3Q24 results are basically in line with our expectations

The company announced 3Q24 results: revenue -0.25% to 0.679 billion yuan; net profit to mother +3.8% to 80.41 million yuan; net profit after deducting non-return to mother -7.9% YoY to 65.76 million yuan; of these, non-recurring profit and loss of 14.65 million yuan, the company's net profit deducted from non-mother is basically in line with our expectations.

Sales volume of thick yarn and products remained flat month-on-month, and the settlement of repricing led to marginal profit restoration. We estimate that the company's 3Q24 sales volume of glass fiber and products may have remained flat month-on-month. Since prices for glass fiber raw yarn and products both recovered in the second quarter, taking the original yarn as an example, according to Zhuochuang information, the average price of the company's 3Q24 wrapped direct yarn including tax was +102 yuan to 3,652 yuan/ton. We estimate that the net profit per ton of thick yarn and products in the third quarter may reach about 850 yuan, and the overall sales ratio of thick yarn and products remained stable. Furthermore, since resin prices fell due to insufficient market demand, we judge that the company's profit for chemical products in the third quarter may be affected.

The year-on-year increase in the financial expense ratio was mainly due to a decrease in exchange earnings. The company's expense ratio for the 3Q24 period was +1ppt/month-on-month +0.5ppt to 13.2%, mainly due to the company's financial expense ratio of +0.6ppt/month-on-month +0.9ppt to 1.3% year over year. According to the company's disclosure, exchange earnings declined during the reporting period due to the depreciation of the US dollar.

The first phase of the intelligent manufacturing 0.15 million ton production line was launched in the third quarter. According to the company's disclosure, as of June 30, the first phase of the company's intelligent manufacturing 0.15 million-ton project had been completed 90%, and the progress of the 3-8 transformation project had reached 80%. According to Zhuochuang information, the first phase of the company's intelligent manufacturing 0.15 million ton production line was launched in August-September.

Net operating cash flow improved marginally, and capital expenditure decreased. The net cash flow from the company's 3Q24 operating activities reached 0.287 billion yuan, including operating cash inflows of 0.74 billion yuan and operating cash outflows of 0.45 billion yuan. 3Q24 capital expenditure reached 0.167 billion yuan, a marginal improvement over 2Q24. During the reporting period, the company's balance ratio reached 33% and remained low.

Development trends

Domestic demand focuses on the subsequent strengthening of fiscal policies and the recovery of demand in overseas regions. Looking back, we believe that domestic demand for thick glass fiber yarn is mainly driven by strong fiscal policies, wind power installations, and demand in new fields; overseas attention is being paid to demand recovery in Europe, the Middle East and other regions. In addition, 2H24's new domestic production lines include: 1) 0.1 million tons of Jushi Huai'an Second Line; 2) 0.15 million tons of Changhai Intelligent Manufacturing Line; 3) New Xingtai Jinniu Line of 0.15 million tons. We judge that the new supply pressure in the industry is still there.

Profit forecasting and valuation

We maintain 24e/25e EPS 0.67/0.98 yuan, and the current stock price corresponds to 24/25e 17x/12x P/E.

We maintain our outperforming industry rating and maintain a target price of 11.8 yuan, corresponding to 24/25e 18x/12x P/E, implying 1% upward space.

risks

The recovery in demand for glass fiber fell short of expectations, and the number of new production lines launched exceeded expectations.