Company Profile Shandong Fiberglass Group Co., Ltd. is a China-based company mainly engaged in the research and development, production and sales of glass fiber and its products. The Company also provides thermoelectric products. The Company's main products are alkali-free yarn, medium alkali yarn, glass fiber products and thermoelectric products, including roving, textile spun yarn, wet-laid felt, checkered cloth, wall covering, electricity, steam and heating. Its products are mainly used in building materials, transportation, electronic appliances, environmental protection wind power and other fields. The Company conducts its businesses within the domestic market and to overseas markets such as the European Union, the United States, India, Russia and

Southeast Asia. (Source: Reuters)

Event

Shandong Fiberglass Group (the company) announced its mid-year report of 2022.

In the reporting period, it reported NCY 1.60 billion in revenue, up 10.27% year on year (YoY), mainly thanks to a mild rise in sales and price of glass fiber yarn; it reported CNY 348 million in net income attributable to shareholders, up 5.27% from a year earlier; it posted CNY 340 million in net income deducting non-recurring items, an increase of 5.27% from a year earlier.

In Q2, the company achieved CNY 762 million in revenue, up 7.44% from a year earlier; its net income attributable to shareholders dropped by 6.85% YoY to CNY 166 million, and its net income deducting non-recurring items slid 8.99%YoY to CNY 160 million.

In H1, the company’s net margin was 21.81%, down 1.04 percentage points (pp) and the figure was 21.76% in Q2, down 3.34 pp from a year ago.

Comments

By products, the company’s glass fiber products and thermoelectric products reported CNY 1.76 billion and CNY 353 million in revenue, up 18.84% and 39.47% from a year earlier, respectively.

And the glass fiber products are its main product, accounting for 87.17% of the revenue, down 0.21 percentage points from a year earlier.

In the first half of 2022, the company’s expenses accounted for 10.21%, down 0.17 percentage points from the same period of 2021. 1) The selling expense rate was 0.63%, down 0.28pp from a year ago; 2) its administrative expense rate was 3.17%, up 0.11 percentage points from a year ago;

3) its financial expense rate declined by 1.04pp to 2.72%; and 4) its R&D expense rate climbed by 1.04 percentage points to 3.69%.

At H1-end, the company’s asset-liability ratio was 45.21% versus the figure of 56.76% in a year before.

The short-term loans were CNY 244 million and the long-term loans stood at CNY 483 million compared with CNY 771 million and CNY 575 million in the same period of 2021.

The company reported net operating cash flow at CNY 400 million in H1, CNY 116 million more than that in a year earlier; its net operating cash flow per share was CNY 0.67, CNY 0.19 more than that in the same period of last year.

The company’s cash collection ratio and cash payment ratio in H1 was 56.81% and 48.56%, respectively, up 4.32 percentage points and 4.62 percentage points from a year earlier.

As for cash flow, the company’s net cash flow from operating activities stood at CNY 400 million, up 40.94%; its net cash flow from investing activities registered a loss of CNY 161 million, down 46.88% from a year earlier; and that from financing activities tumbled by 346.01% to a loss of CNY 620 million, due to less financing.

Earnings forecast and investment recommendation We revised its earnings forecasts and estimated its net income attributable to shareholders at CNY 658 million in 2022, CNY 797 million in 2023, and CNY 971 million in 2024, implying a P/E ratio to 9.2X, 7.6X, and 6.2X, respectively, based on the closing price on August 22nd. Reiterate “Outperform”.

Potential risks continuous downturn of real estate completion; price spikes of raw materials; bad debts incurred by failure in accounts receivable; slower-than-expected new business expansion; lower gross margin brought about by intensified competition