Dynamic research: glass fiber industry is highly prosperous

The leading position of fiberglass industry is steady and the comprehensive competitiveness is continuously improved. The company is a leading enterprise in the glass fiber industry. The market share of glass fiber accounts for more than 20% in the world. The company lays out the domestic market in an all-round way, builds production lines in Jiujiang, Tongxiang, Chengdu and Egypt, introduces efficient production management methods, and continuously reduces production costs. The gross profit rate of glass fiber products in 2014-2016 is 35.3%, 40.2% and 44.5% respectively, showing an upward trend year by year, and the company's overall competitiveness in the industry continues to improve. Overseas projects continue to expand, and global market service capabilities are enhanced. The company has completed the three phase of the project in Egypt, with a total capacity of 200 thousand tons / year. Egyptian project products are sold to European, Turkish and Middle East markets; the company plans to invest US $300 million in South Carolina to build an 80,000-ton/year glass fiber production line, which is expected to be put into production by the end of 2018. This will effectively reduce the U.S. regional glass fiber sales inventory cycle and benefit from the U.S. tax reform policy, further enhance the company's products in the U.S. Competitiveness in the U.S. market; August 2017 announcement of the company is expected to build 100,000 tons / year of alkali-free glass fiber yarn production line in India, to achieve continuous expansion of overseas projects, the global market service capacity as a whole. Technical upgrading of glass fiber products continues to enhance the proportion of high-end applications. The company's traditional glass fiber products are mainly used in building materials, accounting for up to 40% of revenue by 2014. As the company continues to improve the glass fiber product technology level and downstream applications gradually to high-end development, the company's product downstream application structure has changed significantly. The company will continue to increase its share in rail transit, automotive lightweight, wind energy, pipes and cans, and electronic products in the future to further enhance the overall level of profitability. Large shareholders in building materials and Chinese materials shares announced merger agreements, the company's business to the downstream areas of composite materials. In September 2017, the company's major shareholder, China Building Materials Stock (03323. HK) and China Building Materials Stock (01893. HK), jointly announced the merger agreement, each share of Chinese building materials stocks can be exchanged for 0.85 shares of Chinese building materials stocks, after the exchange of shares of all assets, liabilities, personnel and other rights and obligations will be undertaken by China Building Materials. As a subsidiary of China Building Materials Corporation, the company benefits from its strong leading position in the building materials industry of its parent company and is controlled by the same major shareholder as its competitor, Taishan Glass Fiber. China Building Materials Group has promised to compete for a shorter period of time within three years and abide by relevant regulations in a manner conducive to the development and maintenance of China's giant rocks shareholders (especially small and medium-sized stocks). Under the premise of interests, we should steadily promote the integration of related business to solve the problem of Interindustry competition, and the future synergy will be enhanced. At the same time, the company acquired 32.04% equity in the fan blade supplier under the flag of China Building Materials Co., Ltd. to realize the extension of the wind power industry chain and further enhance the competitiveness of the industry. Profit Forecast and Investment Rating: We are optimistic about the company's development prospects as a leading glass fiber industry, the future of the company's product application restructuring and overseas business expansion will promote further growth of the company's performance, based on Prudential principles, regardless of the future of the company's major shareholders in the building materials holding company's internal glass fiber business integration on the company's performance and equity Affected, we expect strong downstream demand in the fiberglass industry in 2018, leading to rapid growth of the company's performance, upgrade the company's 2017-2019 EPS of 0.73, 0.98 and 1.22 yuan / share, maintain the "buy" rating. Risk hints: overseas project construction progress is lower than expected; domestic glass fiber cold repair technical renovation project effect is lower than expected; glass fiber product market demand is lower than expected; China building materials shares and Chinese materials shares synergy effect is lower than expected.