Incident: The company released its 2024 quarterly report. The 2024 Q1 revenue was 581 million yuan, -3.67% YoY, -6.14%; net profit to mother was 507.935 million yuan, -7.56% YoY, +523% month-on-month; net profit without return to mother was 45.2641 million yuan, -37.83% YoY and +189.84% month-on-month.
Comment: Profitability improved month-on-month in 24Q1. The 24Q1 company's gross profit margin was 21.55%, year-on-year -6.24pct, month-on-month +2.4pct; net profit margin 8.74%, year-on-year -4.7pct, +7.43pct month-on-month; net profit margin without return to mother 7.79%, year-on-year -4.3pct, +5.27pct month-on-month. 24Q1 The company's profitability improved month-on-month, which is expected to result from the company's product structure (increase in product share) and regional structure optimization (increase in export sales share).
The cost rate has been declining steadily. The total cost rate of the 24Q1 company's four items was 12.9%, -0.7pct year on year; of these, sales/management/R&D/finance expenses ratio was 2.4%/5.2%/4.6%/0.7%, +0.7/+1.1/-1.4/-1.2pct year on year.
In terms of exports, overseas demand is strong, and the company's share of exports is expected to increase in 24Q1. The company exports mainly products, and its profitability is expected to be better than domestic sales, thus driving the company's overall profit improvement in Q1.
According to data from Zhuochuang and Customs, China's export volume of glass fiber and products in 24Q1 was 525,000 tons, +12.07% year on year, +17.05% month on month; average price was 1,407 US dollars/ton, -14.23% year on month and -6.66% month on month.
The price of thick yarn bottomed out and the price restarted, and profits may have recovered in the future. According to Zhuochuang data, the average tonne price of alkali-free thick yarn in 24Q1 was 3,393 yuan, -1,046 yuan (-23.6%) year-on-year, and -151.33 yuan (-4.3%) month-on-month. At the end of March '24, many companies in the industry made a restorative price increase. The average price of alkali-free thick yarn was 3,467 yuan/ton on 2024/4/19, up 129 yuan/ton compared to the average price before the 2024/3/26 price increase. The profitability of coarse yarn products is expected to improve in the future, and the company's new production capacity is expected to land in '24, further increasing its market share. As of 2023/12/31, the company has completed 60% of the first phase of 600,000 tons of 150,000 tons, and the 80,000-ton technical improvement project started at the end of 23. It is expected to be put into operation within 24 years, and its market share is expected to increase further.
Investment advice: The price of glass fiber may have bottomed out, and the fundamentals have reached an inflection point. As a “small but beautiful” enterprise in the glass fiber industry, the company's market share is expected to continue to increase. We expect the company to achieve net profit of 334/4.23/594 million yuan in 24-26, corresponding to EPS of 0.82/1.04/1.45 yuan, maintaining a “buy” rating.
Risk warning: Risk of downstream demand falling short of expectations, risk of exchange rate fluctuations, risk of production expansion falling short of expectations.