The development of the glass fiber industry shows strong growth in the cycle

Since 2014, compared with the overall downturn in the building materials industry, the recovery of the glass fiber sub-sector is obvious. Clarifying the market base of this round of recovery is the key to predicting whether the economy will continue. We believe that the three points that need to pay attention to the glass fiber industry's prosperity are: the global economic cycle, the impact of capacity supply, and the structural changes in demand. The global economic cycle is a comprehensive reflection of the global glass fiber supply and demand pattern. Due to the different degrees of openness and comparative advantages of the global fiberglass industry chain, the performance of enterprises is affected by their respective regions. we discover:

1) The glass fiber industry is in sync with the global macroeconomic cycle. According to the data since 1988, the glass fiber industry cycle is about 8-11 years.

2) Since 2014, it has been a stable period of the new round of cycles. During the period, China's glass fiber performance has risen strongly. The reason for the difference in performance is the combination of domestic production capacity supply and structural demand. Compared with the global leader OC, the high growth rate of 2016 Q1 is also The increase in demand in the region without new capacity (increased housing operating rate in the United States).

3) The valuation center of foreign glass fiber enterprises has moved up after the multi-layer development of the company's diversified glass fiber application penetration rate, which is not available in pure cycle industries such as cement glass. At present, domestic enterprises have not yet experienced this stage.

It is expected that the high vibrancy of glass fiber will continue to be stable this year.

Through combing the three core logics of judging the prosperity of the glass fiber industry, the reason for this round of glass fiber boom is the steady growth of the global economy, the slowdown of supply and the supply contraction brought by concentrated cold repair, and the demand stimulation in the fields of wind power/thermoplasty. . In combination with the cycle logic and the demand situation, we judge that this round of prosperity will maintain a high level in 2016, the global economy will grow steadily and the demand structure will be transformed into a boom, but continue to be affected by the expansion of capacity impact: the capacity impact in 2015 is about 1.7. %, the production capacity impact in 2016~2017 is not less than 11.1%. In terms of splitting, the capacity impacts in 2016 and 2017 are 3.6% and 6.9% respectively.

Upstream and downstream differential transmission, game growth opportunities

The impact of this round of economic recovery on the profitability of the industry has two transmission mechanisms: 1) the downstream demand rebounds to increase the demand for fiberglass processing enterprises, and is transmitted from the bottom up; 2) the capacity supply shrinks and improves the supply and demand pattern to the glass fiber production enterprises. There must be a price increase and conduction from top to bottom. Under the joint effect, the upstream enterprises benefited even more, which led to the development trend of downstream enterprises extending upstream.

Under the trend of increasing capacity supply and structural changes in demand, the effects of the two transmission mechanisms will change: 1) The bottom-up transmission will continue to play, but the scope of downstream beneficiary enterprises will expand and the benefits will increase. Extending upstream to ensure self-sufficiency in production capacity, internal demand for new demand increased; 2) Limited transmission from top to bottom, further increase in raw material prices, and lower cost of downstream enterprises, due to the continuous expansion of production capacity and the increasingly tight supply and demand pattern . Based on this, we are optimistic about the glass fiber composite materials enterprises with good demand in specific areas and extending upstream: Sinoma Technology, Resheng Technology, and Changhai.