Ping An View:
Research method: glass supply and demand dominate the price, and the industry periodicity is significant. On the supply side, the production capacity of glass in production is mainly affected by new ignition, cold repair, shutdown and resumption of production. At present, it is mainly concerned with cold repair and resumption of production. On the demand side, float glass is mainly used in real estate, which can be combined with the real estate sales and completion of the Bureau of statistics to judge the demand. Among them, the growth rate of sales area has a good correlation with the glass price, which is more affected from the perspective of expectation. Although the absolute value of completion may be distorted, the growth rate can still reflect the current demand. Due to the relatively rigid supply and the cyclical impact of real estate demand, the volume and price of the glass industry are also cyclical. Since 2009, it has experienced four cycles, each lasting 3-4 years, and the price has changed from rise to fall. The degree of prosperity and spot price can be considered as two-week tracking indicators, which can reflect the short-term inventory price. On the cost side, glass is mainly soda ash and fuel, accounting for more than half. Nearly 40% of soda ash demand comes from glass, and the price has a certain correlation with the latter; There are different types of fuels, among which petroleum coke is widely used and fluctuates greatly under the influence of oil price. It can track the price difference of glass soda ash petroleum coke to judge the profit. Although the cost fluctuates, in the medium and long term, the profit of glass is dominated by price, which is also highly correlated with the stock price of listed companies.
Resumption history: the mismatch between supply and demand brings five cycles of evolution. 20012008: the rapid development of urbanization and economy drives the rapid development of real estate and automobile industry, and the glass industry develops rapidly, showing both supply and demand; When the financial crisis hit in 2008, the decline of real estate sales, completion and export led to the pressure on the volume and price of the glass industry. 20092011: the financial crisis led to the decline of glass profits and the contraction of production capacity, while the beneficiary policies actively rescued the market, the recovery of the real estate market strengthened, and the glass price rose under the improvement of supply and demand; With the sharp expansion of production capacity and the weakening of demand expectation, the glass price fell and the superimposed cost rose, and enterprises are generally facing a decline in performance. 20122015: profit pressure led to the contraction of production capacity supply, while the demand side improved with the loosening of monetary and real estate policies, and the glass price gradually rebounded; With the downward pressure on the property market and the increasing problem of overcapacity in 2014, glass prices fell. 20162018: the supply side reform was launched, with policies restricting new production capacity and environmental protection limiting production in Shahe and other places, the supply of glass production capacity contracted, intensive introduction of demand side real estate support policies, and the gradual warming of the real estate market, driving glass prices higher; However, due to the slow pace of completion, the demand in 2018 was lower than expected, and the glass price fell slightly. 20192021: the supply side continues to limit new production capacity, the cold repair peak is gradually approaching, and the completion peak is approaching. Under the strong demand, the glass price rises sharply in 2020h2, repeatedly hitting a record high; With the increasing capital pressure of 2021h2 real estate enterprises and even frequent defaults, the pace of completion slowed down and glass prices fell.
Looking forward to the future: short-term completion may be difficult to improve, and the demand in the second half of the year is not pessimistic. Compared with the past cycles, there are two differences at present. First, unlike the acceleration of capacity expansion in the past and the decline of industry prosperity, the decline of glass prices since 2021h2 is mainly due to the sharp increase of capital pressure of real estate enterprises and the rapid weakening of demand; Second, affected by the rise in fuel prices, the starting point of glass prices in this cycle is higher. In the short term, the fundamentals of real estate have not been repaired, and the capital pressure of real estate enterprises is high. Considering the time lag of policies and the time required for the recovery of market confidence, the short-term completion is still under pressure, and the rise of glass inventory confirms the weak demand in the downstream. However, due to the rise of fuel prices, the downward space of glass prices is also relatively limited. In the medium term, if the real estate policy continues to work, the capital environment of real estate enterprises is significantly improved, and the policy requirements of “guaranteed housing delivery” are added, the completion and repair speed will be faster than the commencement under the pressure of the peak delivery period. With the superposition of the backlog of completion demand since 2021h2, it is expected that the completion of 2022h2 is expected to be on track. At the same time, the impact of the resumption of production line at the supply end on the production capacity may be limited, and the continuation of the cold repair peak will also help to alleviate the pressure of production capacity, With the improvement of supply and demand, there is no need to be pessimistic about the prosperity of glass, which is expected to usher in a new round of cycle evolution.
Investment suggestion: over the past 20 years, the flat glass industry has a significant periodicity, the supply is relatively rigid, the demand is affected by the real estate cycle, the supply and demand dominate the rise and fall of glass prices, and then affect the stock price performance of glass enterprises. At the current time point, we believe that unlike the past few cycles, the decline of industry prosperity is more due to the rapid weakening of demand, and there is no need to worry too much about capacity expansion. In fact, the impact of subsequent resumption production line is limited, the logic of cold repair peak continues, and the overall capacity supply tends to shrink. Therefore, the industry prosperity pays more attention to the demand side. Although the short-term completion is still under pressure and the rise of oil price also leads to the periodic pressure on profitability, with the continuous development of real estate policy and the superposition of the policy requirements of “guaranteed delivery”, the glass demand is still expected under the logic support of the completion peak. It is suggested to pay attention to the industry leaders Zhuzhou Kibing Group Co.Ltd(601636) , Xinyi Glass.
Risk tips: 1) under the pressure of real estate fundamentals, if the follow-up policy support is too small or the introduction time is too late, it will affect the level and speed of real estate sales and completion repair, and then affect the scale of glass demand and price performance. 2) If the prices of raw materials such as soda ash and silica sand rise subsequently, and the prices of fuels such as natural gas, petroleum coke and heavy oil continue to rise due to geopolitical influence, it will put pressure on the profits of the industry and drag down the profits of glass enterprises. 3) If the subsequent implementation of the environmental protection and production restriction policy is not as expected, resulting in the increase of new ignition or re production lines, it will increase the pressure on the glass supply end.
