1H25 earnings slightly beat our forecast

China Jushi announced its 1H25 results: Revenue rose 17.7% YoY to Rmb9.1bn, and attributable net profit rose 76% YoY to Rmb1.7bn. In 2Q25, revenue rose 6.3% YoY to Rmb4.6bn, and attributable net profit grew 57% YoY at Rmb957mn. The firm's results slightly beat our expectations and were in line with the preannouncement. We attribute this to incremental revenue from the wind power project at the zero-carbon base in Huai'an, and higher prices of wind power yarns in 1Q25, boosting net profit per tonne.

Roving sales volume rose YoY in 1H25; net profit per tonne recovered.

Production capacity: the company's 1H25 Jiujiang Phase-I and Phase-II projects with total production capacity of 200,000t came online in February and April. The Tongxiang production line expanded capacity to 200,000t after cold repair.

Sales volume: The firm's sales volume of roving rose 4% YoY to about 1.58mnt in 1H25, maintaining positive growth despite a high base in 1H24.

We estimate that net profit per tonne of roving reached about Rmb900 in 1H25 (vs. about Rmb300-400 in 1H24), and the YoY recovery may be due to price hikes of high-end products (wind power and thermoplastic products).

Demand for traditional electronic fabrics remained stable, and the industry average price edged up QoQ in 2Q25. Data from sci99.com

shows that the industry ASP of 7628 electronic fabric (tax included) rose slightly QoQ to Rmb4.23/m in 2Q25, possibly due to joint price hikes by leading companies. Sales volume of electronic fabric reached 485mn meters in 1H25 (vs. about 450mn meters in 1H24), and traditional downstream sectors include automobiles and industrial intelligence.

Profitability of overseas factories improved marginally. In 1H25, the

firm's plant in Egypt generated revenue of Rmb971mn and net profit of Rmb195mn, with a net margin of 20%. The firm's factory in the US recorded revenue of Rmb429mn and net income of Rmb18.21mn, with net margin of 4.2%. Profitability of glass fiber produced by overseas factories improved YoY. We think this may be due to tariff hikes on exported glass fiber, which　　may boost earnings of leading companies with factories in Egypt and the US in the near term.

Wind power projects supporting the zero-carbon base in Huai'an

contributed earnings. In 1H25, Huai’an new energy project generated earnings of Rmb54.66mn, and wind power business operated steadily.

Expense ratio continued to fall. In 1H25, the firm's expense ratio fell 1ppt YoY to 9%, mainly due to optimization of G&A expenses thanks to lower rental expenses and narrowing losses from production suspension.

Cash flow improved; dividend payout ratio increased slightly. In 1H25,

net operating cash flow was Rmb1.4bn (vs. Rmb227mn in 1H24), inventory and accounts receivable turnover days decreased by 6 and 4 days YoY to 117 and 43 days, and capex dropped to Rmb326mn (vs: Rmb626mn in 2H24). The firm announced an interim dividend of Rmb0.17/sh, implying a payout ratio of 40%.

Trends to watch Prices to remain stable in the near term, but we are upbeat on domestic fiberglass leaders' global market position in the long term.

We estimate that net new production capacity of glass fiber roving may exceed 500,000t in 2025, and supply and demand conditions in the industry may remain balanced, implying limited catalysts for price hikes in the short term. In the medium term, however, the firm's strategy of differentiated competition through high-end products and overseas production bases remains intact. In 1H25, its exports and overseas production bases combined accounted for about 34% of total fiberglass sales volume in Europe, the Middle East, Southeast Asia, and the US.

Financials and valuation

We maintain our 2025 and 2026 EPS forecasts of Rmb0.88 and Rmb1.01.

The stock is trading at 15x 2025e and 13x 2026e P/E. We maintain an OUTPERFORM rating and target price of Rmb14.9, implying 17x 2025e and 15x 2026e P/E and offering 11% upside.

Risks

Overseas tariff hikes weigh on exports; supply-demand imbalance in domestic fiberglass market; disappointing domestic policies.