Company overview
The company's main business is manufacturing and selling plywood and wooden biomass particles in China, accounting for 76% and 24% of revenue, respectively. Among them, plywood products are mainly made of poplar wood, including furniture board, ecological board and solid wood laminate. Wood biomass particles are clean fuels produced from wood dregs.
From 2014 to 1H2016, the income was 310 million, 380 million and 208 million respectively, and the net profit increased steadily, which was 38.92 million, 45.22 million and 26.75 million respectively in the same period. The three-year net profit CAGR is 18%.
The company's gross profit margin and net profit margin were stable at 22% and 13% in the first half of 2016.
Industry status and prospects
Plywood, fibreboard and particleboard are the three main types of wood board, among which plywood and fibreboard are widely used in downstream industries such as construction and decoration, furniture manufacturing and transportation manufacturing. Plywood manufacturing is highly fragmented and highly competitive, mainly due to similar products and processing technologies. According to Ipsos, there were more than 4000 plywood manufacturers in China in 2015. In 2015, the top five wood board processing manufacturers accounted for only about 0.65% of China's total wood board manufacturing.
The company's wooden biomass particles belong to biomass energy fuel. according to the Ipsos report, China's wooden biomass pellet manufacturing industry is highly fragmented and highly competitive, with the top five companies contributing 1.92 per cent of the total market capitalization in 2015. China's wooden biomass particle manufacturing industry is still in the early stage of development. due to the government's support policies and low access threshold, most of the wooden biomass particle manufacturing companies are small factories.
Advantages and opportunities
The company's headquarters and factory are located in Shandong Province, it is easy to obtain the main raw materials, and has established a long-term cooperative relationship with local suppliers. Has a comprehensive and experienced management team in the industry.
Weakness and risk
With a short business history, the company launched its first plywood products in 2011 and wooden biomass particles for the first time in 2013. The company's turnover and profits may not continue to grow at the same rate in the future.
Any shortage of raw materials may have a serious impact on the company's production process. Such as poplar log, poplar plywood core, veneer and wood residue.
The production processes of plywood and wooden biomass particles are labor-intensive. The increase in labor costs will reduce the company's profit margin, profitability and liquidity, and have a significant adverse impact on the financial position and operating results.
Valuation
The company's prospectus does not provide a profit forecast. The IPO price corresponds to a price-to-earnings ratio of 8.6-12.8 times 2015A, which is relatively reasonable compared with the average price-to-earnings ratio of 8-10 times for Hong Kong's industrial manufacturing industry. We give IPO a dedicated rating of "5".
