The company is an OEM for outdoor shading and leisure furniture. The increase in performance in 2020 and 21 was mainly due to the impact of the overseas epidemic on home and garden consumption. Since the second half of '22, it has been adversely affected by the Russian-Ukrainian war in Europe, the impact of US inflation on demand, and the removal of inventory from overseas. (1) In the short term, the overseas leisure furniture industry is still being removed from inventory after the epidemic, but the company maintained a high increase with the popular product star roof, and we expect the pace of recovery to be faster than that of peers, and the Q2 revenue growth rate is expected to be corrected; (2) In the medium term, production capacity for the company's IPO fundraising projects will gradually be released, and gross margin is expected to increase with intelligent transformation and falling raw material costs; (3) in the long run, the company's growth is driven by the replacement of wooden pergola canopy, a further increase in penetration rate, e-commerce channel expansion, and an increase in customer procurement share.

The estimated revenue for 2023-2025 is 15.50/1,795/2,072 billion yuan, and EPS is 1.11/1.48/1.80 yuan. The company's closing price on June 15, 2023 was 23.14 yuan, corresponding to 2023-2025 21/16/13xPE. Considering that the company's large product, Starry Sky Pong, is still growing rapidly, it was given 20XPE in 2024, with a target price of 29.6 yuan/share, covered for the first time, and given a “buy” rating.

Outdoor leisure furniture and supplies industry: Overseas maturity, domestic growth According to Statista's forecast, global imports of major outdoor leisure furniture and supplies products will be over US$37 billion in 2020, with a compound growth rate of 3.74% in 2016-2020, and future growth of 4%-7.5%. Meanwhile, in recent years, the total output value of China's outdoor leisure furniture and supplies industry has continued to grow. According to statistics from the Joint Research Network, the market size in 2022 was about 3.65 billion yuan, with a total output value of about 46.54 billion yuan.

Company advantages: R&D+intelligent manufacturing+vertical supply chain+major customer advantage The company's advantages are: 1) the company has a strong level of R&D and has received many domestic and foreign patent certifications and industry awards; 2) the company has carried out comprehensive digital upgrading of the production workshop to build a smart factory to achieve stable quality, cost leadership and rapid delivery; (3) the company has formed long-term cooperative relationships with large foreign supermarkets such as Walmart and COSTCO.

Looking at industry comparisons, (1) the company's revenue and net profit CAGR is higher than that of peers, thanks to the construction of starry sky canopies; (2) gross margin is higher under the advantage of scale; and (3) operating cash flow is better.

Driven by growth: High growth of starry sky canopy+e-commerce expansion+increase in customer share The company's future growth lies in: 1) Starry Sky Canopy is expected to maintain high growth through accessory research and development, high cost efficiency, ease of assembly, and dual online and offline expansion; 2) IPO fundraising projects expand production, and intelligent transformation is expected to further increase gross profit margins; 3) There is still room for e-commerce channel expansion and customer procurement share increase.

Risk warning: risk of exchange rate fluctuations; risk of fluctuations in raw material prices; risk of trade friction; risk of capacity absorption in fund-raising projects; systemic risk.