JINJING SCIENCE&TECHNOLOGY STOCK(600586)：WELL-ESTABLISHED PLAYER ENTERS NEW ENERGY GLASS BUSINESS

　　Investment positives
　　We initiate coverage on Jinjing Science & Technology Stock （Jinjing） with an OUTPERFORM rating and a target price of Rmb10.70, implying 18x 2023e and 13x 2024e P/E. The firm’s main businesses include float glass, soda ash, transparent conductive oxide （TCO） glass and photovoltaic （PV） glass. We view the firm as a tier-2 player in the domestic ordinary white glass market, with a share of 4%. It is a tier-1 player in the ultra-white glass market, with a share of 14%. It has a 4-5% share of the soda ash market. The firm has the largest production capacity of TCO glass in the domestic market, while its production capacity of PV glass is relatively small.
　　Why an OUTPERFORM rating?
　　Float glass business may turn around; soda ash business helps cushion earnings. We expect float glass prices to rebound from the bottom in 2023. We estimate the gap between demand and supply for float glass may reach 2% in 2023, as housing project completions and policies to ensure delivery of housing projects boost demand. We think soda ash prices may remain stable in 1H23 and drop marginally in 2H23 after new production capacity comes on stream. The firm supplies about 30% of its soda ash for its glass production. We think the price at which Jinjing buys soda ash from its subsidiary Haitian Chemical is lower than the prices at which it buys soda ash from other companies.
　　Has become tier-1 player in ultra-white glass market, laying foundation for expansion into new energy glass. We estimate more than 70% of the firm’s production capacity will be capable of producing ultra-white glass. The trend in demand for ultra-white glass is similar to float glass but is more likely to be used in high-end projects and its prices are more stable than white glass.
　　The firm’s ultra-white glass products have been used in leading projects at home and abroad, e.g., the Beijing National Stadium and Burj Khalifa. These types of products give the firm stronger bargaining power and more resilient earnings during downturns. In addition, we think Jinjing’s ultra-white glass business is the technological foundation for its rapid expansion into the new energy glass business.
　　TCO glass market to reach over Rmb10bn; firm capable of rapid market response and effective quality control. We expect the TCO glass market to reach over Rmb10bn in 2025. The firm has high-quality products and focuses on attracting large customers. It has established a strategic partnership with Microquanta, a leading Chinese firm in perovskite PV technology. Overseas, we think leading solar PV module manufacturer First Solar will bring in new suppliers, including Jinjing. We make this assumption based on the capacity expansion plans of First Solar and its existing supplier NSG.
　　We believe Jinjing is well positioned to become a supplier to overseas companies. We are optimistic about the progress made by manufacturers of perovskite solar cells on GW-scale production lines in 2023 and the catalyzing effect this would have on related sectors and stocks. The firm is building production lines for PV glass in Ningxia and other regions to be closer to end-market customers. We expect earnings in the new energy glass sector to improve in 2023 as yield improves.
　　How do we differ from the market? The market is focused on TCO glass. We emphasize the firm’s leading position in ultra-white glass, which is the foundation for producing TCO glass. Meanwhile, the market mainly provides a qualitative analysis of the firm’s TCO glass business. We analyze the potential for the company to gain orders from a quantitative perspective based on the capacity expansion plans of both its competitors and downstream customers.
　　Potential catalysts: Rebound in float glass prices amid supply-demand mismatch; launch of GW-level production lines for perovskite cells.
　　Financials and valuation
　　Our EPS forecast is Rmb0.59 for 2023 and Rmb0.8 for 2024, a CAGR of 80% for 2022-2024. The stock is trading at 14x 2023e and 10x 2024e P/E. We initiate coverage with an OUTPERFORM rating and SOTP valuation-based TP of Rmb10.70, implying 18x 2023e and 13x 2024e P/E, offering 30% upside.
　　Risks
　　Housing project completions, production capacity under cold repair, or TCO glass orders lower than we expected; firm does not comply with various environmental regulations.
【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。

   【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。