Core views
The first quarter is usually the company's traditional low season, but 24Q1 revenue surged 46.4% year over year, mainly reflected in a sharp increase in sales/orders. As the main energy cost for the company's main business, natural gas has declined sharply since the beginning of the year, and the company's gross margin has entered the repair channel. Demand-side energy efficiency policy upgrades in Europe and China drive increased penetration rates & market expansion. The company began investing in production expansion projects and main base technology improvement projects in March to match the growth in demand. The company's main business is growing strongly, and the vacuum glass project continues to advance, broadening the company's growth space.
occurrences
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 840 million yuan, +31.7% year on year; net profit to mother was 106 million yuan, +66.1% year on year; of these, Q4 revenue was 248 million yuan, +39.3% year on month, and Q4 net profit was 0.27 million yuan, +15.4% year on month, and -28.6% month on month.
2024Q1 achieved revenue of 223 million yuan, +46.4% year over year, -10.1% month on month; net profit to mother of 0.29 million yuan, +152.1% year over year, +7.4% month on month.
Brief review
Q1 Revenue increased significantly year-on-year, and gross margin recovered from natural gas price cuts
The first quarter is usually the company's traditional low season due to seasonal factors such as the Spring Festival vacation, but 24Q1 revenue surged 46.4% year-on-year. Considering that product prices remained basically stable, it was mainly reflected in a sharp increase in sales/orders.
On the profit side, the company achieved a gross profit margin of 34.6% in 24Q1, +4.8pct year on year; the company's main energy consumption of natural gas averaged 4,994 yuan/ton in 2023, the average price of 2024Q1 was 4,652 yuan/ton, a decrease of 6.8%. As of May 9, 2024, the latest price was 4,308 yuan/ton, which continued to decline 7.4% month-on-month, and the company's main business profit is expected to continue to recover.
European demand continues to be released+the drafting of the new national standard continues to advance, and the company's new production capacity begins to be put into operation to resolve supply constraints
According to the European Commission's forecast, after the implementation of the new energy efficiency regulations, household refrigerators and freezers with energy efficiency grade F will gradually increase, and the proportion of A, B, and C grade products will gradually increase by 2030; China's new national standard “Household Refrigerators Electricity Consumption Limits and Energy Efficiency Classes” is expected to be released in April 2025. Overall, with the gradual upgrading of energy efficiency policies in Europe and China, VIP penetration is expected to accelerate, leading to market expansion.
On the production capacity side, the company raised a 5 million square meter VIP board production expansion project in Anhui. The first batch of production equipment was put into operation in Q2 '24, and a technical improvement and production expansion project was implemented at the Liancheng base. Starting in March of this year, the company's additional production capacity was gradually released to solve the current tight supply problem and match the demand volume.
The vacuum glass project continues to advance, creating a second growth curve
Vacuum glass is expected to gradually replace insulating glass in the fields of construction, home appliances, transportation, etc. due to its excellent thermal insulation, energy efficiency, sound insulation, ultra-thin, and anti-condensation properties, reaching the 100 billion market. The company has developed vacuum glass products based on vacuum insulation technology, which is expected to form a good customer & technical synergy with the main business. In 2023, the company's vacuum glass pilot line has completed installation, technical improvement and small-batch production. The subsidiary Weiaiji's 2 million flat vacuum glass project started construction in the first half of 2023 and is currently progressing steadily.
Profit forecasting and valuation: The company's main business benefit policy is driving high demand, and the addition has begun to scale to meet strong demand, and at the same time, the vacuum glass space is vast and has entered the mass production and volume stage. Net profit for 2024-2026 is estimated to be $184, 3.41, and 489 million yuan, respectively. Corresponding PE is 21X, 11X, and 8X, respectively, maintaining a “buy” rating.
Risk warning:
Raw material prices fluctuated greatly; downstream demand fell short of expectations; capacity construction fell short of expectations; the international situation fluctuated greatly; company directors received a warning letter from the Fujian Supervisory Authority.