CJS(600176) GOLDEN SUN SECURITIES·2024-10-07 06:43Investment Rating - The report initiates coverage with a "Buy" rating for China Jushi [1][2]. Core Views - The overall supply and demand are stabilizing, with structural opportunities in wind power, automotive, and exports. The demand for fiberglass is expected to maintain low growth in the next 1-2 years, with construction materials dragging down overall usage, while wind power and automotive sectors are expected to grow faster than the industry average [1]. - The company has established a cost advantage and is focusing on structural upgrades to enhance profitability. The cost advantage is primarily due to scale effects, with production costs for raw yarn decreasing from 3,769 RMB/ton in 2011 to 2,943 RMB/ton in 2020, a reduction of 21.9% [1][20]. - The company is targeting high-end markets, including wind power, thermoplastics, electronics, and exports, to enhance its competitive edge [1]. Summary by Sections Company Overview - China Jushi is a leading global fiberglass manufacturer, part of China National Building Material Group, with production bases in multiple locations including China and the USA. The company has over 20 large-scale production lines with an annual capacity exceeding 2.6 million tons [14][16]. Industry Overview - The fiberglass industry is experiencing a cyclical downturn, with prices declining and companies facing operational challenges. The report notes that the industry is at a cyclical bottom, but recovery may take time [1][20]. Financial Performance - The company's revenue for 2022 was 20.19 billion RMB, with a net profit of 6.61 billion RMB. In 2023, revenue dropped to 14.88 billion RMB, and net profit fell to 3.04 billion RMB, reflecting a significant decline in profitability [4][20]. - Forecasts for 2024-2026 predict net profits of 2 billion, 2.8 billion, and 3.6 billion RMB, respectively, with corresponding P/E ratios of 21, 15, and 12 [1][4]. Cost Structure and Competitive Advantage - The report highlights that the company has maintained a cost advantage through effective management and technological innovations, although the rapid cost reduction phase is nearing its end [1][20]. - The focus on high-end products is expected to improve profit margins, particularly in the wind power and electronics sectors, where demand is anticipated to be stronger than in traditional markets [1]. Investment Outlook - The report suggests that China Jushi's strong market position and cost structure make it well-positioned to capitalize on future growth opportunities, particularly in high-demand sectors [1][20].