The company achieved net profit to mother of -0.097 billion yuan in the first half of the year. The year-on-year profit to loss company published 24 annual reports. H1 revenue was 1.015 billion yuan, -12.8% year-on-year. Net profit to mother and net profit after deduction of non-return to mother were -0.097/-0.104 billion yuan, respectively, from profit to loss. Among them, Q2 achieved revenue of 0.5 billion yuan in a single quarter, -6.7% year-on-year, and net profit attributable to mothers/net profit after deduction of -0.012/-0.017 billion yuan, respectively. The year-on-year change from profit to loss was mainly government subsidies included in current profit and loss.

Glass fiber prices are dragging down profits, and thermoelectric efficiency is improving

24H1's revenue is -12.8% year-on-year. It is expected to be mainly dragged down by the decline in glass fiber prices, and sales volume may be somewhat supportive. It is estimated that the average price of the industry fell 17% year on year in the first half of the year, and the company's cumulative glass fiber production increased 2.3% year on year. On a month-on-month basis, the 24Q2 company's performance gradually recovered and stabilized. Q2 revenue fell slightly by 2.8% month-on-month to 0.5 billion yuan, and net profit loss to mother decreased by 73.09 million yuan month-on-month, mainly due to marginal restoration of glass fiber prices. In mid-late March, the company took the lead in raising prices for some varieties. According to statistics from Zhuochuang, the average price of 24Q2's 2400tex direct yarn reached +20% month-on-month. As of last week (8.18-8.24), the average price was 3,650 yuan/ton. Price support is good. The company's profit in the glass fiber sector is expected to improve in the second half of the year. The company currently has 7 pond kiln lines in production, with an annual production capacity of 0.52 million tons. Among them, the Yishui 6 line/7 line (annual production capacity 0.03/0.12 million tons) was ignited in January of this year, and the 4 lines (0.06 million tons/year) were undergoing cold repair technology changes in the first quarter of this year. Construction began at the end of February 24. After ignition, it will actually increase the annual production capacity of 0.11 million tons. The other 8 lines (0.15 million tons/year) are also scheduled to be ignited in 24. The company plans to basically achieve a production capacity of one million tons by the end of the 14th Five-Year Plan, and subsequent sales growth is still quite flexible. In terms of thermal power business, 24H1's Yishui Thermal Electronics Company's net profit +31% year over year reached 20.07 million yuan, or was mainly due to the increase in electricity demand and the decline in coal prices (24H1, the electricity consumption of the whole country increased 8% year on year, and coal prices fell 14% year on year). Looking at the second half of the year, if economic fundamentals are expected to gradually recover, glass fiber demand and thermoelectricity demand are expected to resonate and improve, and the company's performance is also expected to recover and improve at the same time.

Q2 Gross margin increased month-on-month, and cash flow was under pressure

The company achieved a gross profit margin of 3.48% in the first half of the year, -10.77pct year on year. Among them, the overall gross profit margin for the Q2 quarter was 10.21%, and -3.45/+13.27pct yoy, respectively. The cost rate for the first half of '24 was 14.10%, +2.27pct. Among them, the sales/management/ R&D/finance expense ratios were +0.17/+1.50/+0.52/+0.09pct, respectively. The increase in sales expenses was mainly due to an increase in exhibition fees, etc., and the increase in management expenses was mainly due to an increase in depreciation expenses, equity incentive cost sharing, etc., which ultimately resulted in a net interest rate of -9.59%, which changed from positive to negative year-on-year. The balance ratio at the end of the first half of '24 was 57.18%, +11pct year-on-year.

Net operating cash flow in the first half of '24 was 0.033 billion yuan, which turned negative year on year, mainly due to a decrease in cash received by the company from selling goods and providing services. The revenue ratio of -7.25 pcts reached 61.78% year on year, and the payout ratio of +32.11 pct year on year reached 56.22%.

The company's buyback shows confidence and maintains a “buy” rating

The company announced a share repurchase plan. It is expected that 50 million yuan to 100 million yuan of free funds will be used to repurchase shares for employee stock ownership plans or equity incentives, fully demonstrating the company's confidence. Considering the sharp decline in performance in the first half of the year, the 24-26 net profit forecast was lowered to 0.02/0.15/0.2 billion yuan (previous value was 0.11/0.19/0.27 billion yuan) to maintain the “buy” rating.

Risk warning: demand falls short of expectations, industry supply growth exceeds expectations, the company's new production capacity investment pace is lower than expected, cost optimization execution falls short of expectations, etc.