\u3000\u3 Bohai Water Industry Co.Ltd(000605) 006 Shandong Fiberglass Group Co.Ltd(605006) )
Key investment points
Event: the company released its annual report for 2021, and the company achieved an operating revenue of 2.749 billion yuan, a year-on-year increase of 37.72%; The net profit attributable to the parent company was 546 million yuan, a year-on-year increase of 216.78%; The basic earnings per share is 1.09 yuan. The company released the performance forecast for the first quarter of 2022. The company expects to realize the net profit attributable to the parent company in the first quarter of 2022 to be 177 million yuan to 196 million yuan, with a year-on-year increase of 16% to 28%. The company’s performance is in line with expectations.
In 2021, the volume and price of the main glass fiber business increased simultaneously, driving the high growth of performance.
Since the glass fiber industry ushered in the inflection point in 2020q4, the prosperity of the industry has been rising. According to Zhuo Chuang information, the average price of alkali free glass fiber roving in 2021 was 6607 yuan / ton, an increase of 36.51% year-on-year.
Ton price: as the second-line leading enterprise with the fourth roving capacity in China, the company directly benefited from the upward boom of the industry. The average price of glass fiber business in 2021 was 602085 yuan / ton, a significant increase of 35.35% year-on-year.
Sales volume: in 2021, the company achieved 393300 tons of glass fiber sales, with a year-on-year increase of 4.4%. It is judged that the main reason is that Zibo Zhuoyi special fiber line with a production capacity of 80000 tons in May 2020 made a complete contribution to the production capacity in 2021 after ignition. Cost per ton: in 2021, the cost per ton of glass fiber of the company was 354437 yuan / ton, with a year-on-year increase of 11.05%. It is judged that it is mainly driven by the price rise of energy and raw materials.
On the whole, with the simultaneous rise of volume and price, the company’s glass fiber business revenue in 2021 increased by 41.36% year-on-year, and the gross profit margin increased by 12.88 points. The simultaneous rise of volume and price of main business glass fiber promoted the high growth of the company’s performance.
In 2022, the glass fiber boom continued and the profit of thermoelectric business improved.
Glass fiber business: the pressure release period of 21q4 production capacity has passed, and the industry cycle is weakened with the dual control of energy consumption. From the perspective of the quarterly marginal new effective capacity of roving, only the marginal new effective capacity of 21q4 is more, reaching 58000 tons / quarter. After entering 22 years, the marginal new effective capacity has slowed down. We expect the marginal new effective capacity of Q1-Q4 in 22 years to be 1.7/1.7/3.313000 tons / quarter respectively. Under the “dual control of energy consumption”, it is more difficult for the industry to increase new production capacity, and the landing uncertainty increases. Under the judgment that the demand side continues to improve, the industry boom is expected to continue and the high price is expected to be maintained. In terms of volume, the company’s Yishui third line will be put into operation in October 2021 and will contribute to the complete annual output increment in 2022. From the 2022q1 performance forecast released by the company, the glass fiber business continues to grow year-on-year. Thermal power business: in 2021, the company’s thermal power business revenue increased by 12.45%, and the coal price rose sharply and extremely in the second half of the year, which had a great impact on the cost of thermal power business. The annual gross profit margin was – 1.05%, resulting in a loss. Since Q1 of 2022, under the background of ensuring supply and price stability, the coal price has been high and stable, and there will be no sharp and extreme rise in October last year. The company’s thermal power business is expected to benefit from this, and the profit is expected to gradually recover.
The company’s advantages such as capacity scale, low cost and customer resources highlight its comprehensive strength.
1) the production capacity is the fourth largest in China and continues to expand through cold repair technical transformation: according to the announcement of the company, the company plans to carry out cold repair technical transformation on a glass fiber tank furnace wire drawing production line with an annual output of 60000 tons 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. In the follow-up, there are still plans for cold repair and technical transformation of production lines. It is expected that China’s production capacity will reach about 620000 tons by 2025.
2) low cost advantage: the company has obvious comprehensive advantages such as large-scale, intelligent 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 area, 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. With the expansion of production capacity and the promotion of cold repair technology transformation, there is still room for cost reduction.
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) employee stock ownership advantage: the company’s middle-level and above management and technical personnel hold shares on the company’s stock ownership platform, the management team is stable, and demonstrates the determination and confidence of development.
Investment suggestion: the core recommendation logic is the cold repair and technical transformation of beta superposition companies in the glass fiber industry, which brings a rise in volume, price and profit, maintains a high profit state and makes the valuation more cost-effective. Due to the recent observation that the production of new production capacity in the glass fiber industry is accelerating and the pressure on the supply side is approaching or faster than expected, we slightly reduced the company’s profit forecast and predicted that the company will realize the net profit attributable to the parent company of RMB 656 million and 721 million (the previous value of RMB 667 million and 749 million) from 2022 to 2023. The current share price corresponds to PE of 9 and 8 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 materials used in the research report may have the risk of information lag or untimely update.
