\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 176 China Jushi Co.Ltd(600176) )
China Jushi Co.Ltd(600176) : remain the leader of the global glass fiber industry
China Jushi Co.Ltd(600176) , founded in 1993 and listed on the Shanghai Stock Exchange in 1999, the controlling shareholder is China building materials. Revenue mainly comes from glass fiber and products business. China has set up three main production bases in Tongxiang, Zhejiang, Jiujiang, Jiangxi and Chengdu, Sichuan.
Glass fiber industry: tight supply and demand, iterative upgrading
On the demand side, we expect China’s apparent consumption of glass fiber to be 6.6 million tons in 2022, with a year-on-year increase of + 6%. The increase mainly comes from exports, new energy vehicles and wind power: 1) China’s total export of glass fiber and products reached 1.683 million tons in 2021, with a year-on-year increase of + 26.6%. Overseas demand is high and booming; 2) Glass fiber composite is an important material for automobile lightweight, with large room for increasing the consumption of single vehicle, and the rapid increase of the permeability of new energy vehicles drives the consumption of glass fiber; 3) Wind power yarn continues to upgrade and is optimistic about the trend of wind power installation. On the supply side, we will continue to digest the newly invested capacity in the early stage in 2022. Under strict assumptions, the actual increase is still limited. It is expected that the actual capacity margin will slow down this year (455000 tons are expected to be added, compared with + 820000 tons in 2021), and the increase is mainly from industry leaders. We expect the effective capacity increment to be about 647000 tons in 2022. To sum up, the supply rate of glass fiber industry is estimated to be 86.65% in 20212022.
The company holds the global glass fiber pricing power
The relationship between supply and demand determines the cyclical fluctuation of glass fiber price. We repeated the price changes in the industry for nearly three rounds: 1) 20142015: the “rush for installation” of wind power driven demand; 2) 2017q4-2018h1: rising costs, export + thermoplastic boom; 3) 2020q3 to now: the epidemic has led to a mismatch between supply and demand, and downstream demand has taken over in turns. This round is “different”: the price peak is higher, the high time is longer, the cyclical attribute is weakened, and there may be trend changes in cost and price.
Expansion at the bottom of the cycle, intelligent manufacturing and globalization of production and marketing: 1) before 2011: the financial crisis started at the bottom, and the production capacity jumped to the first in the world. Continue to reduce costs, accumulate and wait for glass fiber prices to pick up. 2) 20112017: “external supply”, global layout. At present, Egypt has a total production capacity of 200000 tons of glass fiber and the United States has 95000 tons. 3) 20182021: intelligent manufacturing, rebuilding boulder. Technology + products continue to iterate, and cost control leads the industry: before 2010, the scale of tank kilns continued to lead, and since 2010, technology has led the transformation and upgrading of product structure. With the advantages of scale + industrial chain integration + geographical location, the ton cost continued to decline, and the cost reduction benefit was significant. The ton net profit rose to a higher level after 2014, and the ton net profit center rose from 200500 yuan to more than 1000 yuan.
Investment advice
The valuation of the company is significantly low. We believe that as the king of glass fiber in the world, the company has obvious cost advantages, and the production capacity is still increased, so it can enjoy a certain valuation premium compared with its peers. At the same time, the glass fiber industry and Jushi itself weaken the impact of the cycle, and the valuation center has great room for improvement. We estimate that the net profit attributable to the parent company from 2022 to 2024 will be 6.721 billion yuan, 7.130 billion yuan and 7.843 billion yuan respectively, and the corresponding dynamic PE on March 24 will be 9x, 9x and 8x respectively. In horizontal comparison, the average PE of comparable companies in A-share glass fiber industry in 2022 is about 9x. Longitudinal comparison shows that at present, Jushi PE is located at the central low point in recent 10 years, and Pb is located at the central low point in recent 10 years. Comprehensively considering the industry status, profitability, performance growth space and current valuation level, it will be covered for the first time and given a “recommended” rating.
Risk warning: macroeconomic downturn; The pace of industrial capacity launch is lower than expected; Fuel prices fluctuated sharply.
