Tongda Co., Ltd. specializes in R&D, production and sales of island-shaped microfiber leather. Its main products include island-type microfiber leather base cloth, microfiber suede, and microfiber smooth leather. It is one of the leading enterprises in microfiber leather products at home and abroad. The company has a number of self-developed core technologies in the microfiber leather field. It first broke the monopoly of Japanese companies and became the pioneer of the microfiber artificial leather industry. Currently, the company has a production capacity of 6 million square meters of microfiber substrates, which is at the forefront of the industry.
The vast space of microfiber leather stems from substitution effects and consumption upgrades. 1) Although natural leather has outstanding performance, production is limited and cannot meet the huge demand for downstream leather products. It is an inevitable trend to replace natural leather; 2) PVC synthetic leather and ordinary PU leather have been widely used as first-generation and second-generation products to replace natural leather, but their performance has always been far different from genuine leather, while microfiber leather has achieved as much simulation as possible of natural leather, and the performance is as close to real leather as possible, and even some of its properties surpass natural leather, representing an upgrade trend in future replacement fields. The space is very broad.
The company's future outlook: Short-term perspective: The company's products are in short supply in the market, and the production line is already overloaded. With the launch of the fund-raising “3 million square meter ecological microfiber high simulation fabric project”, on the one hand, it can ease the company's production capacity bottlenecks and expand the scale. On the other hand, it can optimize and upgrade the product structure, enter the middle and high-end fields, broaden the product sequence, and further enhance competitiveness. Long-term perspective: Due to the influence of costs and consumption habits, the current proportion of microfiber leather in artificial leather products is usually around 3%. In the future, with the double impetus of substitution and consumption upgrading, this ratio is expected to increase dramatically.
Profit forecast and valuation: We forecast the company's diluted EPS in 2012-2014 to be 1.45, 1.84, and 2.25 yuan respectively. The price-earnings ratio of comparable companies in 2012-2013 was 16.60-20.65 times. Combining industry conditions and the company's position, the company can be given 17-19 times PE after listing. The reasonable price range is 24.65-27.55 yuan, and the recommended purchase range is 20.95-23.42 yuan.
Risk warning: risk of fluctuations in raw material prices; risk that fund-raising capacity will be successfully digested by the market; risk of weak expansion of the microfiber leather market