Description of the event
The company released a quarterly report: In the first quarter of 2024, revenue was about 4.4 billion yuan, a year-on-year decrease of 12%, and attributable net profit of about 220 million yuan, a year-on-year decrease of 48%, after deducting non-net profit of about 110 million yuan, a year-on-year decrease of 71%.
Incident comments
Overall profitability declined in the first quarter. The company's gross margin for the first quarter was about 19.4%, down 5.7 percentage points year on year. The cost ratio for the period was about 14.7%, up 1.2 percentage points year on year. Among them, sales, management, R&D, and finance expenses changed by -0.3, +1.5, -0.6, and +0.5 percentage points year on year, respectively. Furthermore, the company's non-recurring profit and loss in the first quarter was about 110 million yuan, compared to only about 50 million yuan compared to last year, mainly due to government subsidies. In the end, the company's net interest rate for the first quarter was about 4.9%, down 3.3 percentage points year on year, and deducted non-net interest rate for the first quarter about 2.4%, down 4.9 percentage points year on year. View by section:
Profits in the fiberglass sector are expected to bottom out. Referring to other glass fiber listed peers, apart from Changhai Co., Ltd.'s net profit per ton, which is relatively good, the net profit per ton of enterprises generally continued to drop sharply, mainly due to the continuous decline in industry prices. The company's glass fiber profit is also expected to decline in the first quarter, but it is expected to rise steadily in the future. Recently, glass fiber prices have risen sharply. First, domestic and foreign demand has recovered, including thermoplastics, exports, etc., and inventories of industry manufacturers dropped sharply in March; second, leading companies' strategies have changed, and they are no longer actively engaged in price wars to raise prices in line with the market. We believe it is necessary to pay attention to the inflection point of glass fiber supply and demand:
First, the supply of glass fiber is slowing down in this round. The industry is expected to increase production by about 200,000 tons in 2024, weakening marginally for two consecutive years.
Second, demand is synchronized with the global industrial manufacturing cycle. It is estimated that the increase in demand in 2024 will mainly come from exports, thermoplastics, wind power, electronics, etc. In summary, glass fiber supply and demand are expected to reverse in 2024, and medium-term elasticity will come from the release of demand for million-ton photovoltaic frames.
Blade sales are expected to fluctuate quarterly. Referring to the overall deviation in the performance of other links in the wind power industry chain, such as wind power coatings and wind power towers, the company's blade sales are also expected to decline in the first quarter. We think it is mainly quarterly fluctuations. Based on the wind power tenders in the previous period, industry demand is expected to grow positively throughout the year. The company continues to upgrade in the field of wind power blades. On the one hand, the company improved the seabreeze layout, the Yangjiang base was put into operation, the first trial production of the 10MW medium and low wind speed SI115 completed the first set, and 2 SI122 100-meter blade production lines were built, leading to batch demonstration applications of 120 grade blades. The blades continued to be large-scale, with a single set of power reaching 5.6 MW per set, an increase of 23% over the previous year; on the other hand, the Brazilian project was successfully put into operation, achieving a breakthrough in overseas manufacturing zero.
Diaphragm profits entered the bottom range. Prices in the diaphragm industry continued to fall, and the average profit level fell sharply. Net profit attributable to Enjie and Xingyuan fell 76% and 41% year-on-year respectively in the first quarter. Sinoma Technology's diaphragm performance is also expected to be under pressure. The company actively responds to downward pressure on industry prices, continuously optimizes the product structure, and increases the sales share of coated products; at the same time, the company continuously optimizes production efficiency and continues to accelerate production lines through equipment transformation, process parameter optimization and management innovation. The substrate film capacity utilization rate is expected to continue to increase, and the base film unit cost is expected to continue to decline, reflecting the spirit of continuous innovation and continuous optimization of central enterprises, which can partially hedge against the decline in industry prices. In terms of capacity construction, construction of new production capacity at each base is progressing according to the plan. By the end of 2023, the company had a production capacity of 4 billion square meters of base film, and production capacity is expected to exceed 6 billion square meters by 2024.
The company's net profit for 2024-2025 is estimated to be 2.23 billion yuan, corresponding to 12 or 9 times the valuation, and the valuation advantage is remarkable.
Risk warning
1. Global economic growth is lower than expected;
2. The price of raw materials has risen sharply.