Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 1.224 billion yuan, -6.40% year on year; net profit to mother 0.122 billion yuan, or -42.01% year on year; net profit after deducting non-return to mother 0.117 billion yuan, or -40.05% year on year.

From a single-quarter perspective, the company achieved revenue of 0.643 billion yuan in 24Q2, -8.74% year-on-year, and +10.62% month-on-month; net profit to mother 0.071 billion yuan, -44.82% year-on-year, and +40.30% month-on-month.

Comment: Profitability continues to recover compared to the previous quarter. 24 In the first half of the year, the company's gross profit margin was 22.80%, -4.50pct year on year; net sales margin was 9.95%, -6.13pct year on year. Q2 In a single quarter, the company's gross profit margin was 23.93%, -2.94 pct year on year, +2.38 pct month on month; net sales margin was 11.07%, -7.25 pct year on year, +2.35 pct month on month.

24Q2 The company's profitability continued to improve month-on-month, mainly boosted by industry price recovery, and price recovery led to a recovery in gross margin.

The fee rate increased significantly year-on-year, mainly due to fluctuations in exchange earnings in financial expenses. 24 In the first half of the year, the company's four expenses totaled 12.8%, +3.1 pct; of these, the sales/management/ R&D/ finance ratio was 2.4%/5.2%/4.8%/0.6%, +0.1/+0.9/-0.6/+2.8pct. Financial expenses fluctuate significantly and are mainly affected by changes in exchange earnings due to exchange rate fluctuations.

The export business maintained a high level of profitability. The company's overseas business achieved revenue of 0.331 billion yuan, accounting for 27.07% of total revenue, and the gross profit margin of overseas business was 32.48%, 13.32pct higher than the domestic business gross profit margin of 19.16%.

The price of thick yarn has recovered, and profitability is expected to continue to rise. According to Zhuochuang data, the average price of thick yarn in the first half of the year was 365.92 yuan/ton, -17.60%; prices recovered after the industry resumed prices in the second quarter. The average price of thick yarn in Q2 was 3951.52 yuan/ton, +16.45% month-on-month, and -10.99% year-on-year. The year-on-year decline was significantly narrower than in the first quarter.

The company's new production capacity is expected to be launched in 24, helping to continue to increase sales volume and competitive advantage. As of 2024/6/30, the company's 0.6 million-ton phase of 0.15 million tons has completed 90%, and the 0.08 million-ton technology improvement project has completed 80%. The release of incremental production capacity is expected to further increase the company's market share.

Investment advice: The price of glass fiber may have bottomed out, and the fundamentals have reached an inflection point. As a “small but beautiful” enterprise in the glass fiber industry, the company's market share is expected to continue to increase. We expect the company to achieve net profit of 0.294/0.379/0.541 billion yuan in 24-26, corresponding to EPS of 0.72/0.93/1.32 yuan, giving it an “increase in wealth” rating.

Risk warning: Risk of downstream demand falling short of expectations, risk of exchange rate fluctuations, risk of production expansion falling short of expectations.