Results Review

3Q25 results in line with our expectationsChina Jushi announced its 3Q25 results: Revenue rose 23%YoY to Rmb4,795mn, attributable net profit rose 54% YoY toRmb881mn, and recurring attributable net profit grew 73% YoYto Rmb911mn. Non-recurring loss was Rmb30.19mn due tolosses from disposal of non-current assets, in line with ourexpectations.

Net profit per tonne of roving edged down QoQ; electronicfabric sales strong. According to corporate filings, roving salesvolume rose slightly QoQ in 3Q25, delivering strongperformance in the slack season. However, net profit per tonneof roving edged down QoQ and remained positive YoY, due tothe impact of sales structure changes and volatile prices of lowenddirect yarns.

According to corporate filings, the firm plans to conduct coldrepair and technological renovation of its glass fiber productionline in Tongxiang, whose production capacity will rise from180,000t to 200,000t. The firm's electronic fabric sales volumegrew rapidly in 3Q25, and we believe low inventory levels maysupport product price hikes in October.

Expense ratio fell YoY. In 3Q25, the firm's expense ratio fell1.8ppt YoY to 9.1%, as selling and R&D expense ratios declinedYoY. Operating cash flow was slightly under pressure, andcapex dropped YoY. In 3Q25, the firm's net operating cash flowwas Rmb694mn, slightly under pressure; capex fell YoY toabout Rmb270mn.

Trends to watch

Price hikes of electronic fabrics in 4Q25 may continue toboost earnings. According to sci99.com, since the beginning of4Q25, the tax-inclusive ASP of 7628 electronic fabrics as ofOctober 19 rose Rmb0.18/m QoQ from the 3Q25 average. Weexpect electronic fabric business to boost earnings, considering:1) Limited short-term increase in electronic fabric production　　capacity and low inventories at leading players; and 2) stabledownstream demand. The company has 100,000t electronic yarnproject in the pipeline in Huai'an, and the project may increaseproduction capacity by more than 30% after reaching full capacity.

We believe the firm's R&D of special fiberglass fabrics may createanother earnings driver.

Net increase in sector-wide roving production capacitymanageable in 2026; watch earnings contribution from majoroverseas clients. For 2026, we expect net increase in the sectorwideroving production capacity, contributed by existingcompanies, to remain flat YoY and reach 200,000t. Export volumeof glass fiber and products fell 3% YoY to 1.57mnt over January–September, implying resilient demand, and we expect earningscontribution from leading overseas clients to increase.

Financials and valuation

We maintain our 2025 and 2026 EPS forecasts at Rmb0.88 andRmb1.01. The stock is trading at 18x 2025e and 16x 2026e P/E.

We maintain an OUTPERFORM rating. As the firm's deploymentin high-end electronic fabric products may boost its valuation,we raise our target price 22% to Rmb18.2 (21x 2025e and 18x2026e P/E), offering 15% upside.

Risks

Overseas tariff increase; supply-demand imbalance in domesticfiberglass market; disappointing domestic policies.