The Zhitong Finance App learned that Changjiang Securities released a research report saying that the bottom is actively recommending the glass fiber sector. The inflection point of industry inventory has reached, and elasticity lies in electronic cloth and emerging demand. The profit elasticity of this round of glass fiber is: one is the increase in the price of electronic cloth. The downward cycle of this category began in the second half of 2021. Supply has contracted due to prolonged pressure on the bottom, and the profit elasticity of this category is high. Each price increase increases by about 800 million yuan per meter; second, the demand for photovoltaic frames. The space and sustainability of each round of glass fiber increase is more dependent on demand. We should pay attention to the volume of emerging demand created by low glass fiber prices, especially the potential demand for million-ton photovoltaic frames.

Target recommendations: China Jushi (600176.SH), Sinoma Technology (002080.SZ), Changhai Co., Ltd. (300196.SZ), etc.

Incident: On March 25, leading glass fiber companies collectively issued a price increase letter, directly increasing the price of yarn by 200-400 yuan/ton and joint stock yarn by 300-600 yuan/ton. At the beginning of April, the price of G75 yarn was raised by 200 yuan/ton, and the price of electronic cloth was raised by 0.1 yuan/meter. The first round of price increases has already been implemented. On April 13, China Jushi issued a price increase letter for thin yarn. The double price of G75 yarn is 400-600 yuan/ton, and the 7628 electronic cloth is 0.2-0.3 yuan/meter.

Changjiang Securities reviews are as follows:

Marginal improvement in supply and demand is a necessary condition for glass fiber price increases, and collaboration can only change the pace.

The main reason for this increase in glass fiber prices is a recovery in demand for exports, thermoplastics, wind power, etc., and the withdrawal of backward production capacity and an increase in cold repair production capacity. The inventories of industry manufacturers fell sharply in March (at the end of March, the number of days of inventory decline was about 40 days, and the number of days of month-on-month decline was about 6 days), and it is expected that stocks will continue to fall in the future; secondly, leading companies' strategies have changed, and they will no longer actively engage in price wars to raise prices in line with the market.

This round of new slowdown in glass fiber supply is reflected in the withdrawal of backward production capacity and an increase in cold repair production capacity.

Since the second half of 2022, the supply and demand of glass fiber have weakened, and prices have continued to fall, causing the profit level of glass fiber to return to its lowest level in recent years. Among them, small enterprises have reached the point of losing cash flow costs. Due to the fact that the industry's boom lasted a long time and profits were high, and the number of companies listed and the cash on hand increased, supply contracted slowly at the bottom of this cycle, and the profit level hit a new low. However, the direction of the new supply slowdown is very clear: after large-scale losses from glass fiber companies in the second half of 2023, on the one hand, backward production capacity withdrew. Domestic glass fiber production in 2023 was about 7.23 million tons, an increase of 360,000 tons over the previous year. Among them, pool kiln yarn production was about 6.87 million tons, an increase of 430,000 tons year-on-year, due to backward production capacity falling 70,000 tons year-on-year; on the other hand, cold repair production capacity increased. About 170,000 tons from 2024 (Taishan glass electronic fiber yarn is about 50,000 tons, international composite material is 50,000 tons), Xingtai Jinniu about 40,000 tons, Sichuan glass fiber electronic yarn 30,000 tons; other cold repair plans are still in place). As the supply of glass fiber slows down, we expect the industry to increase production by about 200,000 tons in 2024, weakening marginally for two consecutive years.

Has demand for fiberglass improved in this round? The 24-year increase in demand will continue for 23 years, focusing on emerging demand such as photovoltaic frames.

In 2023, the global glass fiber scale is expected to be about 10 million tons, while domestic production is about 7.23 million tons, and domestic demand (domestic production - net export - inventory change at the end of the period) is estimated to be about 5.4 million tons, of which exports account for about 25%. Export volume fell slightly year-on-year in 2023, and the share of export demand reached more than 30%; the domestic glass fiber production structure in 2023 is 40% ordinary heat-fixed yarn, 16% wind power high-mode yarn, thermoplastic yarn 23%, electronic and electrical appliances (corresponding fine yarn). The increase in domestic demand mainly comes from wind power, thermoplastics, etc., export, electronics, construction, etc. We believe that the increase in demand in 2024 is mainly due to exports, thermoplastics, wind power, etc. In addition, emerging demand is beginning to expand on a small scale, so this year's demand increase will continue from last year, and is expected to be about 500,000 tons.

The bottom actively recommends the glass fiber sector. The inflection point of industry inventory has arrived, and elasticity lies in electronic cloth and emerging demand.

Glass fiber supply and demand are expected to reverse in 2024, and the current decline in inventories of manufacturers is an important sign. In this context, the profitability of leading companies is expected to recover, as the profit gap between them and their small peers is still significant.

The profit elasticity of this round of glass fiber is: one is the increase in the price of electronic cloth. The downward cycle of this category began in the second half of 2021. Supply has contracted due to prolonged pressure at the bottom, and the profit elasticity of this category is high. Each price increase increases by about 800 million yuan per meter; second, the demand for photovoltaic frames. The space and sustainability of each round of glass fiber increase is more dependent on demand. We should pay attention to the volume of emerging demand created by low glass fiber prices, especially the potential demand for million-ton photovoltaic frames.

Risk warning: 1) Global economic growth is lower than expected; 2) Raw material prices have risen sharply.