Shandong Fiberglass Group Co.Ltd(605006) (605006)
Event: on December 3 Shandong Fiberglass Group Co.Ltd(605006) , the project announcement was issued. The company plans to carry out cold repair technical transformation on a 60000 ton glass fiber tank furnace wire drawing production line of Tianju energy saving, a wholly-owned subsidiary. After the technical transformation is completed, the production capacity of the production line will be increased to 170000 tons. The total investment of the project is 1.454 billion yuan, which does not constitute related party transactions.
Investor: Tianju energy saving full name: Linyi Tianju energy saving material technology Co., Ltd., a wholly-owned subsidiary of Shandong Fiberglass Group Co.Ltd(605006) , was established on June 19, 2013 with a registered capital of 17 million yuan. Its main business includes the manufacturing and sales of glass fiber and products, high-performance fiber and composite materials and glass fiber reinforced plastic products. The financial data of Tianju energy conservation for the last year and the first period are shown in the table below. The net interest rate has increased from 6.96% in 2020 to 18.25% from January to September 2021. The financial fundamentals are good, the profitability has improved significantly and the development momentum is strong.
Investment project: the project is called “digital upgrading and technical transformation project of 170000 T / a ECE glass fiber production line”. The construction site is located in Tianju energy saving plant, with a construction period of one year. It will reach the design service life in January 2023. The estimated total investment of the project is 1.454 billion yuan, and the project funds are self raised funds and bank loans.
Investment impact: through the technical transformation of the production line, the adoption of advanced process technology, intelligent and digital technology, and the use of existing conditions for digital upgrading and transformation, the design annual production capacity can be increased by 110000 tons to 170000 tons, which is in line with the policy orientation, market demand and self-development. It is conducive to further reduce production costs, improve economic benefits and product competitiveness, and further enhance the company’s market voice.
Glass fiber industry: the boom is expected to continue and the product structure will continue to be optimized. We expect that the new capacity of the industry will be limited from 21q4 to 22, with about 26000 / 150000 tons of roving / electronic yarn respectively. Under the “dual control of energy consumption”, it is more difficult to increase the new capacity of the industry, and the landing uncertainty increases. Under the judgment that the demand side continues to improve, the industry boom is expected to continue.
The company’s advantages such as capacity scale, low cost and customer resources highlight its comprehensive strength.
1) The capacity scale ranks fourth in China and continues to expand through cold repair and technical transformation: according to the company’s announcement, there are still plans for cold repair and technical transformation of production lines in the future. It is expected that China’s capacity will reach about 620000 tons by 2025.
2) Low cost advantage: the company has obvious comprehensive advantages such as scale, intelligence and self owned thermal power, and the unit cost shows a downward trend. With the rapid progress of the construction of digital production base in Yishui plant, the company’s key indicators such as man hour efficiency and energy consumption intensity will be in line with the first-class level in the industry. There is still room for cost reduction due to the expansion of production capacity and the promotion of cold repair technology.
3) Customer resource advantages: OC is the company’s largest customer, and OC will also give the company certain technical (wetting agent) and management support.
4) ESOP advantage: the company’s middle-level and above managers and technicians hold shares on the company’s shareholding platform, the management team is stable, showing development determination and confidence.
Investment suggestion: the core recommendation logic is the cold repair and technical transformation of beta superposition companies in the glass fiber industry, which brings rise in volume, price and profit, declining cost, flexible performance and more cost-effective valuation. We predict that the company will realize a net profit attributable to the parent company of RMB 610 million and RMB 680 million from 2021 to 2022, and the current share price corresponding to PE is 12 and 11 times respectively. Maintain the “buy” rating.
Risk warning: macro demand is less than expected; Supply increased more than expected; Risk of delay in the construction of new production lines; The public data used in the research report may have the risk of information lag or untimely update.
