Jianguo International issues research reports that in March and May, flat glass (06865) lit one 1200-ton production line each for photovoltaic glass, increasing total production capacity to 23000 tons. In the second half of the year, the company plans to light up six more production lines, but the bank believes that there may be delays due to deteriorating supply and demand. The bank calculates that the average price of 2.0/3.2mm glass in the second quarter increased by 2.9%/+0.2% MoM, but due to the decline in the prices of soda ash and natural gas, the bank estimates that gross margin will increase by 1-2 percentage points QoQ in the second quarter, with a slight decline in sales volume and a net profit of 0.75 billion yuan (RMB) attributable to shareholders, which remains largely stable compared to the previous month.
Currently, the price of 2.0/3.2mm photovoltaic glass has fallen by 16.4%/7.6% compared to April. According to the bank's calculation, apart from the company and Xinyi, Qibin, other companies are already in deficit at the current price. The bank expects the industry's expansion rate to slow down significantly, and a large-scale cold repair trend is expected, while further price declines are limited.
The bank stated that due to the weaker-than-expected trend of photovoltaic glass prices, the bank lowered its profit forecast and lowered the target price to HKD 13.10 (from the original HKD 19.50). Since March, the bank has downgraded the rating to neutral, and the stock price has fallen more than 40%. The bank believes that the valuation is attractive and upgraded the rating to buy.