KIBING GROUP(601636)：PROFIT OF FLOAT GLASS RISES QOQ;UPBEAT ON EARNINGS OF PV GLASS IN 2023

　　2022 results in line; 1Q23 results miss
　　Kibing Group announced its 2022 and 1Q23 results: Revenue dropped 9% YoY in 2022 to Rmb13.3bn, and net profit attributable to shareholders fell 69% YoY to Rmb1.32bn. The results were largely in line with our forecast.
　　In 1Q23, revenue rose 2% YoY to Rmb3.1bn and attributable net profit fell 78% YoY to Rmb113mn. The results slightly missed our expectations, due to slower-than-expected recovery of end-market demand.
　　Average float glass price sharply declined; revenue fell YoY. In 2022, revenue from float glass dropped 18% YoY to Rmb8.7bn. Sales volume of this product came in at 108mn boxes. Based data from its 2022 financial statement, we estimate that prices of float glass fell 23% YoY to Rmb81/box. GM of this product fell 29ppt YoY to 20.9%. In 4Q22, the firm's revenue rose 4% QoQ to Rmb3.5bn. We estimate that sales volume of float glass at the company reached 25mn boxes in 4Q22. Data from National Bureau of Statistics （NBS） shows that in 4Q22, prices of float glass averaged Rmb1,671/t （down 3% QoQ, incl. tax）。
　　Production capacity of double glazed glass increased; volume and prices of energy-saving glass rose. In 2022, revenue of energy-saving glass rose 24% YoY to Rmb2.57bn. Sales volume increased 19% YoY to 38.95mn sqm. ASP o rose 6% YoY to Rmb66/sqm.
　　PV glass business and other new businesses ramped up. In 2022, revenue of other energy-saving glass dropped 3% YoY to Rmb1.85bn, with GM down 26ppt YoY to 11%. The firm's new production lines for photovoltaic （PV） glass in Chenzhou ramped up in 2022.
　　Period expense ratio dropped 5.1ppt YoY in 2022. Its G&A expense ratio fell 4ppt YoY to 5.1%, as the firm reduced its provision for earnings-based bonus.
　　End-market demand gradually recovered; GM rose 3.6ppt QoQ in 1Q23. In 1Q23, revenue rose 2% YoY to Rmb3.13bn. NBS data shows that in 1Q23, prices of float glass averaged Rmb1,734/t （down 22% YoY, incl. tax）。 Gross profit was around Rmb6/box. NBS data shows that in April, prices of float glass averaged Rmb1,830/t （up 5% MoM, incl. tax）。 As of April 20, prices averaged Rmb2,100-2,200/t （incl. tax） in south China, and gross profit of float glass exceeded Rmb20/box in some regions. Profit of float glass rose MoM.
　　Trends to watch
　　GFA completed to keep mildly increasing; prices of float glass to rebound. The CICC real estate team estimates that GFA completed will increase 10% YoY in 2023. This, coupled with destocking at companies in recent weeks, prompts us to believe that downstream demand is recovering and demand may increase notably in 2H23. Companies that had incurred losses in previous years may not resume production unit prices of float glass exceed costs. We expect prices of float glass to increase going forward.
　　PV and electronic glass businesses will likely contribute incremental earnings. The firm has increased efforts to expand production capacity of PV, electronic and pharmaceutical glass.
　　PV glass: The firm expects to launch its production lines in Zhangzhou and Ninghai this year. We think its actual production capacity of PV glass will exceed 4,000t per day in 2023.
　　Electronic glass: The company plans to invest Rmb970mn to build two production lines for high-performance electronic glass （total production capacity: 215t per day） in Sichuan.
　　Pharmaceutical glass: It has also released a plan to invest Rmb790mn to build two production lines for neutral borosilicate glass.
　　Financials and valuation
　　We cut our 2023 and 2024 EPS forecasts 16% and 13% to Rmb0.63 and Rmb0.79 to reflect slower-than-expected progress in recovery of the float glass industry in 1Q23. The stock is trading at 17x 2023e and 14x 2024e P/E. We maintain OUTPERFORM and our target price of Rmb13.6 believing that the float glass industry will recover QoQ. Our TP implies 21x 2023e and 17x 2024e P/E, and offers 24% upside.
　　Risks
　　GFA completed, cold repair in manufacturing facilities for float glass, and launch of new PV glass projects disappoint.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。