Incident 1: On October 29, the company released the 2024 three-quarter report. In the first three quarters, the company achieved operating income of 11.6 billion yuan, +3.7% year-on-year; net profit attributable to mother and net profit of 0.7 and 0.62 billion yuan after deduction, respectively, of -43.8% and -45.2% compared to the same period last year. The third quarter achieved revenue of 3.69 billion yuan, -14.2% year-on-year, and -9.0% month-on-month; realized net profit attributable to mother and net profit of -0.11 and -0.14 billion yuan after deduction of net profit and loss from quarter to month.

Incident 2: On the evening of November 5, the company announced that it plans to purchase 28.78% of the shares of the holding subsidiary Kibin Solar Energy by issuing shares. Currently, the company holds 71.22% of the shares in Kibin Solar Energy. As a subsidiary of the company's photovoltaic glass business, as of the end of September, the production capacity of Kibing Solar Photovoltaic Glass was 10,600 t/d, and the production capacity under construction was 2,400 t/d.

The decline in float & photovoltaic glass prices affected the company's revenue. In 24Q3, the prices of float glass and photovoltaic glass both declined significantly. According to Zhuochuang information, the average price of float glass and photovoltaic glass (2.0mm) in 24Q3 was 1,405 yuan/ton and 13.7 yuan/square, respectively, -30.9% and -25.3%, respectively, and -17.3% quarter-on-quarter and -21.5%. We judge that the company's revenue for the third quarter declined sequentially, and was more affected by the decline in product prices. Due to profit pressure in the third quarter of the single quarter, production capacity in the float and photovoltaic glass industries at the end of 24Q3 was 0.164 milliont/d and 0.105 milliont/d, respectively, -4.5% and -8.6% quarter-on-quarter, -3.2%, and +17.9% year-on-year. As demand picked up during the peak season, float glass inventories have declined since October. According to Zhuochuang information, as of the end of October, float manufacturers in key provinces across the country had stocks of 45.88 million heavy boxes, down 30.1% from the September high. Meanwhile, the average price of float in the country was 1,364 yuan/ton at the end of October, up 15.7% from the end of September. However, the stock of the photovoltaic glass industry continues to rise even as supply shrinks, indicating that the demand side is still operating weakly. As the industry's supply continues to shrink and demand expectations improve, the price of photovoltaic glass is expected to stabilize at the bottom.

PV glass is under pressure, dragging down the overall performance of a single quarter. The 24Q3 company achieved an overall gross profit margin of 7.7%, -20.0pcts year-on-year, and -14.9pcts quarter-on-quarter. The cost rate for the third quarter of a single quarter was 13.3%, +2.1pcts year-on-year, and +1.2pcts quarter-on-quarter.

In 24Q3, the company achieved a net sales margin of -4.7%, -18.6pcts year-on-year, and -14.4pcts quarter-on-quarter. Given the company's obvious float profit advantage, there have been almost no quarterly losses in history, so we judge that the 24Q3 company's net profit change from profit to loss was mainly dragged down by PV glass profits. Considering that the company's new production capacity is 1,200t/d large kilns, which have a good scale advantage, and the company has advantages such as raw fuel collection and self-supply of ultra-white sand, the company's gross margin has reached the leading level in the industry, and the profit advantage is obvious. We believe that after the company's acquisition of minority shares is completed, Kibin Solar will become a wholly-owned subsidiary of the company. This move will help further strengthen the company's equity management and corporate governance, optimize the layout and positioning of the photovoltaic glass industry, and improve the efficiency of Kibing Solar's production and operation decisions.

Investment advice: Considering the decline in float glass and photovoltaic glass prices, we lowered and updated the corresponding price assumptions. After adjustment, the company's net profit for 2024-2026 is 0.68, 1.07, and 1.29 billion yuan, respectively (the previous forecast was 1.19, 1.56, and 1.81 billion yuan respectively for 2024-2026). Since the company's acquisition of Kibin Solar Energy has not yet been determined, we still consider the impact of minority shareholders' rights on the company's profit; the current stock price corresponds to the adjusted PE profit It was 26.2, 16.6, and 13.7 times, respectively, and the corresponding PB was 1.3, 1.2, and 1.2 times. Considering the company's strong cost advantage in glass production and the profit elasticity of subsequent pattern restoration, the “gain” rating was maintained.

Risk warning: Cold repairs in the float industry fall short of expectations; PV glass supply and demand deteriorate; the company's production capacity expansion falls short of expectations.