Event: The company released its 2024 three-quarter report. The company's revenue for the first three quarters of 2024 was 11.6 billion yuan, up 3.7% year on year, achieving net profit of 0.7 billion yuan year on year, down 43.8% year on year, after deducting 0.62 billion yuan in non-net profit, down 45.2% year on year. Among them, single Q3 achieved revenue of 3.69 billion yuan, down 14.2% year on year, down 9.0% from Q2, achieving net profit to mother -0.11 billion yuan, down 118.8% year on year, down 130.4% from Q2, less Non-net profit -0.14 billion yuan, down 123.8% year on year and 139.8% month-on-month in Q2.

Float glass: Prices are falling under pressure in Q3, and profits in Q4 may pick up as cold repairs accelerate. According to Zhuochuang statistics, in Q3 2024, the country's apparent consumption of float glass was 0.261 billion heavy boxes, down 2.1% year on year, down 6.6% from Q2, while float glass production was 0.277 billion heavy boxes, up 2.4% year on year and 0.4% month on month. By the end of September, the average price of Q3 glass was 1405.2 yuan/ton, down 31.0% year on year and 17.3% month on month. The September Politburo meeting proposed “to stop the decline and stabilize the real estate market” to restore confidence in the real estate chain, accelerate cold repairs in superposition production lines, and recover glass prices as of October 29, the average price of float glass nationwide was 1337.38 yuan/ton, up 13.4% from the end of September, an increase of 1,58.4 yuan/ton. The number of days in inventory for manufacturers also fell to around 26 days in late October. Profits in Q4 may continue to recover.

Photovoltaic glass: supply-side reforms are expected to accelerate price recovery, and there is plenty of room for net profit improvement in the future. The average price of 2.0mm/3.2mm glass in the Q3 industry was 13.6/22.7 yuan respectively, down 25.0%/12.7% year-on-year, and 22.9%/12.4% month-on-month, respectively. The sharp drop in price caused the company to lose money in Q3. At present, sample companies in the photovoltaic glass industry have been in stock for more than 38 days. In October, the low prices of 2.0mm and 3.2mm coated glass were 12 yuan/square meter, respectively. As losses continued to expand, new production capacity in the industry was delayed or suspended, and some kilns were cooled and production cut ahead of schedule. According to Steel Connect data, as of October 30, the daily melting volume of photovoltaic glass production had dropped from a high of 0.1165 million tons to 0.0953 million tons, a total decrease of 0.0212 million tons Tons. The monthly glass production is gradually approaching the demand for components, and the supply and demand pattern is slowly being repaired. Recently, the Photovoltaic Industry Association once again organized a symposium on preventing excessive and vicious competition in the photovoltaic industry. The theme was to eliminate excess production capacity. The PV industry is expected to usher in supply-side reforms, which may accelerate the restoration of photovoltaic glass prices. Coupled with the continuous progress of the company's own cost reduction and efficiency, there is plenty of room for net profit improvement in the future.

Expense rates have increased slightly, and profit margins have declined sharply. The company's gross profit margin for the first three quarters of 2024 was 19.0%, down 4.4 pcts year on year. Among them, the gross profit margin for single Q3 was 7.7%, down 20.0 pct year on year, and 14.9 pct from month to month. The decline in gross margin was mainly due to price cuts for float glass and photovoltaic glass. In terms of the cost ratio, the cost rate for the first three quarters was 12.4%, up 1.8 pct year on year, 13.3% year on year, 2.1 pct year on year, and 1.2 pct increase over Q2. The main reason was that some photovoltaic glass production lines were in the early stages of operation and the management cost ratio was high due to project construction. At the same time, the funding source for projects under construction was a combination of own funds and bank loans, and the financial cost ratio increased. Corresponding to the company's net interest rate of 5.9% for the first three quarters, down 5.2 pcts year on year, net profit margin for single Q3 -4.7%, down 18.6 pcts year on year, and 14.4 pcts month-on-month.

Investment advice: The sharp decline in float glass and photovoltaic glass prices in the third quarter caused the company to lose money. Currently, float glass prices are still at the bottom, and profit recovery will take time. We lowered the company's profit expectations. We expect net profit to be 0.643 billion yuan, 0.954 billion yuan, and 1.127 billion yuan respectively for 2024-2026. The three-year performance compound growth rate is 32.4%. Corresponding PE is 28.2X, 19.0X, and 16.1X, respectively, maintaining the “increase” rating .

Risk warning: Risk of a sharp decline in completion demand, risk of a sharp decline in PV demand, and risk of continuing to rise rapidly in raw materials and fuel prices.