Incident: In the Q3 quarter, the company's revenue was 0.679 billion yuan, down 0.25% year on year, and attributable net profit was 0.08 billion yuan, up 3.83% year on year; net profit not returned to mother was 0.066 billion yuan, down 7.86% year on year.

Glass fiber price increases have come to fruition, and performance improved marginally in the third quarter. In terms of price, according to Zhuochuang data, the average price of 2024Q3 alkali-free glass fiber thick yarn was 4,315 yuan/ton, an increase of 2.90% over the previous 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. The continued implementation of price recovery of glass fiber products led to an increase in the company's performance. Net profit increased 3.83% year-on-year in Q3 and 12.83% month-on-month.

Price increases affected profit margins, and 2024Q3 profit margins increased year-on-year. 2024Q3's gross margin was 24.45%, up 0.40pct; the net margin was 11.82%, up 0.46pct. The increase in profit margin was mainly due to continuous product price increases. Looking specifically at the cost side, the 2024Q3 company's cost rate during the period was 13.25%, an increase of 1.07pct over the same period. Among them, the sales expense ratio was 2.36%, the same decrease of 0.14 pct, the management expense ratio (including R&D) was 9.57%, the same increase was 0.62 pct, the financial expense ratio was 1.33%, and the same increase was 0.59 pct. The increase in the financial rate was mainly due to a decrease in exchange earnings.

With the introduction of policies, the economy is picking up, and industry sentiment is expected to bottom up. Since the end of September, real estate policies, debt conversion policies, and consumer policies have continued to be introduced and implemented, and the economy has picked up at an accelerated pace. However, overall demand for glass fiber is highly correlated with the economy. Currently, real estate sales have improved, and demand in traditional sectors will also pick up steadily, further boosting demand for glass fiber. Coupled with increased export demand from the Middle East and other regions, the glass fiber industry is expected to usher in a return to prosperity.

Investment advice: We expect the company to achieve net profit of 0.27/0.362/0.458 billion yuan in 2024-2026, a year-on-year change of -9.0%/34.2%/26.7%. The latest closing price corresponds to PE of 18x/13x/11x, maintaining the “gain” rating.

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