Incident: On October 24, 2024, the company released its three-quarter report for 2024, achieving revenue, net profit to mother, and net profit without return to mother of 11.632, 1.533, and 1.156 billion yuan, respectively, +1.81% year-on-year, -42.66%, and -28.81%, respectively. Of these, 24Q3 achieved revenue, net profit attributable to mother, and net profit after non-return to mother were 3.893, 0.572, and 0.528 billion, respectively. -10.64%, -6.39%, +14.76% month-on-month.

The industry continued to pick up in 24Q3, and net profit after deducting non-return to mother improved markedly. After the price recovery in the second quarter, industry product prices stopped falling and picked up. The average price of thick glass fiber yarn in Q3 was 4,315 yuan/ton, +2.90% and +3.44%, respectively, and the average price of Q3 electronic yarn was 9199 yuan/ton, +16.66% and +9.11%, respectively. As overall price expectations changed and demand picked up due to product price reinstatement, the company's sales volume of thick yarn products and e-cloth prices increased year-on-year during the reporting period, driving a sharp increase in net profit deducted from non-return to mother. On the demand side, demand for wind power is expected to accelerate due to the rush to install wind power, and thermoplastic shortening will also maintain strong demand resilience, which is expected to provide strong support for the company's subsequent growth.

The repricing effect was obvious, and profitability improved quarter by quarter. In the first three quarters of 2024, the company's gross margin was 23.74%, down 4.93pct year on year, mainly due to the continued low price of products in the glass fiber industry. However, through measures such as orderly product repricing and product structure adjustments, the company's profitability continued to improve. 2024Q1/Q2/Q3 gross margins were 20.13%/22.57%/28.18%, respectively, showing a quarterly improvement trend. Among them, Q3 gross margin was +1.04pct and +5.61pct, respectively. In terms of the period expense ratio, the company's expense ratio for the first three quarters of 2024 was 10.48%, up 0.67pct year on year. Among them, the sales/management/finance/R&D expenses rates were 1.19%/4.33%/1.68%/3.29%, respectively, and +0.05/-0.03/+0.94/-0.29pct. The increase in the financial rate may be related to the increase in the company's overseas sales volume and exchange rate changes.

Projects under construction continued to advance, and cash flow from operating activities improved markedly. In the first three quarters of 2024, the number of projects under construction by the company decreased by 50.60% compared to the beginning of the period. The company continued to promote the construction of various base projects. The second Chiyao Line of Huai'an Zero-carbon Intelligent Manufacturing Base was ignited on July 26, 2024. The design production capacity of the production line was 0.1 million tons/year, effectively supplementing the company's production capacity. In addition, the net cash flow from the company's operating activities during the reporting period was 1.072 billion yuan, an increase of 121% over the previous year. The level of cash flow improved significantly, mainly due to a decrease in the company's payment of bank acceptance notes due and payable.

Investment advice: The company's 24-26 revenue is expected to be 16.455, 19.012, and 22.011 billion, respectively, and +10.62%, +15.77%, respectively, and net profit to mother is 2.195, 2.83, and 3.469 billion, respectively, -27.90%, +28.95%, and +22.55%, respectively. Corresponding PE is 20.44, 15.85, and 12.94, taking into account the company's strong glass fiber cost advantages and high value-added barriers, and profitability Leading the industry, starting a new process of zero-carbon intelligent manufacturing, and maintaining the “Highly Recommended” rating.

Risk warning: Industry supply and demand deteriorate; production expansion is slower than the industry; high-end products fall short of expectations, etc.