With the warming of real estate policy and the continuous promotion of "guaranteed delivery", the completion link in 2023 will be more flexible, which is expected to release the demand for glass backlog. On the supply side, the key to high inventory digestion lies in the release and expectation of demand. There is no need to worry too much. The current industrial inventory is also mainly concentrated in the production enterprises. If the follow-up demand can be released as scheduled, it is expected to replicate the 20-year scenario. The bank believes that the gap between supply and demand gives birth to short-term investment opportunities, and the medium and long-term logic of enterprises is more attractive.
Demand side: The demand backlog in the early stage is expected to be fully released
. The transmission chain from new construction to completion is blocked, and the demand backlog of glass is pending: Glass is a variety deeply bound with the completion of real estate, and it is also an important pre-indicator to observe the construction intensity and completion progress of real estate. From 2019 to 2022, the new construction area of commercial housing is 1.42 billion square meters annually, and the completed area is only 670 million square meters annually, which means that the demand for future completion is still relatively strong. There is a time lag of about 3 years for the transmission of new real estate construction and completion. Data fitting shows that there is a large space for the demand for completion in 2022. However, due to the repeated epidemics in China and the exposure of the credit risk of the main body of real estate developers, the demand for completion has not been released as scheduled. With the warming of real estate policy and the continuous promotion of "guaranteed delivery", the bank judges that the completion link in 2023 has greater flexibility, which is expected to release the demand for glass backlog.
Supply-side: Cold repair has been accelerated, and the gap between supply and demand is expected to further
widen. Under the background of weak demand and high cost, the glass industry is on the verge of loss. Since July 2022, as glass fundamentals and expectations continue to weaken, the pace of cold repair of production lines has accelerated. According to the statistics of Longzhong Information, a total of 32 production lines were cold repaired from July to December, with a total daily melting capacity of 20,000 tons and a net reduction of 13,000 t/d (cold repair-resumption of production-new ignition), accounting for 8% of the production capacity. Construction off-season superimposed the Spring Festival holidays, 23Q1 business pressure is still greater, or can see more production lines into cold repair. The key to
high inventory digestion lies in the release and expectation of demand, so there is no need to worry too much. Taking the "day volume" inventory digestion of production enterprises during the 2020H1 epidemic as an example, once the demand starts, it will strongly stimulate the sentiment of downstream traders or processing plants, thus bringing about the rapid transfer of inventory in the short term. The current industrial inventory is also mainly concentrated in the production enterprises, if the follow-up demand can be released on schedule, it is expected to replicate the 2020 scenario. The gap between
supply and demand gives birth to short-term investment opportunities, and the medium and long-term logic of enterprises is more interesting
. Supply and demand balance calculation: the probability of 23 years is tight. For cyclical products, the price rise caused by the periodic imbalance between supply and demand will bring about the elasticity of earnings and valuation of related enterprises. According to the data backtesting in recent years, the correlation coefficient between completion and glass demand is about 0.98. If the completed area returns to 1.07 billion square meters in 23 years (compared with the compound growth rate of 2.7% in 21 years), the glass demand may reach 1.05 billion heavy boxes. Under the neutral assumption (cold repair is not accelerated in 23 years, but the recovery rate is low), there is a gap of 40 million heavy boxes on the supply side (including inventory). From the existing gap of new construction and completion, the demand for glass may not be limited to the aforementioned judgment. The performance contribution of "
new glass" will not be ignored. With the continuous landing of new business and production capacity of glass enterprises, the contribution of their "new glass" business can not be ignored. For example, Qibin Group is expanding in photovoltaic glass, electronic glass and other fields, if its photovoltaic glass production capacity is fully put into operation, the contribution of related business income is expected to reach 68% of the income proportion in 21 years; for example, CSG A's income can reach 169% of its income proportion in 21 years after the full production capacity of photovoltaic calendering and high purity silicon business layout. Such as Jinjing technology plus photovoltaic glass, TCO glass business and so on. Although the competitiveness and profit contribution of the "new glass" final product still need time to verify, the bank believes that it is expected to see the dawn in 2023.
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