Shenwan Hongyuan Group: Price increase for electronic yarn and electronic fabric expected to restore profitability for fiberglass industry.

Shenwan Hongyuan Group released a research report stating that on February 24th, at least 9 companies, including China Jushi Co., Ltd, announced a price increase of 800 yuan/ton for various types of fiberglass electronic yarn (G series), and a price increase of 0.3 yuan/meter for various types of electronic cloth. This round of price increases is mainly due to the fact that the prices of electronic yarn and electronic cloth have been at low levels for a long time, with many companies experiencing weak profitability or even long-term losses. The price increase reflects the urgent need of companies to improve their profitability. From an industry perspective, this is part of the continuous trend of price increases in the fiberglass industry, and the profitability of the fiberglass industry in the future may further improve, with the possibility of price increases for other varieties. Shenwan Hongyuan Group's main points are as follows: Event: Several electronic yarn companies raise prices, improving profitability of electronic cloth On February 24th, at least 9 companies, including China Jushi Co., Ltd, Taishan Fiberglass, Chongqing Tianhuan, and Guangyuan New Materials, announced price increases of 800 yuan/ton for various types of fiberglass electronic yarn (G series) and 0.3 yuan/meter for various types of electronic cloth. This round of price increases is mainly due to the long-term low prices of electronic yarn and electronic cloth, with many companies experiencing weak profitability or even long-term losses, prompting the need for price increases to improve profitability. This round of price increases continues the trend of price increases for various fiberglass products since the first quarter of 2024. Since the first quarter of 2024, prices for various fiberglass products such as alkali-free coarse yarn, wind power yarn, chopped yarn, thermoplastic yarn, and assembled yarn have been raised in March, June, and November. The certainty of the bottoming out and rebound of price centers in the fiberglass industry is relatively high. There is a possibility that prices of other categories of fiberglass products may further increase. According to Sublime China Information, as of February 20, 2025, the national average price for G75 electronic yarn was about 8400 yuan/ton, and the average price for electronic cloth was 3.85 yuan/meter, which are lower than the prices in the third quarter of 2024 by 700 yuan/ton and 0.15 yuan/meter respectively, indicating that prices are relatively low. On the supply side, there has been no new production capacity for electronic yarn for two and a half years, and the industry structure is generally stable. According to Sublime China Information, since the ignition of the 3 production lines for intelligent electronic yarn in Jushitongxiang in June 2022, there has been no new production capacity for over two years. In 2023-2024, only 5 lines with a total capacity of 228,000 tons of electronic yarn were put back into production after cold repairs, with no substantial increase in production capacity. In January 2025, the 4 production lines of 2000 tons/year of low dielectric constant fiberglass production line in Linzhou Guangyuan were ignited, mainly producing high-quality low dielectric products, which did not affect the supply pattern of ordinary electronic yarn. On the demand side, the application of electronic yarn is expected to continue to upgrade. Electronic yarn is mainly used as the substrate for integrated circuit copper clad laminates, and is highly related to the demand in the electronics industry. With the continuing strong demand for 5G base stations/AI servers, the demand for electronic yarn, especially low dielectric electronic yarn used in high-frequency and high-speed copper clad laminates, is expected to continue to grow. Chinese companies have accelerated their layout in the field of low dielectric electronic yarn and electronic cloth, with companies such as Taishan Fiberglass, Chongqing Polycomp International Corporation, Grace Fabric Technology, and Guangyuan New Materials actively expanding their production capacity for low dielectric electronic yarn and electronic cloth, continuously achieving technological breakthroughs, improving production stability, and expected to gradually benefit from the increased penetration of low dielectric fiberglass yarn brought about by the rapid development of 5G and AI. Investment recommendations Understanding this round of price increases for electronic yarn from three perspectives: 1) This is part of the continuous trend of price increases in the fiberglass industry, and the profitability of the fiberglass industry may further improve, with the possibility of price increases for other varieties; 2) The widespread price increase for electronic yarn and electronic cloth is beneficial for companies leading in the electronic yarn and electronic cloth sectors; 3) The supply of low dielectric fiberglass yarn remains tight, and with improved profitability after the price increase for electronic yarn, there may be further increases in research and production investment for low dielectric products, with the potential for further breakthroughs in low dielectric technology. In conclusion, we recommend China Jushi Co., Ltd (600176.SH) and suggest paying attention to Sinoma Science & Technology (002080.SZ), Chongqing Polycomp International Corporation (301208.SZ), and Grace Fabric Technology (603256.SH). Risk warning 1) Concentrated investment in new production capacity may bring supply pressure, and the subsequent implementation of price increases may not be sufficient; 2) Difficulty in technological breakthroughs for low dielectric products may restrict supply stability.