China Jushi (600176) Report Interpretation

Overview

This earnings review argues that China Jushi can sustain elevated electronic-fabric profitability longer than the market expects. UBS raises forecasts and its target price while retaining Buy, citing tight effective supply, accelerating E-fabric prices, and optionality from Al-related fabrics.

Core views

UBS raises its 2026/2027/2028 net-profit forecasts by 22%/84%/107% to Rmb8.5bn/Rmb15.4bn/Rmb20.0bn after E-fabric price increases exceeded its expectations since May. Its revised electronic-fabric blended ASP assumptions, excluding tax, are Rmb8.0/Rmb13.5/Rmb14.2 per metre for 2026-28, respectively, up 18%/91%/91% from the prior forecast. The resulting earnings estimates are 10%-36% above Wind consensus, principally because UBS assumes higher electronic-fabric ASPs. The central thesis is that E-fabric supply will remain effectively constrained through 2028. UBS forecasts industry deficits of 13% in 2026, 10% in 2027 and 6% in 2028. It cites limited loom availability, 12-18 month delivery times for Toyota looms, insufficient quality from domestic alternatives for standard 7628 fabric, constraints in electronic-yarn furnaces and pre- and post-treatment equipment, as well as commissioning, yield and customer-qualification bottlenecks. Capacity additions may therefore not convert one-for-one into saleable supply: management expects the Tongxiang project to ramp gradually through 2029-30 and to shift externally sold electronic yarn into internally produced fabric, while thinner and Al-related fabrics produce materially less output per loom. Low inventories across the supply chain are also expected to underpin pricing. Pricing evidence supports the view. UBS notes that 7628 E-glass reached Rmb10.20/m in August, already above the previous-cycle peak of Rmb8.8/m, and forecasts the tax-inclusive price at around Rmb15/m by end-2026. Management's stated intent to expand rationally and preserve industry profitability reinforces UBS's conclusion that 2027 is a high earnings base rather than necessarily a single-year peak followed by a sharp reversal. For conventional glass fibre, net capacity additions are viewed as modest because gross additions are partly offset by cold repair, while higher platinum prices raise new-furnace capital costs. UBS also highlights China Jushi's roughly 30% domestic market share and industry-leading costs; roving prices of Rmb3,800/t remain about 15% below the long-term average above Rmb4,400/t, which UBS sees as supporting the profitability floor and leaving recovery optionality. Al-related fabrics provide additional upside beyond the base case. First-generation low-Dk, low-CTE and Q-glass fabrics are available in small batches, with second-generation low-Dk samples expected shortly. Order-backed monthly capacity is about 0.15-0.30m metres per product and qualification is under way with leading customers. UBS includes no Al-fabric earnings or valuation in its base case. Its upside case assumes 20m metres of shipments at Rmb50 net profit per metre, producing Rmb1.0bn of net profit and Rmb40bn of additional valuation upside; further order intake and successful qualification are identified as catalysts. UBS raises the 12-month target price from Rmb43.00 to Rmb58.00 and changes from an SOTP approach to a consolidated 15x 2027E PE methodology. The lower multiple versus the previous approach reflects an increasingly cyclical earnings mix and the expectation that earnings approach a cyclical high in 2027-28. At Rmb39.79 on 25 August, the stock traded at about 10x 2027E EPS versus a 15x historical average; it traded at 3.4x 2027E P/BV for 35% ROE, compared with historical averages of 2.3x and 15%. UBS views 15x as reasonable against relevant conventional and diversified glass-fibre peers at 15-21x, while noting peers overall ranged from 15x to 49x due to differing business mixes and cycle positions. The key market question remains whether E-fabric prices can stay high beyond 2027 and whether 2027E EPS should be treated as peak-cycle earnings; UBS accepts that a lower multiple is warranted but argues the current valuation already discounts meaningful normalization after 2027.

Analysis framework

UBS combines post-results management commentary with E-fabric price trends, supply-demand forecasts, capacity and equipment constraints, and China Jushi's operating position. It translates higher ASP assumptions into revised earnings forecasts, compares those forecasts with consensus and peer valuations, then applies a 15x 2027E PE valuation while separately presenting Al-fabric scenario upside.

Methodology notes

• Industry AnalysisSupply-demand framework

  Electronic-fabric supply-demand balance

  UBS forecasts supply deficits for 2026-28 and links equipment, commissioning, yield and qualification constraints to persistent tightness and higher fabric pricing.

• Industry AnalysisVolume-price decomposition

  ASP-driven earnings revision

  The report holds much of the volume outlook broadly stable while raising electronic-fabric ASP assumptions, making price the principal driver of higher revenue, margins and earnings.

• Valuation methodsP/E and PEG Valuation

  2027E price-to-earnings valuation

  UBS values China Jushi using 15x 2027E PE to derive its Rmb58 target price, with peer and historical P/E comparisons used as context.

Asset mapping & comparison

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

• China Jushi (600176.SH)

  Primary covered company and intended beneficiary of sustained electronic-fabric tightness and higher ASPs.

  Strengths

  Roughly 30% domestic market share, industry-leading costs, scale, product mix and high-end electronic-fabric exposure.

  Weaknesses

  Earnings are becoming more cyclical and may approach a cyclical high in 2027-28.

  Comparison

  Trades at about 10x 2027E PE, below the 15-21x range cited for relevant conventional and diversified glass-fibre peers.

  Risks

  E-fabric ASP normalization, slower Al-fabric qualification or conversion, and raw-material cost volatility.

• Changhai (300196.SZ)

  Comparable cyclical glass-fibre producer.

  Comparison

  Included in UBS's peer valuation comparison.

• Sinoma (002080.SZ)

  Comparable diversified producer with glass-fibre exposure.

  Comparison

  Included in UBS's peer valuation comparison.

• Fellhua Quartz Glass (300395.SZ)

  Comparable with high Al exposure.

  Strengths

  High Al exposure.

  Comparison

  Included in UBS's peer valuation comparison.

• Polycomp International (301526.SZ)

  Comparable with cyclical E-glass recovery and Al exposure.

  Strengths

  E-glass recovery and Al exposure.

  Comparison

  Included in UBS's peer valuation comparison.

• Shandong Fiberglass (605006.SH)

  Comparable cyclical glass-fibre producer.

  Comparison

  Included in UBS's peer valuation comparison.

Key data

• 2026-28 net-profit forecastsRmb8.5bn / Rmb15.4bn / Rmb20.0bnRaised 22% / 84% / 107% versus prior UBS estimates.
• 2026-28 electronic-fabric blended ASPRmb8.0 / Rmb13.5 / Rmb14.2 per metreEx-tax assumptions, raised 18% / 91% / 91%.
• 7628 E-glass priceRmb10.20/mAugust price, above the previous-cycle peak of Rmb8.8/m.
• Electronic-fabric supply deficit13% / 10% / 6%UBS forecast for 2026 / 2027 / 2028.
• Target priceRmb58.00Raised from Rmb43.00; based on 15x 2027E PE.
• 2027E valuation10x P/E and 3.4x P/BVVersus historical averages of 15x P/E, 2.3x P/BV and 15% ROE; UBS forecasts 35% ROE.

Impact & implications

UBS believes sustained E-fabric tightness can extend China Jushi's earnings uplift through 2028, while its scale, product mix and high-end electronic-fabric exposure increase leverage to the cycle. The base case excludes Al-fabric earnings, so successful customer qualification and volume ramp-up would add upside under UBS's framework.

Risks

• E-glass ASPs could normalize faster than expected if demand weakens, customer double-ordering unwinds, or capacity additions accelerate from 2028.
• Al-related fabric qualification or order conversion could be slower than UBS expects.
• Raw-material costs could be volatile.

What to watch

• Further Al-fabric order intake, including low-CTE, low-DK and Q-glass products.
• The pace of E-glass price increases and whether pricing remains elevated beyond 2027.
• Price increases from CCL and PCB producers.
• Capacity additions, equipment bottlenecks, yield progress and customer qualification outcomes.