The

2024 performance is lower than our expectations

The company announced its 2024 results: revenue of 1.557 billion yuan, a year-on-year increase of -31.07%; net profit attributable to the parent company -124 million yuan, a year-on-year increase of -139.12%; Among them, the revenue in 4Q24 was 439 million yuan, -32.57% year-on-year and +13.5% month-on-month; The net profit attributable to the parent company was -116 million yuan, -568.42% year-on-year and -248.36% month-on-month, and in 2024, the company will make provision for inventory decline and bad debts of accounts receivable of 7530.8/11.367 million yuan respectively. Due to the continuous decline in the price of carbon fiber, the company's main product, the company's sales volume and cost reduction are less than expected, and the performance in 2024 is lower than our expectations.

In 2024, the company's carbon fiber production capacity will be 28,500 tons, and the production and sales volume will be 1.82/16,200 tons, respectively, a year-on-year increase of -8.09/-10.12%, and the gross profit margin will be 13.59%, a year-on-year decrease of 16.62ppt. The sharp year-on-year decline in the company's performance in 2024 is mainly due to the reduction in carbon fiber prices, the provision for impairment of accounts receivable and inventory, and the capitalization of interest to expense of the full production of the Shenying Xining and Shenying Shanghai projects.

Development trend

The industry is oversupplied, and the price of carbon fiber has basically bottomed out. According to Baichuan Yingfu, in 2024, the effective domestic carbon fiber production capacity will reach 130,200 tons/year, a year-on-year increase of 12.7%, the domestic output will be 59,000 tons, and the capacity utilization rate will only be 45.3%, a year-on-year decrease of 1.7ppt, and the trend of oversupply in the industry will further continue. At the same time, the average price of carbon fiber market continued to decline due to the impact of oversupply, from 94.7 yuan/kg at the beginning of the year to 83.8 yuan/kg at the end of the year, a decrease of 11.6%, and the annual average price was 90.1 yuan/kg, a year-on-year increase of -23.9%. Since December 2024, the average market price of carbon fiber has remained at 83.8 yuan/kg, according to Baichuan Yingfu's calculation, the average gross profit margin of the industry at this price level is basically less than -20%, we believe that the price of carbon fiber has basically bottomed out, and the room for further decline is limited.

The demand for new energy is improving, and the low-altitude economy is expected to become a new engine for future demand. According to Wind data, China's installed wind power capacity in 2024 will be 79,343,800 kilowatts, a year-on-year increase of +4.5%; According to the data of the National Energy Administration, in 2024, China's new photovoltaic installed capacity will be 278GW, a year-on-year increase of 28%, and the application of new energy fields will promote the steady growth of carbon fiber demand. According to the annual report, the company's comprehensive market share in the new energy field will exceed 50% in 2024, and we expect the market share to continue to increase in 2025. According to Stratview, more than 90% of the composite materials used in eVTOL are carbon fiber composites, and we believe that the low-altitude economy is expected to become a new growth pole for carbon fiber demand.

Earnings Forecast & Valuation

Due to the decline in product prices due to oversupply in the carbon fiber industry, we lowered our net profit in 2025 by 97.1% to 18.15 million yuan and introduced a profit forecast of 102 million yuan in 2026. The current share price corresponds to 2025/2026 price-to-book ratios of 4.1 and 4.0x, respectively. We believe that the company's active adjustment of sales strategy is expected to promote sales growth, while reducing costs and increasing efficiency to improve the company's performance, maintain the outperform rating, as the price of carbon fiber is basically bottoming, considering the growth of downstream demand and the company's growth, we only lower the target price by 25.9% to 25.35 yuan, which is 19.6% upside from the current stock price.

Risk

The company's sales growth is less than expected, the cost reduction is less than expected, and the price of carbon fiber continues to fall.