Description of the event

In the first half of 2024, the company achieved revenue of 7.912 billion, an increase of 14.92%; realized net profit of 0.811 billion yuan, an increase of 25.35%. Equivalent to Q2, revenue was 4.055 billion, an increase of 8.01%; realized net profit of 0.369 billion yuan, a decrease of 30.91%.

In the first half of 2024, the company produced 55.03 million heavy boxes of various high-quality float glass original sheets, a year-on-year decrease of 1.88 million heavy boxes; sold 48.82 million heavy boxes of various high-quality original float glass sheets, a year-on-year decrease of 4.87 million heavy boxes, with a production and sales rate of 89%; produced 213.02 million square meters of photovoltaic glass processing films and sold 184.95 million square meters of photovoltaic glass processing sheets, with a production and sales rate of 87%.

Incident comments

Profit rebounded year-on-year in the first half of the year, and the amount of photovoltaic glass released. In the first half of 2024, the company's revenue increased 14.92% year-on-year, mainly due to the incremental contribution of photovoltaic glass. By product, float glass production in the first half of the year decreased by 3.3%, sales volume of 48.82 million heavy boxes decreased by 9.1%, production and sales rate 89%; produced 213.02 million square meters of photovoltaic glass processing films and sold 184.95 million square meters of photovoltaic glass processing sheets. Production and sales increased significantly. The gross margin increased 3.6 pcts year on year in the first half of the year, or mainly benefited from the year-on-year improvement in the float industry boom and profit improvement after the release of photovoltaic glass; the cost rate for the period was 12.0%, up 1.8 pcts year on year, of which management, R&D, and sales rates increased 0.3, 0.3, 0.1 pct, or mainly due to the expansion of photovoltaic glass production and sales; ultimately, it was possible to deduct 0.759 billion yuan, an increase of 35.2% year on year, after deducting non-net profit of 9.6%, up 1.4 pcts year on year.

The float economy declined, and Q2 earnings declined somewhat. Looking at a single quarter, Q2 revenue increased 8% year over year. Float glass sales are expected to increase slightly year over year, and the production and sales rate is expected to increase month-on-month; in addition, sales of photovoltaic glass are expected to increase sharply year over year after production capacity is put in, but there may be a slight decline from month to month due to weakening demand. In terms of profitability, Q2 gross margin fell 4.1 pcts year over year to 22.6%, which is expected mainly due to the rapid drop in float glass prices in the second quarter. The rate during the Q2 period was 12.1%, up 1.9 pcts year on year, including financial and R&D rates increased by 1.3 and 0.8 pcts; in the end, non-net profit was deducted by 0.344 billion, a year-on-year decrease of 30.9%, after deducting the non-net interest rate of 8.5%, a year-on-year decrease of 4.8 pcts.

The amount of photovoltaic glass released is expected to be fulfilled. In 2024, the company has a production capacity of 10,600T/D of photovoltaic glass, and is currently constructing 2 1200t production lines. 2022 was the year the company tried out photovoltaic glass. 2023 was the first year of release, and profitability improved markedly. Although the industry boom was under pressure in 2024, the company remained stable and profitable. Following the expansion of the scale, and considering the company's advantages in production line scale (latecomer advantage), mining resources (currently the company supports the construction of ultra-white silica mines in Zixing, Hunan, Yiliang, Yunnan, and Guda in Sabah, Malaysia, and large-scale ultra-white sand processing base in Dongshan, Fujian), and float experience, the profit theory has the conditions to become industry-leading.

Investment advice: The company has outstanding float cost advantages. Photovoltaic glass is rapidly released, and electronic medicinal glass is expected to improve. The estimated net profit for 2024 is 1.32 billion, corresponding to PE 10 times.

Risk warning

1. Reduce expectations under the cost of photovoltaic glass;

2. Demand for completed real estate is low.