In the second half of 2023, Follett Glass (06865) seems to have entered a "water reversal period": not only has the stock price been declining since late June, hitting a new low in more than three years;And in November, shareholders such as Xiaomo and Suzaku have successively ** the company's shares, and CLSA has sharply lowered the company's target price and profit, downgrading the rating from "**" to "underperforming the market".
Judging from the third quarter financial report, the company's revenue and profit both increased, exceeding market expectations, and the pace of capacity expansion continued to accelerate, showing a positive momentum, but the market funds were still cold after the results were released, which did not boost the stock price. The reason for the divergence between performance and stock price may not be as simple as it seems.
The photovoltaic glass leader led the industry, and its Q3 performance exceeded expectations.
Flat Glass is a leader in photovoltaic glass for more than 20 years, and in 2022, Flat will have a global photovoltaic glass market share of 28%, ranking second. In addition to the main photovoltaic glass, the company also provides float glass original and its downstream deep processing of engineering glass, household (consumer) glass, etc.
In 2023, the rapid decline of PV industry chain products** will boost the domestic PV installed capacity demand to continue its rapid growth trend. According to data from the National Energy Administration, in the first three quarters of 2023, the country's newly installed photovoltaic capacity was 128.94 million kilowatts, a year-on-year increase of 145%;By the end of September 2023, the installed capacity of photovoltaic power generation in the country will reach 5200 million kilowatts. In the first three quarters of 2023, the country's photovoltaic power generation capacity was 436.9 billion kWh, a year-on-year increase of 33%;The utilization rate of photovoltaic power generation in the country is 983%, an increase of 03 percentage points.
According to Zhitong Financial APP, although the industry continues to maintain a high degree of prosperity, due to the sharp decline in the industrial chain, the performance of related photovoltaic enterprises has generally declined. In the industrial chain, photovoltaic glass is in the middle of the industry, and the downstream is various module manufacturers.
Photovoltaic glass is an essential material for photovoltaic modules, which is mainly installed in the outermost layer of photovoltaic modules to block the effects of moisture and corrosive gases, and play a role in protecting cells and electrodes. Therefore, its quality directly determines the power generation efficiency of the photovoltaic module and the service life of the module.
Due to the high concentration of upstream and downstream industries, coupled with the homogenization of the quality of photovoltaic glass itself, the voice of photovoltaic glass enterprises in bargaining is relatively limited. At the same time, as photovoltaic glass has shown a pattern of both supply and demand in recent years, fierce competition has also dragged down the profits of photovoltaic glass manufacturers.
Judging from the performance disclosed by listed companies in the first half of the year, among the 11 major listed companies in the industry, 9 had a year-on-year increase in revenue and 8 had a year-on-year decrease in net profitAccording to the statistics of the Financial Associated Press, in the first half of this year, the average gross profit margin of the photovoltaic glass industry was 1530%, which is already the lowest point in the past five years, a decrease of 242 percentage points.
Looking at the performance of Follett Glass in recent years, the company's revenue has grown rapidly, but it is a little weak in terms of profitability, and the net profit in 2022 will only increase by 013%。
In the third quarter of 2023, the company's profitability improved, achieving an operating income of 620.6 billion yuan, a year-on-year increase of 5872%;Achieved net profit attributable to the parent company of 88.4 billion yuan, a year-on-year increase of 7619%。Realized the net profit of 87.6 billion yuan, a year-on-year increase of 773%。
Looking at the overall performance in the first three quarters, the operating income in the first three quarters was 1588.5 billion yuan (RMB, the same below), a year-on-year increase of 4164%;Net profit attributable to shareholders of listed companies196.9 billion yuan, a year-on-year increase of 3086%;Net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses194.6 billion yuan, a year-on-year increase of 3244%。
Although the year-on-year growth rate of less than double-digit is not the same as the peak period a few years ago, considering the pressure of the industry's stage surplus in the first half of the year, the performance of Follett Glass has exceeded expectations.
According to Zhitong Financial APP, due to the high threshold of photovoltaic glass technology, long construction period and small capacity elasticity, the industry has high barriers to entry.
In such a typical manufacturing industry with heavy asset attributes, the comprehensive competitiveness of enterprises depends more on the advantages brought by scale effect and cost control. Whether in terms of production scale or cost control, Follett glass is remarkable.
In terms of production capacity, the company has accelerated the expansion of production capacity, and as of June 30, 2023, the company's existing production capacity is 2060,000 tons, it is expected that four 1,200-ton production lines will be put into operation in Q4, and the production capacity will reach 25,400 tons per day by the end of the year, a year-on-year increase of 30%. The company revealed that in addition to the approval process of the hearing on the domestic planned production capacity, the company is also considering further expansion overseas, and it is expected that the company will maintain a certain pace of expansion in the future, and the market share is expected to increase in the long run.
In terms of cost, the main raw material soda ash ** fell in the third quarter, driving the company's gross profit margin to increase to 2452%, an increase of 3 year-on-year5 percentage points, an increase of 4 from the previous month6 percentage points. In terms of future planning, the company is actively increasing the proportion of 1,600 tons of large kilns to further reduce costs, the combustion and temperature inside the large kiln are more stable, compared with 1000 tons of energy consumption can be reduced by 10%-15%, the yield rate from 85% to 88%-89%, the company's 1,000 tons and above large kilns account for nearly 90%.
The supply and demand of the industry are booming, and the price reduction of raw materials has led to the recovery of profits.
In the long run, as the head enterprise with a high market share, Follett glass still has a solid leading edge, and when the industry as a whole is under pressure, it is headwinds to maintain performance growth, but the stock price has not been able to follow the performance upward, which may have to find out the reason from the recent photovoltaic glass industry level.
At present, photovoltaic glass presents a pattern of "supply and demand increase". According to the data of the Photovoltaic Industry Association, as of the end of December 2022, the total production capacity of photovoltaic rolled glass was about 84,299 t d, of which the kiln production capacity in production was about 79,389 t d, a year-on-year increase of 844%;In June 2023, the domestic photovoltaic glass production capacity will be further increased to 860,000 tons per day, a year-on-year increase of 56%.
On the one hand, the tighter supply-demand ratio led to pressure on the profitability of photovoltaic glass in the first half of the yearOn the other hand, the fluctuation of raw material costs is also an important factor affecting the profit margins of photovoltaic glass enterprises.
According to Zhitong Financial APP, soda ash is one of the main upstream raw materials for float glass and photovoltaic glass. In the first half of 2023, soda ash** will decline sharply, and the whole will be operating at the bottom;However, since November, soda ash has shown a continuous upward trend, and the maximum increase in the month has exceeded 30%.
Looking ahead, in terms of cost, Minsheng ** pointed out that in the second half of 2023, there will be greater pressure on the new production capacity of soda ash, and the output growth rate of the industry in 2024 may reach 107%, soda ash or will show a trend of oversupply, suppressing the soda ash ** to further weaken;
According to the statistics of the Ministry of Industry and Information Technology, as of July 2023, the total production capacity of photovoltaic glass is about 90,000 tons, an increase of 714%。Under the early warning policy of photovoltaic glass production capacity in various places, the overall new supply in the second half of the year is still relatively limited
On the demand side, Huatai** pointed out that in 2022, the progress of global PV installation and grid connection lags behind module production, and as the pace of PV module production further accelerates in 2023, the potential inventory has increased, and the pace of market digestion is still uncertain.
At the beginning of September, affected by the cost of raw materials, a number of photovoltaic glass companies have raised prices, and market sources said that photovoltaic glass of different thicknesses were raised by 2-3 yuan. This represents an increase of about 12% compared to the previous selling price. Prior to this, there had been significant price increases in many links of the photovoltaic industry chain.
It can be seen that under the premise that the performance and fundamentals exceed the average level of the industry, the decline of Follett glass in the secondary market is mainly affected by the overall uncertainty of the industry. Not only is the relationship between supply and demand still facing certain challenges, but the company's profitability will also be subject to the fluctuation of upstream raw materials. Therefore, at a time when the company's valuation is close to a historical low, the cost-effectiveness of the left-hand allocation is improving, and it is advisable to maintain a cautious and optimistic attitude to continue to pay attention.