The company released its 2024 three-quarter report: operating income of 11.632 billion yuan in the first three quarters, up 1.81% year on year; net profit attributable to shareholders of listed companies was 1.533 billion yuan, down 42.66% year on year. Net profit after deduction was 1.156 billion yuan, a year-on-year decrease of 28.81%, achieving an EPS of 0.38 yuan.

Comment:

“Price recovery” and sales volume went hand in hand. Revenue in the third quarter improved year on year and gross margin improved year on year in the single quarter. The company began “repricing” in the second quarter of 2024. After a long period of continuous price decline, product sales prices increased in the second quarter compared to the first quarter. In terms of sales, wind power and thermoplastic short cut products maintained a high growth rate. This is related to the “rush” of domestic wind power. From January to September 2024, the total installed capacity of wind power was 39.12 million kilowatts, an increase of 16.85% over the previous year. In addition, new energy vehicles and the like are also driving demand for short thermoplastics. From January to September 2024, NEV production increased by 33.8% year-on-year, making it a good direction for domestic demand growth.

At the same time, driven by better export demand, the company's overseas demand grew relatively well, and export sales maintained a high growth trend. In particular, demand in Europe, America and the Middle East increased the most, and emerging markets such as Southeast Asia also grew more clearly. Driven by volume and price, revenue for the first three quarters of 2024 was positive year on year. Among them, the revenue growth rate for the third quarter in a single quarter was 8.27% year on year, up 3.50 percentage points from the second quarter. The company's gross margin level stabilized in the third quarter of 2024 after continuing to fall year on year from a high level in 2021. The comprehensive gross margin was 28.18%, up 1.04 percentage points year on year.

The company's operating capacity has improved markedly, and prices are still low, which is dragging down the profit level. The company's business cycle for the first three quarters of 2024 was 175.10 days, a year-on-year decrease of 10.35 days, and a year-on-year decrease of 9.83 days. Mainly, the company's inventory turnover days decreased a lot year-on-year. The company's inventory turnover in the first three quarters of 2024 was 129.91 days, a year-on-year decrease of 10.08 days, reflecting the company's good sales situation in terms of sales. Due to the continuous decline in prices, the price level is still low and the profit level is still low even though it has gone through “repricing”. The company's gross margin for the first three quarters of 2024 was 23.74%, down 4.93 percentage points year on year. The gross profit margin of 46.21% in the first three quarters of 2021, which was the highest level in five years, fell sharply year on year. The decline was 22.47 percentage points.

Glass fiber faucets have strong resilience to risks, and low demand helps the company optimize its products and increase its market share. As a global leader in glass fiber, the company's cost of scale advantage enhances its resilience to risks in an environment of low demand. At the same time, it will also accelerate the transformation of the company's product structure to stable demand and a better demand direction, and facilitate the optimization of the company's product structure, such as improving the company's wind power products and increasing the proportion of overseas products, so that the company's products can better match the direction of market demand. The sluggish industry environment also helps the company gain a larger share of the market after other high-cost companies exit the market. These will further help the company continue to improve its technology, scale and cost advantages, and further enhance the certainty of the company's development and growth. Once the supply and demand pattern of the industry changes, performance flexibility is good.

Company profit forecast and investment rating: We expect the company's net profit for 2024-2026 to be $21.19, 27.00, and $3,698 billion, respectively, and corresponding EPS of 0.53, 0.67, and 0.92 yuan, respectively. The current stock price corresponds to 2024-2026 PE values of 21.18, 16.62, and 12.14 times, respectively. As a leader in the global glass fiber industry, the company has strong resilience to risks. In a sluggish environment, the company was able to build up a solid foundation for development and maintain the company's “Highly Recommended” rating.

Risk warning: The slump in demand continued longer than expected.