Citi maintains a Buy rating on China Jushi; electronic yarn momentum is significantly stronger than roving

Overview

This report is Citi's weekly tracking report on China's glass fiber and electronic fabric industry, with a focus on China Jushi. The report notes that, during the week ended July 16, China's fiberglass market continued to diverge: roving prices and shipments were pressured by high temperatures, rainfall, and low downstream operating rates, while electronic yarn and electronic fabric remained strong due to robust CCL customer demand, low inventories, and constrained effective supply.

Core views

The core view is that electronic yarn will continue to outperform roving. In the near term, roving prices are expected to remain under pressure, with inventory digestion proving difficult; electronic yarn prices are likely to remain stable in the short term and retain medium-term upside potential because monthly orders are largely locked in, supply-side ramp-up is insufficient, high-end product availability is limited, and CCL demand is strong. Citi maintains its Buy rating on China Jushi, believing that its global cost advantage, integrated electronic yarn and electronic fabric platform, and earnings sensitivity to the electronic fabric upcycle support a relatively high valuation.

Analysis framework

The report uses weekly supply-demand tracking and price monitoring, separately examining the prices, inventories, production lines, capacity, and downstream procurement of roving, G75 electronic yarn, and 7628 electronic fabric, while assessing the reasonableness of China Jushi's target price within the company's valuation framework.

Methodology notes

• Industry supply-demand analysisPrice-inventory-capacity-demand tracking

  Assess the momentum of the glass fiber and electronic yarn markets through weekly prices, inventories, production line operations, and downstream orders.

  The report analyzes roving and electronic yarn separately, emphasizing that roving is dragged down by seasonally weak demand, while electronic yarn is supported by tight supply and demand and low inventories.

• Valuation methodologyP/E valuation

  Derive the target price by applying a 26x P/E to 2027E earnings per share.

  Citi believes 2027E better reflects the full-year earnings contribution from electronic fabric price increases, capacity ramp-up, and product mix upgrades.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Jushi (600176.SS)

  Covered company; Buy rating maintained

  Strengths

  Global cost leadership; integrated electronic yarn and electronic fabric platform; benefits from rising electronic fabric prices, capacity ramp-up, and product mix upgrades.

  Weaknesses

  The roving business is affected by seasonally weak demand, low downstream operating rates, and rising inventories.

  Comparison

  The target P/E is 26x 2027E, one standard deviation above the historical average P/E since listing, but still below the current forward valuations of relevant peers.

  Risks

  Fiberglass demand below expectations, rising energy and electricity costs, and industry capacity additions exceeding expectations.

Key data

• 2400tex direct winding roving priceRmb3,500-3,900/ton; national average price Rmb3,768.5/tonDown 0.26% month-on-month and up 3.27% year-on-year.
• G75 electronic yarn priceRmb16,800-17,500/ton; average price approximately Rmb16,987.5/tonFlat month-on-month following recent substantial price increases.
• 7628 electronic fabric priceRmb8.5-8.7/meterRemained at high levels, with transactions still negotiated based on volume.
• Operating furnace lines and total capacity122 furnace lines; total capacity of 9.038mtpaFlat week-on-week and up 8.03% year-on-year.
• Target priceRmb67/shareBased on a 26x P/E on 2027E earnings per share.

Impact & implications

For China Jushi, the near-term drag from roving remains, but tight supply and demand, high prices, and product mix upgrades in electronic yarn and electronic fabric could become the main drivers of earnings upgrades. If the electronic fabric upcycle continues, the company is likely to achieve stronger earnings sensitivity through its cost leadership and integrated platform.

Risks

• Demand for fiberglass products is weaker than expected.
• Higher energy or electricity costs compress margins.
• Capacity additions exceeding expectations lead to a deterioration in supply-demand conditions.
• If demand is better than expected or supply discipline is stronger than expected, the share price could also exceed the target price.

What to watch

• Roving inventory digestion and the recovery of downstream processing operating rates.
• Whether G75 electronic yarn and 7628 electronic fabric prices remain stable at high levels or rise further.
• CCL customer order strength and the degree of supply tightness for high-end electronic yarn.
• The pace of ramp-up in new electronic yarn capacity and the volume growth of high-end products.
• The progress of earnings realization during China Jushi's electronic fabric cycle.