Description of the event

The company achieved operating income of 11.63 billion yuan in the first three quarters, an increase of 2% year on year; attributable net profit of 1.53 billion yuan, down 43% year on year, and reduced non-net profit of 29% year on year. In the third quarter, revenue was 3.89 billion yuan, up 8% year on year, and attributable net profit was about 0.57 billion yuan, down 6% year on year, and 49% year on year after deducting non-net profit.

Incident comments

The high increase in the company's thick yarn sales is due to the product structure and production capacity layout. The company sold 2.2575 million tons of thick yarn and products in the first three quarters, up 23.16% year on year; sales of electronic cloth were 0.629 billion meters, down 2.23% year on year. Corresponding to sales volume of 0.735 million tons in the 3rd quarter, up 24% year on year, electronic cloth sales volume was about 0.17 billion meters, down 27% year on year. The company achieved a high increase in thick yarn sales and a significant increase in share, mainly due to production capacity layout advantages and product structure advantages. Judging from the export data of customs statistics, China's thick yarn export sales increased by 5% in the first three quarters, sales of short cut glass fiber increased by 41%, thick yarn export sales increased by 1% in the 3rd quarter, sales of short cut glass fiber increased by 44%, and demand for thermoplastic short cut exports accelerated slightly in the third quarter. The total production capacity of the company's production sites in the US and Egypt was 0.46 million tons, the first to benefit. Looking at the product structure, the growth rate of wind power and thermoplastic short cut products is still ahead of other fields, especially wind power yarn series products. Due to the impact of the wind power industry's rush to install, the growth rate is far ahead of other industries.

The company's profitability once again proved the competitive advantage of leading companies. The company's gross margin for the first three quarters was about 23.7%, down 4.9 percentage points year on year. The gross margin for the third quarter of a single quarter was about 28.2%, up 1.0 percentage point year on year, up 5.6 percentage points from month to month. In addition, the rate rate for the 3rd quarter was about 10.9%, down 1.3 percentage points year on year, mainly due to cost dilution due to high sales growth.

Furthermore, the company's net investment income for the 3rd quarter was about 0.03 billion yuan, mainly due to the month-on-month improvement in the performance of the participating company Sinoma Blade. According to the tonne index, the overall net profit per ton for the 3rd quarter (after deducting non-net profit/thick yarn sales) was about 720 yuan, while most of the peers were still in a state of loss. The profit gap between China Jushi and mainstream companies in the market was large. The bottom of this cycle once again proved competitiveness.

A tight balance between supply and demand may be maintained in 2025, and the increase in supply will be significantly reduced in 2026. We expect global demand for glass fiber to increase by about 5% in 2024, while glass fiber production capacity will be increased by about 700+ million tons (cold repair capacity is about 300,000 tons), and production is expected to increase production by about 0.4 million tons, so the supply and demand situation is improving throughout the year. Referring to Zhuochuang data, the average price of glass fiber wrapped direct yarn in the first three quarters was about 3,561 yuan/ton, down 10% year on year; the average price in the third quarter was about 3,834 yuan/ton, up 3% year on year. Looking ahead to 2025, global demand for glass fiber is expected to increase by about 6%, mainly due to the accelerated improvement in wind power demand (domestic wind power installations are expected to reach more than 110 GW in 2025, an increase of more than 20% over the previous year). Demand for electronics, automobiles, and household appliances continued to grow this year. Furthermore, demand for construction materials declined and subsided, while glass fiber added about 0.6 million tons of additional production capacity (0.2 million tons in Jiujiang, China; 0.15 million tons of glass fiber in Taishan; 0.12 million tons of glass fiber in Shanxi, Inner Mongolia; 0.12 million tons of glass fiber in China; 0.12 million tons of glass fiber in Inner Mongolia; 0.12 million tons of glass fiber 0.06 million tons of technology was changed to 0.17 million tons), but since mainstream companies are no longer losing cash flow, the scale of cold repair production capacity may be less than 2024, and the overall increase in production is expected to be about 0.5-0.6 million tons. Entering 2026, the industry's plans to increase production capacity will drop significantly, and prices may rise or usher in greater flexibility.

This round of fiberglass faucets still maintains their leading edge. Previously, the market feared that the industry pattern would deteriorate under this cycle, and the gap between leading enterprises and small enterprises had narrowed significantly. However, starting in the fourth quarter of last year, the profit gap between leading companies and small enterprises stabilized or even widened. The profit performance in the third quarter continued this trend, once again proving the competitiveness of leading companies. The company's net profit for 2024-2025 is estimated to be 2.14 and 2.91 billion yuan, with a corresponding valuation of 21 or 15 times, with a bottom allocation value.

Risk warning

1. Low expectations for global economic growth;

2. Prices of raw materials have risen sharply.