China Galaxy Securities: Glass fiber exports may be restricted by trade, optimistic about companies with a diversified overseas production layout.

China Galaxy Securities released a research report stating that the United States increasing trade restrictions on China will impact industries related to exports from China. It is expected that the volume of Chinese goods exports will decrease, directly affecting the profits of related companies. Currently, the United States is one of the major export countries for glass fiber in China, and it is expected that the export volume of glass fiber in China will be significantly impacted. In this context, overseas companies with production capacity, especially those with production capacity in the United States, will have a competitive advantage. At the same time, it is expected that China will further increase stimulus measures for domestic demand under this background, benefiting the rapid recovery of the domestic glass fiber market demand. Event: In the early morning of November 6th, as per the Eastern Time in the United States, the Republican presidential candidate Trump announced his victory in the 2024 presidential election. Key points of the China Galaxy Securities report are as follows: The United States increasing trade restrictions on China will impact industries related to exports from China. Tariffs are a core part of Trump's trade policy, which includes: 1) Imposing a 10% basic tariff on most foreign goods, and a 60% or higher tariff on all Chinese goods; 2) Revoking China's Most Favored Nation trading status, gradually stopping imports of all necessary goods from China, preventing US companies from investing in China, and prohibiting any company outsourcing business to China from signing federal contracts, etc. The heightened trade restrictions by the United States on China will impact industries and companies related to exports from China, and it is anticipated that the volume of Chinese goods exports will decrease, directly affecting the profits of related companies. The export of glass fiber from China will shrink, and companies with a strong presence in overseas production capacity are favored. The 60% tariffs imposed by the United States on Chinese goods will significantly increase the cost of Chinese glass fiber entering the US market, directly squeezing the export profits of Chinese glass fiber companies. Even if the cost pressure is passed on to downstream consumers through price increases, Chinese glass fiber products in the US market will lose their price advantage, ultimately losing market share in the United States. The United States is one of the major export countries for glass fiber in China. According to Sublime China Information data, as of September 2024, China's total glass fiber exports were 1.618 million tons, with exports to the United States being 191,800 tons, accounting for 11.85%; with a total export value of USD 2.26 billion, of which exports to the United States were USD 301 million, accounting for 13.34%. It is expected that the export volume of glass fiber from China will be significantly impacted. In this context, companies with a strong overseas production capacity, especially those with production capacity in the United States, will have a competitive advantage. There is an expectation for an increase in the stimulus policies for domestic demand, leading to a rapid recovery in domestic glass fiber demand. Against the backdrop of intensified US trade restrictions on China, it is expected that China will further increase stimulus measures for domestic demand, favoring the rapid recovery of the domestic glass fiber market demand. In recent months, the demand for spun yarn in China has slowly recovered, with the market showing signs of improvement compared to previous periods. With the rapid development of industries such as wind power and new energy vehicles in China, the outlook for wind power yarn and thermoplastic yarn markets is promising. In addition, the application of spun yarn in new scenarios for photovoltaic frames is expected to quickly increase, highlighting the favorable prospects for domestic spun yarn market demand. Global leading glass fiber companies benefit from local production capacity in the United States. China Jushi Co., Ltd. is the leading glass fiber company in China, with the largest production capacity scale globally. It has two major overseas production bases in South Carolina, USA, and Suez, Egypt. The company's overseas production capacity totals 416,000 tons/year, with a capacity of 96,000 tons/year in the USA. Compared to other glass fiber companies in China, it is expected that China Jushi Co., Ltd. will be less impacted by US trade restrictions in overseas sales, and the company can leverage its production base in the United States to increase its market share. Investment recommendation: The increased US trade restrictions on China will directly impact the export volume of glass fiber from China. We recommend focusing on leading glass fiber companies with production capacity in the United States, such as China Jushi Co., Ltd (600176.SH), and pay attention to companies with a strong overseas production capacity, such as Chongqing Polycomp International Corporation (301526.SZ). Risk warning: Risks of unexpected fluctuations in raw material prices; risks of lower-than-expected downstream demand; risks of policies not progressing as expected.