Key points of investment

This Thursday (March 30), a GEM listed company “Sentai Co., Ltd.” asked for a quote.

Sentai Co., Ltd. (301429): The company's main business is R&D, design, production and sales of high-performance wood-plastic composites, novel stone-wood-plastic composites, and their products and applications. The company achieved revenue of 632 million yuan/915 million yuan/821 million yuan/821 million yuan respectively in 2020 and 2022, YOY was 18.44%/44.71%/-10.26% in that order, and the three-year revenue compound annual growth rate was 15.43%; achieved net profit of 103 million yuan/100 million yuan/85 million yuan, YOY was 119.18%/-2.65%/-15.84%, and the three-year compound annual growth rate of Fumo's net profit was 21.55%.

According to preliminary forecasts, the company expects to achieve net profit of 19.7972 million yuan in January-January 2023, an increase of 6.97% over January-March 2022.

Investment highlights: 1. Wood-plastic composites are a new type of green building material and have certain alternative properties to traditional materials. The raw materials of wood-plastic composites and shite-wood-plastic composites can be used as raw materials from waste recycled plastics and forest products, which can effectively reduce plastic pollution, save and efficiently use biomass resources. They are low-carbon and environmentally friendly composites; in addition to the advantages of being green and environmentally friendly, wood-plastic composites also have the advantages of anti-corrosion, mothproof, waterproof and antibacterial, wear-resistant and flame retardant, long service life, and low follow-up maintenance costs, which can replace traditional materials to a certain extent. At present, major developed countries such as Europe and the United States are already using wood-plastic composites in large quantities, but the penetration rate in China is low. According to the unit price of the company's products in 2021 and the estimated production of domestic wood-plastic composites, taking into account the high proportion of wood-plastic composites exported, it is estimated that the penetration rate of wood-plastic composites in China in the wood flooring market may be less than 10%. 2. The company continues to promote iterative product upgrades, and the product line is getting better. In 2006-2018, the company launched high-strength WPC, weather-resistant co-extruded WPC, and lightweight co-extruded WPC. The third generation of products implemented differentiated pricing strategies for different end consumer groups to meet the market needs of various consumer groups. During this period, based on the production and technical experience accumulation of wood-plastic composites, it also independently developed new stone and wood plastic composites, continuously enriched the product structure, and expanded the product application field from outdoor facilities to the indoor home field; and the company's newly laid out new stone and wood plastic digital printing business will also help the company develop further towards customization and high-end development . Thanks to the continuous iteration of products and technology, the gross margin level of various products introduced later, such as weather-resistant co-extruded WPC and lightweight co-extruded WPC, is high; it is expected that as the sales share of these products continues to increase, the revenue structure of the company will continue to be upgraded. 3. The company plans to set up a Vietnamese subsidiary, which may help the company resolve tariff issues. According to the company's prospectus, the company plans to lease an industrial zone in Vietnam and establish its Vietnamese subsidiary or branch. The relevant lease contract is valid from July 2023 to June 2026. During the reporting period, the company's sales revenue to the US in 2021 decreased by 42.0754 million yuan compared to the same period last year due to the impact of additional tariffs imposed by the US on new stone, wood and plastic composites to 25% in August 2020; the establishment of a Vietnamese subsidiary may help the company solve the tariff problems currently faced by the company.

Comparison of listed companies in the same industry: Companies involved in wood-plastic materials, such as China Railway Assembly, Guofeng New Materials, and Meixin Technology, were selected as comparable listed companies of Sentai Co., Ltd., but comparability may be relatively limited. Looking at the comparable companies mentioned above, the average revenue scale of the industry from the fourth quarter of 2021 to the third quarter of 2022 was 1,174 million yuan, with a gross sales margin of 24.52%; in comparison, the company's revenue scale and gross sales margin were at the average level of the same industry.

Risk warning: There is still a possibility that companies that have begun the inquiry process will not be able to go public due to special reasons. The company content is mainly based on the content of prospectuses and other public information, there is a risk that the selection of listed companies in the same industry is inaccurate, there may be interpretation biases in the content of the content data, and the risks of specific listed companies are shown in the content of the text.