From a short-term perspective, demand weighted sectors such as benefiting construction/wind power are seasonally driven, and demand is expected to continue to improve month-on-month in Q2. Glass fiber companies as a whole are in a relatively low profit and valuation range. It is recommended to focus on the prospects for improving fundamentals and the cost performance ratio of medium- to long-term allocation.
The Zhitong Finance App learned that Guolian Securities released a research report saying that according to Zhuochuang information, the total potential additional production capacity in 24Q2-4 is 940,000 tons. The current cold repair production capacity is 820,000 tons (it is expected that part will no longer be put into operation). The industry's new production capacity has clearly slowed since 23H2. Taking into account factors such as current profit levels and financial pressure on some enterprises, the increase in effective production capacity is expected to fall below double digits in 24. 24M1-2 Domestic net demand for glass fiber was 960,000 tons, +18.4% year-on-year. From a short-term perspective, demand weighted sectors such as benefiting construction/wind power are seasonally driven, and demand is expected to continue to improve month-on-month in Q2. Glass fiber companies as a whole are in a relatively low profit and valuation range. It is recommended to focus on the prospects for improving fundamentals and the cost performance ratio of medium- to long-term allocation.
The main views of Guolian Securities are as follows:
Recently, the price of glass fiber has been rising intensively, which is characterized by a certain cyclical trend reversal
In mid-March, the prices of board yarn and felt yarn increased. In late March, the price increase involved a further increase in the variety of glass fiber, and the prices of direct yarn and laminated yarn. Major companies such as China Jushi, Taishan Glass Fiber, and Changhai Co., Ltd. have successively issued price adjustment letters. At present, the price of glass fiber has fallen to the lowest level in history. Combined with high fuel prices, it is expected that most glass fiber companies are in a state of loss. From an inventory perspective, the inventory at the end of March was 794,000 tons, which was 112,000 tons month-on-month. It remained at an all-time high but improved month-on-month. The recent price increase has a low starting point, accompanied by a marked decline in inventories, and a certain cyclical trend reversal.
Supply: Supply growth has slowed since 23H2, and there are no new production capacity arrangements for e-yarn
At the end of 24Q1, the industry had a production capacity of 6.97 million tons/year, +208 thousand tons/ +3.1% year over year, and +163,000 tons/ +2.4% compared to the end of 23. The 24Q1 new ignition production capacity is 270,000 tons. According to Zhuochuang information, the total potential additional production capacity in 24Q2-4 is 940,000 tons. The current cold repair production capacity is 820,000 tons (it is expected that part will no longer be put into operation). Since 23H2, the new production capacity of the industry has slowed markedly. Taking into account factors such as current profit levels and financial pressure on some companies, Guolian Securities expects an increase in effective production capacity in 24 or less. Among them, there are no new production line ignition arrangements for e-yarn in 24, and it is expected that the motivation and willingness of enterprises to increase capital expenditure will be weak.
Demand: Optimistic that short-term demand will improve month-on-month, and medium- to long-term demand will continue to grow
Net domestic demand continued to improve year on year, and export sales improved slightly. 24M1-2 Domestic net demand for glass fiber was 960,000 tons, +18.4% year-on-year. From a short-term perspective, demand weighted sectors such as benefiting construction/wind power are seasonally driven, and demand is expected to continue to improve month-on-month in Q2. At the same time, Guolian Securities believes that the medium-term demand outlook should remain optimistic, based on 1) the high increase in wind power installations, and demand is expected to remain strong; 2) demand growth is driven by high demand for new energy vehicles; 3) new applications or industrialization of photovoltaic frames, which estimate the demand for glass fiber is close to 500,000 tons in 25 years; 4) the removal of copper clad plates from storage, price increases, etc., or drive an improvement in demand for electronic fabric/yarn.
Investment advice: focus on market reversal trading opportunities, focus on China's Jushi, etc.
Glass fiber companies as a whole are in a relatively low profit and valuation range. It is recommended to focus on the prospects for improving fundamentals and the cost performance ratio of medium- to long-term allocation. The proposal focuses on: China Jushi (600176.SH) (stable leading position, bottom area in valuation history, PB-LF is in 6.9% position in the past 5 years); Sinoma Technology (002080.SZ) (diaphragm business revenue continues to increase and efficiency continues to improve, blade profitability continues to improve, glass fiber economy continues to bottom up, valuation is advantageous; PB-LF is similar to China's Jushi); Changhai Co., Ltd. (300196.SZ) (integrated industrial chain layout, production capacity expansion to reduce costs, continuous product structure optimization); Shandong Glass Fiber (605006.SH) Domestic second-tier glass fiber suppliers, the expansion of production capacity is driving the company's cost reduction).
Risk warning: The investment of new glass fiber production capacity exceeded expectations, the new capacity plan exceeded expectations, and downstream demand fell short of expectations (wind power, photovoltaic vehicles, electronics, etc.).