuan, +95.94% year over year. Non-recurring profit and loss were mainly government subsidies included in current profit and loss.

Q1. Glass prices have recovered year over year, and soda ash prices have declined or dragged down revenue 1) Glass sector: We expect the price of ordinary float glass to rise, while the cost drop will increase the profit level, and the price of high-end glass varieties is relatively stable. According to Zhuochuang information, the factory price of 24Q1's 5mm plain white float glass was about 105.36 yuan/square meter, +17%/-6% year-on-year respectively. The factory price of 24Q1's 5mm ultra-white float glass was 172.52 yuan/square meter, which remained stable year-on-year and month-on-month.

We estimated the average gross profit of a single box of gas fuel glass for 24Q1 pipelines (-6.7 yuan for the same period last year).

In terms of photovoltaic glass, the second line of production in Malaysia was put into operation in the first half of '23 and achieved production relatively quickly. We expect 24Q1 to contribute a certain amount of growth. Due to the year-on-year decline in the completed area of commercial housing, demand for ordinary float glass may be under downward pressure, but we expect that with the adjustment of the company's product structure (high-end ultra-white float glass, Ningxia photovoltaic rolled glass, Malaysian base, TCO, etc.), profits will remain resilient. 2) Soda ash sector: We expect a decline in the company's product prices in the first quarter to drag down revenue. We estimated the average price of soda ash in Q1 at 2,384 yuan/ton, -21%-16% year over year, to determine that subsequent soda ash prices may remain volatile, and continue to monitor the pace at which new production capacity is being put into operation.

The gross margin continues to improve, and the increase in the cost ratio affects profits

The 24Q1 company's overall gross profit margin was 22.01%, +8.63/+3.73pct yoy, respectively. We expect to benefit mainly from increased glass prices and lower raw fuel costs. The cost rate for the period was 9.58%, +3.39 pct. Among them, sales/management/R&D/finance expenses were +0.20/+1.23/+1.46/+0.49pct, respectively. Sales expenses were mainly due to increased marketing efforts for new products, management expenses were mainly due to the expansion of the company's business scale, and R&D expenses were mainly due to increased R&D investment. 24Q1 finally achieved a net profit margin of 9.66%, +4.99/+7.80pct yoy. The balance ratio at the end of 24Q1 was 47.86%, -4.08pct year on year, and the capital structure was optimized. Net operating cash flow was 343 million yuan, -56 million yuan year on year, mainly due to revenue ratio of -4.29 pct year on year reaching 76.04%.

Optimistic about the company's TCO glass growth and maintaining the “buy” rating

The company is a leading domestic TCO conductive film glass enterprise. It has a clear first-mover advantage in terms of production capacity, technology, and customers. With the gradual advancement of domestic perovskite production capacity and breakthroughs from foreign customers, TCO glass is expected to begin to expand in 24 years, and continues to be optimistic about the company's medium- to long-term growth. Maintain the company's 24-26 net profit forecast to 5.1/75/9.3 billion yuan. Refer to comparable company valuations. Considering the growth of the company's TCO glass business, the company was given 21 times PE in 24 years, corresponding to a target price of 7.52 yuan, maintaining a “buy” rating.

Risk warning: Downstream demand falls short of expectations, industry competition intensifies, production costs have risen sharply, company capacity growth falls short of expectations, etc.