We believe that the fundamental changes in the glass manufacturing industry from the fourth quarter of last year to the present are similar to the end of 2008 to the beginning of 2009: Profitability is in a downward trend, and the industry gross profit margin is close to the bottom of the history in early 2006 and early 2009, and demand has accelerated. We expect the industry earnings may bottom out at the end of the first quarter. On the one hand, due to the slow rise in the kiln decline, the supply will gradually decline. On the other hand, the market will start seasonally. If demand can start to recover slowly in the second quarter, the industry profitability will be And the price of glass will also gradually pick up.
The main reasons are as follows:
1 According to the data from the end of January, the glass market has not yet started due to the end of the Spring Festival holiday. The prices in all regions are basically the same as in the previous month.
2 The rate of stopping the kiln was 23.9%. The balance was flat, still at a historical high, and the industry suffered heavy losses. In the future, there will still be more production lines or will stop production, reducing the supply of the industry;
3 Taking into account that demand may begin to pick up seasonally in the second quarter, and soda ash prices continue to decline, industry profit is expected to bottom out in the first quarter.
Main concern indicators: Kiln stoppage rate, gross profit margin, fixed investment growth, and real estate sales area growth.
The main recommended companies: Qibin Group and CSG A.
The average price of major cities was basically flat in late January. The average price of 4mm glass in five major cities (Beijing, Qinhuangdao, Xi’an, Shanghai and Guangzhou) was 70.7 yuan/heavy box, which was basically the same as the previous month (average price was 70.8 yuan/heavy box in mid-January). In Guangzhou alone, prices fell from 82.5 yuan/heavy box to 82.0 yuan/heavy box, down by 0.6%. From a regional point of view, some parts of the northern part of the country are still in a state of pricelessness; in South China, the pre-holiday joint-stock companies’ price increase in the post-holiday view shows a modest market response, and there is also a slight increase in stocks on the market; shipments during the holiday season in East China are sluggish. The price was also flat compared to the previous month; individual varieties in Central China rose slightly, but the overall situation did not change much.
The glass-soda heavy oil difference slightly recovered, the industry is still in a loss in late January, soda ash prices were RMB 17,11/ton, a month-on-month drop of RMB 70/ton, a decrease of 3.9%; heavy oil prices were RMB 4,400/ton, a month-on-month decrease of RMB 50 The decline rate was 1.1%. With the declining demand for glass, we expect soda ash prices will slowly decline in the future, while heavy oil will still fluctuate at high levels.
The short-term profitability of the glass industry will bottom out, and the demand for kiln-to-kiln ratio will remain low at the high level of inventory, and output will decline. It is expected that the gross profit margins in December and January will be 3.3% and 7.3%, respectively. According to WIND statistics, the gross margin of the whole industry was 10.9% in November. The gross profit margins in December and January are expected to be 3.3% and 7.3%, respectively, down 7.6% and 3.6% respectively from November. (The historical low occurred in February 2009 at 3.83%). We expect that although short-term company price increases will temporarily increase gross profit margin, low demand will still cause a slight decline in gross profit. If the kiln shutdown rate continues to rise and the market starts to pick up in the future, the industry inventory will gradually decline, and the industry profit will bottom out in the first quarter.
The rate of suspension in the second half of January was 23.9%, which was flat compared to the previous month. It is still at a historical high; it is expected that the rate of shutdown will peak in the second quarter, and the gross margin of the industry will bottom out in the first quarter. At the same time, due to fewer shipments during the Spring Festival, the industry’s inventory increased slightly. In late January, the industry inventory was 27.87 million heavy boxes, which was a 3.0% increase from the previous quarter.
Glass segment and focus on company valuation The domestic A-share market rebounded significantly in late January. The Shenwan Glass Manufacturing Index underperformed the CSI 300 Index by 0.39 percentage points, and the glass segment's 11-year absolute PE was 19.2.
Focusing on the company, CSG A and Qibin Group's PE in 2011 were 13 times and 21 times respectively.
The main reasons are as follows:
1 According to the data from the end of January, the glass market has not yet started due to the end of the Spring Festival holiday. The prices in all regions are basically the same as in the previous month.
2 The rate of stopping the kiln was 23.9%. The balance was flat, still at a historical high, and the industry suffered heavy losses. In the future, there will still be more production lines or will stop production, reducing the supply of the industry;
3 Taking into account that demand may begin to pick up seasonally in the second quarter, and soda ash prices continue to decline, industry profit is expected to bottom out in the first quarter.
Main concern indicators: Kiln stoppage rate, gross profit margin, fixed investment growth, and real estate sales area growth.
The main recommended companies: Qibin Group and CSG A.
The average price of major cities was basically flat in late January. The average price of 4mm glass in five major cities (Beijing, Qinhuangdao, Xi’an, Shanghai and Guangzhou) was 70.7 yuan/heavy box, which was basically the same as the previous month (average price was 70.8 yuan/heavy box in mid-January). In Guangzhou alone, prices fell from 82.5 yuan/heavy box to 82.0 yuan/heavy box, down by 0.6%. From a regional point of view, some parts of the northern part of the country are still in a state of pricelessness; in South China, the pre-holiday joint-stock companies’ price increase in the post-holiday view shows a modest market response, and there is also a slight increase in stocks on the market; shipments during the holiday season in East China are sluggish. The price was also flat compared to the previous month; individual varieties in Central China rose slightly, but the overall situation did not change much.
The glass-soda heavy oil difference slightly recovered, the industry is still in a loss in late January, soda ash prices were RMB 17,11/ton, a month-on-month drop of RMB 70/ton, a decrease of 3.9%; heavy oil prices were RMB 4,400/ton, a month-on-month decrease of RMB 50 The decline rate was 1.1%. With the declining demand for glass, we expect soda ash prices will slowly decline in the future, while heavy oil will still fluctuate at high levels.
The short-term profitability of the glass industry will bottom out, and the demand for kiln-to-kiln ratio will remain low at the high level of inventory, and output will decline. It is expected that the gross profit margins in December and January will be 3.3% and 7.3%, respectively. According to WIND statistics, the gross margin of the whole industry was 10.9% in November. The gross profit margins in December and January are expected to be 3.3% and 7.3%, respectively, down 7.6% and 3.6% respectively from November. (The historical low occurred in February 2009 at 3.83%). We expect that although short-term company price increases will temporarily increase gross profit margin, low demand will still cause a slight decline in gross profit. If the kiln shutdown rate continues to rise and the market starts to pick up in the future, the industry inventory will gradually decline, and the industry profit will bottom out in the first quarter.
The rate of suspension in the second half of January was 23.9%, which was flat compared to the previous month. It is still at a historical high; it is expected that the rate of shutdown will peak in the second quarter, and the gross margin of the industry will bottom out in the first quarter. At the same time, due to fewer shipments during the Spring Festival, the industry’s inventory increased slightly. In late January, the industry inventory was 27.87 million heavy boxes, which was a 3.0% increase from the previous quarter.
Glass segment and focus on company valuation The domestic A-share market rebounded significantly in late January. The Shenwan Glass Manufacturing Index underperformed the CSI 300 Index by 0.39 percentage points, and the glass segment's 11-year absolute PE was 19.2.
Focusing on the company, CSG A and Qibin Group's PE in 2011 were 13 times and 21 times respectively.
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