Electronic yarn strength continues while roving demand remains weak; Citi reiterates Buy on China Jushi

Overview

This is a weekly flash report by Citi on China's glass fiber industry. The report notes that in the week ending June 11, China's glass fiber market remained generally soft, with no clear improvement in roving demand. Companies mainly relied on existing customer orders, and inventories edged higher due to relatively weak production and sales performance. In contrast, the fundamentals of electronic yarn remained strong: June price increases were largely implemented, downstream acceptance was relatively smooth, CCL demand remained strong, and inventories of electronic yarn, electronic cloth, and imitation products all stayed at low levels.

Core views

The core view is that internal differentiation within the industry is deepening: roving prices are likely to remain stable in the short term, but demand recovery is limited, inventories are accumulating slightly, and room for price increases is constrained; by contrast, electronic yarn and electronic cloth continue to have medium-term pricing and earnings resilience, supported by limited supply growth, low inventories, and full downstream CCL order books. Citi continues to view electronic yarn as the key driver of sector earnings and reiterates its Buy rating on China Jushi.

Analysis framework

The report uses a weekly tracking framework, assessing prices, supply, inventories, downstream demand, and the short-term outlook; at the stock level, it uses a P/E valuation method relative to historical valuations to set a target price for China Jushi.

Methodology notes

• High-frequency industry trackingWeekly price-supply-demand-inventory framework

  Industry conditions are assessed through price changes in roving, electronic yarn, and electronic cloth, together with operating kilns and capacity, inventory levels, and downstream order conditions.

  This framework shows weak demand and rising inventories on the roving side, versus low inventories and strong demand on the electronic yarn side, explaining the earnings divergence within the glass fiber industry.

• Equity valuationP/E valuation method

  The target price is derived from forecast 2026 net profit and the target P/E multiple.

  Citi applies a 26.1x P/E multiple to China Jushi's forecast 2026 net profit, resulting in a target price of Rmb43.4/share; compared with the previous higher valuation multiple, the re-rating is driven by continued price increases in electronic cloth, tight supply, and the potential volume ramp-up of specialty electronic cloth products.

Asset mapping & comparison

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

• China Jushi（600176.SS）

  Core covered name; Citi reiterates a Buy rating.

  Strengths

  Benefits from tight supply-demand conditions in electronic yarn and electronic cloth, strong CCL demand, low inventories, and potential valuation re-rating from the ramp-up of specialty electronic cloth products.

  Weaknesses

  Roving demand remains weak, utilization rates at traditional building materials and downstream processing companies are low, and short-term room for roving price increases is limited.

  Comparison

  Compared with the roving business, the electronic yarn and electronic cloth chain has stronger momentum and is currently the main source of earnings elasticity and valuation support.

  Risks

  If glass fiber demand is weaker than expected, energy and electricity costs rise, or new industry capacity exceeds expectations, the share price may deviate from the target price.

• China glass fiber industry

  Subject of the report.

  Strengths

  Inventories of electronic yarn and electronic cloth are low, incremental supply is limited, and downstream CCL orders remain relatively sufficient.

  Weaknesses

  Improvement in roving market demand is limited, production and sales performance is weak, and inventories are accumulating slightly.

  Comparison

  The industry shows structural divergence, with weak roving and strong electronic yarn.

  Risks

  Wind power demand has not yet recovered meaningfully, and weak traditional building materials demand may continue to drag on roving prices and production-sales performance.

Key data

• Mainstream transaction price of 24OOtex winding direct rovingRmb3,600-3,900/ton; national average price Rmb3,791/tonFlat week on week and up 3.01% year on year, but market transactions were weak.
• G75 electronic yarn priceRmb14,000-14,500/ton; average price about Rmb14,525/tonGenerally stable after the previous price increase, with relatively smooth downstream acceptance.
• 7628 electronic cloth priceRmb7.3-7.5/meterPrices continued to rise, reflecting persistently tight industry supply.
• Operating kiln lines and capacity121 lines; 8.875 million tons/yearFlat week on week and up 8.71% year on year.
• China Jushi target priceRmb43.4/shareBased on 26.1x forecast 2026 net profit P/E.

Impact & implications

For investors, the implication of the report is that one cannot simply judge all segments by the overall weak demand in the glass fiber industry. The roving chain still faces insufficient demand from traditional building materials and inventory pressure, but tighter supply-demand conditions in electronic yarn, electronic cloth, and the CCL chain are more likely to support earnings and valuations. The investment case for China Jushi mainly depends on the pricing resilience, volume ramp-up pace, and supply discipline of electronic yarn and specialty electronic cloth products.

Risks

• Glass fiber product demand is weaker than expected.
• Rising energy and electricity costs compress profit margins.
• New industry capacity exceeds expectations, weakening the tight supply pattern.
• Roving inventories continue to accumulate, limiting room for price increases.
• Price increases for electronic yarn or electronic cloth may not be sustainable, or downstream CCL demand may slow.

What to watch

• Whether roving inventories continue to accumulate, and whether company shipments and downstream utilization rates improve.
• The stability of G75 electronic yarn and 7628 electronic cloth prices after the price increases.
• Whether strong CCL order momentum and purchasing enthusiasm continue.
• Whether inventories of electronic yarn, electronic cloth, and imitation products remain low.
• Whether wind power demand shows a meaningful recovery.
• The volume ramp-up pace and earnings contribution of China Jushi's specialty electronic cloth products.