Incident: In the Q3 quarter, the company's revenue was 3.893 billion yuan, up 8.27% year on year, and attributable net profit was 0.572 billion yuan, down 6.38% year on year; net profit not returned to mother was 0.528 billion yuan, up 49.18% year on year.

Profitability improved when repricing was implemented, and 2024Q3 performance improved year-on-month. In terms of price, according to Zhuochuang data, the average price of 2024Q3 alkali-free glass fiber thick yarn was 4,315 yuan/ton, up 2.90% year on year; the average price of fine yarn was 9199 yuan/ton, up 16.66% year on year. On the demand side, exports of glass fiber and its products were 0.3754 million tons in July-August 2024, up 21.88% year on year, while inventories rose from 0.6275 million tons at the end of June to 0.7558 million tons at the end of September. Due to the continued implementation of price recovery for glass fiber products and the increase in overseas demand, the company's performance achieved year-on-month growth. After deducting non-net profit in Q3, the year-on-year increase was 49.18% year-on-year, and 14.76% month-on-month.

Prices reduced and financial expenses increased, and 2024H1 profit margins declined under pressure. 2024Q3's gross margin was 28.18%, up 1.04pct; net profit margin was 15.38%, down 2.33pct. The increase in gross margin was mainly due to product price increases and implementation, while the decline in net interest rate was mainly due to a sharp drop of 0.162 billion yuan in the company's asset processing income over the same period last year. Looking specifically at the cost side, the 2024Q3 company's cost rate during the period was 10.94%, a decrease of 1.29pct. Among them, the sales expense ratio was 1.16%, the same decrease of 0.18 pct, the management expense ratio (including R&D) was 7.55%, the same decrease was 0.54 pct, the financial expenses ratio was 2.23%, and the same decrease was 0.57 pct.

Policies are being introduced and implemented at an accelerated pace, and the fiberglass boom is expected to return as the economy recovers. In terms of price, as of September 30, 2024, the price of non-alkali glass fiber thick yarn was 4,307 yuan/ton, down 69 yuan/ton from the end of June; the price of fine yarn was 9,200 yuan/ton, with a cumulative increase of 50 yuan/ton since the end of June. Looking at it now, the continuous introduction of fiscal policies and real estate policies is conducive to the accelerated recovery of the economy, thereby driving a recovery in demand in various industries, boosting demand for glass fiber, and corporate profits are also expected to gradually improve.

Investment advice: We expect the company to achieve net profit of 2.554/3.077/3.773 billion yuan in 2024-2026, an increase of -16.1%/20.5%/22.6% year-on-year. The PE corresponding to the latest closing price is 17x /14x /11x, maintaining the “increase” rating.

Risk warning: macroeconomic downturn risk, wind power installation falling short of expectations, risk of rising energy prices.